A Prediction about Brookings
By David Henderson
Greg Mankiw announced on his blog today that he will be speaking at a Brookings Institution event tomorrow. The topic: “40 years later- The relevance of Okun’s ‘Equality and Efficiency: The Big Tradeoff.'”
Here’s my prediction: Most, and probably all, of the speakers, whatever their view on policy, will fail to make a clear distinction between equity and equality. Why do I say that? Here’s what I wrote in “Economic Inequality: Facts, Theory, and Significance:”
Most economists judge how just or “equitable” an income distribution is by how equal it is; they don’t ask how people obtained what they have. In short, the majority of economists have a purely end-state view of justice. Typical, for example, is economist Joseph Stiglitz, former chairman of President Clinton’s Council of Economic Advisers. In his textbook, Economics of the Public Sector, he writes:
Consider again a simple economy with two individuals, Robinson Crusoe and Friday. Assume initially that Robinson Crusoe has ten oranges, while Friday has only two. This seems inequitable. Assume, therefore, that we play the role of government and attempt to transfer four oranges from Robinson Crusoe to Friday, but in the process one orange gets lost. Hence Robinson Crusoe ends up with six oranges, and Friday with five. We have eliminated most of the inequity, but in the process the total number of oranges available has been diminished. There is a trade-off between efficiency — the total number of oranges available — and equity.
Notice that Stiglitz does not even bother to tell the reader how Crusoe and Friday obtained what they have. He doesn’t tell because the process is irrelevant to him; all that matters is the end state. He initially hedges by saying it “seems” inequitable rather than it is inequitable, but by the end of the paragraph, the hedge is gone and Stiglitz comes right out and says that inequality is inequitable. Stiglitz is not alone. Many economists move almost seamlessly between the words “equity” and “equality” as if they were interchangeable.
I would love my prediction to be wrong.