Dimensions of Inequality

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My previous post was criticized in the comments on the grounds that I “confuse inequality with unfairness.” That’s actually not the case, and in the book I talk about different aspects of inequality (something I did not have a chance to develop in an 800-word blog post). But the point is important because there is a tendency today to blame all kinds of social ills on inequality without carefully explaining what one means by that. So let’s talk about it.

To keep things focused, I am interested in the effect of inequality on cooperation, and ultimately on generating broad-based improvement of well-being. At the most basic level, people are unequal because everybody is different. That’s not necessarily a bad thing, because many cooperative tasks are better performed by a mix of people with diverse skills (which is obvious), or even inclinations (slightly less obvious). For example, in a family one person may hate cooking, but doesn’t mind washing dishes, while the other actually likes cooking, but hates washing dishes. It would be natural to divide up chores so that one cooks and the other washes dishes, according to their inclinations.

Then there are differences between people in more important ways—power and wealth. Actually, “well-being” is a more broadly important category than one that is purely economic, such as wealth, or income. After all, if I like living in the countryside, where I can enjoy fresh air and peace and quiet, I may prefer a smaller income, compared to what I would need if I was forced to live in a megalopolis. Let’s stick with wealth for simplicity, but with an understanding that I talk about something more general.

OK, the major point I want to make is that both power and wealth (rewards) may be distributed unequally and that is not necessarily bad. In particular, wealth may be distributed unequally, and that can be either fair or unfair. In fact, most people agree that when someone contributes more effort and more skill to a cooperative enterprise, or bears greater risks, this individual should be rewarded with a greater share of the proceeds from cooperation.

How much more such a contributor should get is a big question that doesn’t have a general answer, because the degree of inequality that any particular group is willing to support is culturally determined. Even such closely related cultures as American and Australian have very different ideas of fairness (Australians systematically favor more egalitarian outcomes than Americans).

Similarly with power, but here the question is not fairness, but legitimacy. Sociologists distinguish between legitimate authority (or leadership), power that is used in a consensual way for the common benefit, and illegitimate power—dominance or despotism. Any kind of cooperative venture, especially one involving huge numbers of people, will put a huge amount of power in somebody’s hands. Complex societies organized on a hierarchical principle (which is the only way humans can cooperate in huge groups – we are not ants) must have huge inequalities of power. The big question is how it is used.

And this takes me back to the topic of my previous post. It was about how inequality resulting from the exercise of illegitimate power—domination—is destructive of cooperation. In the experiment, some subjects were given a lot of power over others, and it was not legitimate for two reasons. First, it was arbitrary—rank was assigned either randomly, or as a result of qualities (success in playing Tetris) that were irrelevant to the cooperative venture in the experiment (money contributed to the pot were doubled the same, no matter how well you did in Tetris). Second, inequality of power only affected how the rewards were distributed (again, having high rank did not contribute to the common benefit).

So the experiment combined two kinds of “bad” inequalities: arbitrary, illegitimate power and unfair distribution of rewards. The combination turned out to be corrosive for cooperation.

In the future, it would be important to design experiments that would tease apart the effects of illegitimate power and unfair distribution of rewards on cooperation.

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al loomis

the central problem is that power and wealth tend to accrete to those with power and wealth, small inequalities self- magnify if there is not some redistributive engine in society. this means either you have democracy, which formally invests ultimate power the electorate, or oligarchy, which from beginning has that inequality of power and wealth which leads to tyranny.
democracy not only empowers the poor, it requires that the activities of state be done in public, for the electorate can not rule without knowledge of what is done. very hard to amass secret fortunes when secrets are illegal.

Ross Hartshorn

Actually, the experiment you linked to does test out both earned and unearned inequality:

“Each player experienced one of three different treatments: the “earned hierarchy condition” (described above), a “random hierarchy condition” in which the ranking was assigned randomly without performing any task, or a control condition with no hierarchy… Interestingly, there was no difference between the random and earned hierarchy conditions, indicating that whether rank arose from personal performance or was randomly assigned did not affect cooperation success.”

Which makes sense, since the lower-status person shares less in the gains, regardless of whether the higher status person got their status randomly or due to skill in a previous task.

Swami

I agree completely with this post. Completely. (And I am now half done with your book and broadly agree the concept that competition between societies drives cooperation within)

There are two related areas of disagreement though and both relate to your prior post.

In this one you state (and again I agree) that inequality can be a good thing and that people should be rewarded in ways which recognize greater contribution. Your issue, like mine, is with structural inequality (the absence of rule egalitarianism), illegitimate and unfair inequalities.

Yet in the prior post you state in a standalone paragraph that:

“Inequality corrupts cooperation.”

I pointed out that this is not correct and that it confuses fairness and equality of outcome. Granted it is an abbreviated blog post, so I agree with your current elaboration in this post. Indeed I would suggest that in certain cases “equality corrupts cooperation”. Like you mention, the exact details are situational, value dependent, and depend upon what kind of equality and institution we are talking about. An example of this statement is socialism, which you more than most recognize as not the greatest case study in cooperation. This is well documented in studies of free riding in group activities.

The next area of disagreement is is again with the prior post where you explained that:

“…. increasing inequality of wealth gave rich people disproportionate power to influence politics in our democratic societies. The work by Martin Gilens has shown that public policy in the US reflects only the desires of the richest segment of the population—the top 10 percent, and most likely the top 1 percent. In other words, when it comes to dividing the pot, the 99 percent have no say anymore. Should it then surprise us that several measures of social trust and cooperation have been declining?”

I pretty much disagree factually with every phrase in this paragraph. If you had simply written that you are concerned with the effects of wealth to manipulate politics, I would agree. But you did not write this.

It is not true in the slightest that US public policy “reflects ONLY the desires of the richest segment” and I could provide thousands of examples. It is not true that “when it comes to dividing the pot, the 99 percent have no say anymore.” Again, I could provide countless examples to the contrary, and that is in politics. in markets (which involve the simultaneous creation and distribution of the pot and which make up the majority of the pot in question) it is doubly incorrect. Nobody in my family is in the top ten percent of income, yet every one of them has a significant effect on their standard of living. They chose their schooling, profession, hours worked, dedication level and so forth.

As I stated in my prior post, it is not even true that wealth gave the wealthy disproportionate power to influence politics. Political institutions gave them disproportionate power. I am not sure why this is such a hard concept for people to grasp. If a wealthy person bribes a cop the problem isn’t the briber’s wealth. The problem is the bribery and the bribe taker. Solving bribery by addressing wealth inequality is crazy. Indeed it is counterproductive and won’t likely even reduce bribery, it just changes the currency of graft.

Wealth is just one source of power (incumbency, concentrated benefits, organizational skills, population size, academic/intellectual influence/standing, political involvement, and insider status are a short list of some of the others). If wealth had less effect or distortions it is just as likely that the other influencers would have had even more so. Read Maddison for details.

The point is that political abuse isn’t solved efficiently by manipulating inequality of wealth. It is solved efficiently by safeguarding political institutions from illegitimate influences of any source of power. Indeed, I will offer that your above paragraph is simply a case of tribal affiliation. You believe the other power sources manipulating politics (including the power group you belong to as an academic) should have more power than those with wealth, so you pretend your tribal favorites have zero influence. We are all entitled to our opinions, but it would be healthy if you admitted it was just your personal bias not a factor built into current economic trends (which on a global level are seeing unprecedented gains for the most disadvantaged, and as a side effect increasing developed nation income inequality).

Let me restate. I am not denying the wealthy have too much influence in politics. I agree they do. I also believe other groups have way too much influence. Where we may differ is that I see the only logical course of action is to address political institutions, not the inequality of wealth itself. Indeed, from a utilitarian case, I could argue convincingly that neutralizing inequality of wealth risks harming billions of developing nation people who depend most on their capital and entrepreneurial ideas.

Economic prosperity does not always advance evenly, and I am extremely suspicious that if it did it would be on net beneficial to humanity. I am not pro inequality, or pro equality. I am pro institutional fairness and pro human prosperity.

Roger

I am sorry for the delayed response, the auto-notification isn’t making it into my email.

Please re-read my full response. I do not disagree that the rich have too much influence, and I said so specifically. It is 100% absolutely, and incontrovertibly incorrect though that our policy only reflects their views. As I said, I could list countless examples of policies which do not reflect the interests of the rich. From our abnormally high progressive tax rates, to the pensions of government service workers, the FDA, and so on.

Campaign finance reform isn’t proof of your statement. It might be proof of mine — that they have excessive influence — but it might also be more of a reflection that reform violates our constitutional balance between competing interest groups. There are trade offs between how campaigns are supported, and you cannot assume that your interpretation of how campaigns work is superior to that of the Supreme Court. It may be, in may not be, and it may depend upon your values vs someone else’s.

concomdynamics

Perhaps, “confusion of inequality with unfairness” is a special case of bigger problem – blind substitution of essentially multi-dimensional value by one-dimensional composite index (or by subjective “sense of fairness”).
Even in biological realm, there are at least three dimensions of inequality: inequality in survival, inequality in reproduction and inequality in domination, which may loosely matched to poverty level, income inequality and wealth inequality.
All three measures have very different historical dynamics: to more equality in survival (reduction of poverty), little changes in power structure (wealth inequality) and cycling in reproduction (income inequality).
Indeed, all three types of inequality have different and independent impact on cooperation. For instance, cooperation for survival cannot be directly matched to cooperation for domination, even though they are both formally described by the same game model. Outcome of Russian roulette game with toy gun (typical experimental set) will be quite different from outcome of the same game with real gun, is not it?

concomdynamics

I partly agree, increasing of (wealth/power) equality beyond some level leads to instability and possible disintegration of the system. While, increasing of survival equality (reduction of poverty) has opposite effect.
I think that use of the term “inequality” without specifying what type of inequality is meant leads to multiple confusions.

Juan Alfonso

This is an extremely interesting debate! I have already purchased “Ultrasociety” but I haven´t read it yet, so sorry if I am missing something.

What I miss here is a bit of an evolutionist approach. Swami is using standard economic reasoning, which is very interesting but some insights from straightforward Darwinian approaches could be added.

Natural selection works through differential success, what means that inequality of outcome is necessary for natural selection to work. But for this process to be stable this differential success must be based on traits relevant to multi-selective processes. Otherwise natural selection will be blind. Differential success due to luck or to any advantage not ascribable to traits subject to reproduction, heredity and variation will interfere with natural selection.

This is why equality of OPPORTUNITY is so important. Natural selection will work better if a leveled playground is granted in a way that “evolvable” traits are the only ones responsible for the inequality of outcome (as long as this inequality of outcome is translated into differential fitness). I guess that group selection ensures that these traits will frequently involve pro-social behaviors since they will confere the group with extra resources to compete with other groups. I don´t think that excelling at Tetris has a lot of probabilities to becoming considered a relevant trait to build a meritocratic and consensuous hierarchy.

Is wealth one of this relevant “evolvable” traits subject to reproduction, heredity and variation?… I am not sure. Wealth is, more than anything, a way of signalling status. The signals should not be passed on directly to the offspring but only the ability to produce their own quality signals and the underlying capacity for sustaining the signaling costs. Passing on the signal itself will only “confuse” natural selection. In the animal kingdom signals are usually built in the individuals but we humans have this very durable extended phenotype, wealth, that 1. can be passed on to the following generations without erosion, 2. can determine differential reproductive success and 3. tend to follow the Mathew effect an accumulate itself.

In this example, for natural selection to work properly, wealthy parents should pass on the heritable traits that would help their offspring to earn their own wealth, but not wealth itself.

We humans might have had pressures to evolve instincts to disliking what we consider illegitimate power advantages, such as inheriting wealth, inheriting reputation or just having luck; In this context “Illegitimate” would mean “an advantageous trait which is not direct subject to natural selection”, such as wealth or plain luck. We humans might have evolved to respect the underlying traits more than the signal themselves, since these signals cannot undergo natural selective processes.

In sum, cooperation might not be eroded at all by inequality of outcome. It might be eroded by inequality of opportunity which in turn is most frequently due to nepotistic instincts: the transference of non-replicative wealth to kin. This is very difficult to address since one of the main drives for economic productivity is passing on wealth to kin. We should bear in mind that nepotistic instincts are phylogeneticly the oldest cooperative instincts. In my opinion this is why cultural evolution has not wiped out economic systems based on illegitimate wealth and power. I guess that wealth could be considered a legitimate family (or group) trait and directly subject to natural selection between families (or groups)… I don´t know…

Alessio

Well said, we are not ants but actually live like them. Domination started its path during the advent of agriculture and now the less are resources the less social pressure increases. It’s strikingly clear from some papers and reports how as soon as you move from our biological needs (to live in small communities as hunter gatherers) to agriculture some kind domination is set off and pressures and inequality are proportional to the size and the complexity of the community. Hunter gatherers societies are actually cooperative and egalitarian, but as soon as private property with the life threatening exclusion from such private goods, domination arises straight away. Don’t drive you crazy to study in such a detailed way our society, it will never be egalitarian as long as the engine of domination will be stopped, and I’m really disenchanted about it, things will never change.

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