Sunday, April 30, 2017

Capitalism comes naturally; equality (Communism) does not

That is the implication of a recent big paper that looked at all the psychological research on whether or not people prefer equality.  They do, but only where the two parties really are  the same.  When one does more work, people think they should get more for it.  That is a simple summary of the paper excerpted below

Why people prefer unequal societies

Christina Starmans, Mark Sheskin & Paul Bloom


There is immense concern about economic inequality, both among the scholarly community and in the general public, and many insist that equality is an important social goal. However, when people are asked about the ideal distribution of wealth in their country, they actually prefer unequal societies. We suggest that these two phenomena can be reconciled by noticing that, despite appearances to the contrary, there is no evidence that people are bothered by economic inequality itself. Rather, they are bothered by something that is often confounded with inequality: economic unfairness. Drawing upon laboratory studies, cross-cultural research, and experiments with babies and young children, we argue that humans naturally favour fair distributions, not equal ones, and that when fairness and equality clash, people prefer fair inequality over unfair equality. Both psychological research and decisions by policymakers would benefit from more clearly distinguishing inequality from unfairness.

Fairness in the lab

How can this preference for inequality in the real world be reconciled with the strong preference for equality found in laboratory studies? We suggest that this discrepancy arises because the laboratory findings reviewed above—which report the discovery of egalitarian motives, a desire for more equality, or inequality aversion—do not in fact provide evidence that an aversion to inequality is driving the preference for equal distribution. Instead, these findings are all consistent with both a preference for equality and with a preference for fairness, because the studies are designed so that the equal outcome is also the fair one. This is because the recipients are indistinguishable with regard to considerations such as need and merit. Hence, whether subjects are sensitive to fairness or to equality, they will be inclined to distribute the goods equally.

This idea is supported by numerous studies, including follow-ups of the experiments described above, by the same researchers, in which fairness is carefully distinguished from equality. These studies find that people choose fairness over equality.

For example, in the study in which children had to award erasers to two boys who had cleaned up their room and chose to throw out the extra eraser, both boys were described as having done a good job. But when children were told that one boy did more work than the other, they awarded the extra eraser to the hard worker28,40. In fact, when one recipient has done more work, six-year-olds believe that he or she should receive more resources, even if equal pay is an option26,41,​42,​43. Likewise, although infants prefer equality in a neutral circumstance, they expect an experimenter to distribute rewards preferentially to individuals who have done more work35.

This preference for inequality is not restricted to situations where one person has done more work, but also extends to rewarding people who previously acted helpfully or unhelpfully. When three-year-olds witnessed a puppet help another puppet climb a slide or reach a toy, they later allocated more resources to the helpful puppet than to a puppet that pushed another down the slide, or hit him on the head with the toy44.

As a final twist, consider a situation with two individuals, identical in all relevant regards, where one gets 10 dollars and the other gets nothing. This is plainly unequal, but is it fair? It can be, if the allocation was random. Adults consider it fair to use impartial procedures such as coin flips and lotteries when distributing many different kinds of resources. Children have similar views. In the erasers-for-room-cleaning studies described above, if children are given a fair ‘spinner’ to randomly choose who gets the extra eraser, they are happy to create inequality46. One person getting two erasers and another getting one (or ten and zero for that matter) can be entirely fair and acceptable, although it is clearly not equal.

Fairness in the real world

It follows, then, that if one believes that (a) people in the real world exhibit variation in effort, ability, moral deservingness, and so on, and (b) a fair system takes these considerations into account, then a preference for fairness will dictate that one should prefer unequal outcomes in actual societies. The ideal distributions of wealth proposed by participants in the Norton and Ariely study, then, may reflect how fairness preferences interact with intuitions about the extent to which such traits vary in the population.

Tyler uses a related argument to explain why there is not a stronger degree of public outrage in the face of economic inequality. He argues that Americans regard the American market system to be a fair procedure for wealth allocation, and, accordingly, believe strongly in the possibility of social mobility (see Box 1). On this view, then, people's discontent about the current social situation will be better predicted by their beliefs about the unfairness of wealth allocation than by their beliefs about inequality.....

We have argued that a preference for fair outcomes is early emerging and universal. But it is also clear that people differ in their intuitions as to which resources should be distributed on the basis of merit. Most Americans now believe that a fair system is one in which every adult gets a vote, but this is a relatively modern intuition. In our own time, there is controversy over whether fairness dictates that everyone should have equal access to health care and higher education. Put differently, there is some disagreement over what should be a right, held equally and unchanged by any sort of variation in merit.

Nature Human Behaviour 1, Article number: 0082 (2017)


How Trump’s Tax Plan Would Affect High-Tax States Like California, New York

Crimping California's power to tax sounds a lot of fun

High-income earners in high-tax states would see a federal tax rate cut, but may pay more in the end if they’re unable to deduct state and local taxes under President Donald Trump’s tax reform proposal announced Wednesday.

The White House released the contours of his tax reform proposal that would lower tax rates and reduce the number of tax brackets. However, the plan would also reduce the number of tax deductions.

When a reporter asked if deducting taxes on state and local income taxes would also be eliminated, Treasury Secretary Steven Mnuchin answered, “Yes.”

“We are going to eliminate on the personal side all tax deductions other than mortgage interests and charitable deductions,” Mnuchin said at a White House press conference Wednesday.

House Republicans were already reportedly considering eliminating the deduction on state and local taxes, which could disproportionately affect wealthy people in high-tax blue states such as New York and California.

This federal deduction basically encouraged states to hike taxes, said Jonathan Williams, the chief economist for the American Legislative Exchange Commission, a state-centric public policy organization.

“The current policy subsidizes high-tax states,” Williams told The Daily Signal in a phone interview. “Using that revenue to pay for cutting rates across the board is a step in the right direction.”

The Trump tax plan would reduce the number of tax brackets from seven to three brackets of 10 percent, 25 percent, and 35 percent. The plan would not tax the first $24,000 in income for a couple, which is double the current standard deduction.

The Trump plan would repeal the alternative minimum tax, phaseout the death tax, and repeal the 3.8 percent surtax on investment income used to fund Obamacare.

On the business side, the corporate tax rate will be cut to 15 percent, from 35 percent. Also, the government would only tax a business’s income from inside the United States, not income from abroad. This is common in other countries and is known as a “territorial tax system.”

Gary Cohn, director of the National Economic Council and Trump’s chief economic adviser, told reporters tax reform is a “once-in-a-generation opportunity to do something really big.”

The last sweeping reform came in 1986.

“This isn’t going to be easy. Doing big things never is. We’ll be attacked from the left. We’ll be attacked from the right,” Cohn said. “But one thing is certain. I would never, ever bet against this president.”

Cohn added:

In 2017, we are still stuck with a 1988 corporate tax system. That’s why we are one of the least competitive countries in the developed world when it comes to taxes. So tax reform is long overdue.

House Minority Leader Nancy Pelosi, D-Calif., said the plan is the “same trickle-down economics that undermined the middle class,” and said the president should work on a fiscally responsible bipartisan plan with Democrats.

“Instead of focusing on hardworking families as he promised, President Trump’s tax outline is a wish list for billionaires,” Pelosi said in a public statement. “What few details are here overwhelmingly cut taxes for the richest and do little for middle-class Americans and those trying to get there. Besides which, nowhere does President Trump indicate how his deficit-exploding tax plan will actually be paid for.”

Adam Michel, a tax policy analyst with The Heritage Foundation, said he believes the proposal shows Trump is serious about reform:

For too long, America’s out-of-date and overbearing tax system has put a damper on economic growth while punishing savings and investment. The president’s plan is a great starting point. Now, the president and Congress must work together to finally update our broken tax system. True reform should apply the most efficient and least economically destructive forms of taxation, have low rates on a broad base, and be as transparent, predictable, and simple as possible.

Grover Norquist, president of Americans for Tax Reform, praised Trump’s proposal.

“President Trump has re-energized the drive for fundamental tax reform that creates growth and jobs,” Norquist said in a public statement. “The plan cuts taxes for businesses and individuals and simplifies the code so Americans can file on a postcard. Reducing taxes on all businesses down to 15 percent will turbocharge the economy.”

Mnuchin called the current 35 percent corporate rate “perhaps the most complicated and uncompetitive business rate in the world.”

He said he anticipates the proposal would return the U.S. to greater than 3 percent growth without an adverse impact on the debt or revenue. Throughout most of the Obama administration, economic growth didn’t surpass 3 percent in a single year.

“This plan will lower the ratio of debt to [gross domestic product]. The economic plan under Trump would grow the economy, will create massive amounts of revenues,” Mnuchin said.

The plan is a net tax reduction, Williams said, and fundamental reform takes cronyism out of the tax code, which could help Trump keep another promise.

“Draining the tax code swamp is a good way to go about getting rid of all those special interest loopholes,” Williams said.



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