Tuesday, May 11, 2010

Free Agency and Government Intervention

In a recent NY Times column, Robert Frank argues for progressive taxation:
Suppose, for the sake of discussion, that we grant the libertarian premise that private pay systems provide the best ethical template for society’s income distribution. As closer scrutiny of that premise will make clear, the libertarian denunciation of income transfers fails on its own terms. 
He then goes on to make the case that private companies are actually highly redistributive in their pay structure, as higher productivity rarely translates into a proportionate increase in pay.  Whether this is true or not, the exercise seems largely irrelevant.

While I concede that as a practical matter, taking libertarians/conservatives on their own terms might be a wise strategy in the short term, it doesn't get us to what I think is the next fundamental conceptual transformation that society must undergo.

What is being taken on their terms is this: "an ideal world would be one in which well informed people could exchange freely with one another with no significant market frictions".  The key phrase here is "well-informed people", and it needs a bit of unpacking.  For there to be an equal "playing field", in which individuals perform transactions in which exchanges can be made freely, the individuals must have similar levels of "human capital".  This entails not just comparable levels of objective knowledge, but also everything else that goes into self-efficacy.  They must have similar cognitive and communication skills.  They must have knowledge of self and emotional and behavioral awareness.  In short, being "well informed" is everything that goes into being a productive citizen.

Our biggest problem in society today is that we don't grasp how important this understanding of human development really is.  We have a somewhat schizophrenic, incoherent view of humanity, in which on the one hand we value things like culture, parenting, education, and other social institutions, yet on the other we treat individuals as if they all possess equal levels of self-efficacy and free agency.  We assume that each individual determines his own choices - whether that is to create a run business or rob a liquor store.  We acknowledge that children do not have this sort of free agency, but when they reach adulthood, it is magically acquired. 

I say magically because there is no evidence for anything like free agency.  It is something we intuitively "know" exists, but all evidence points towards it being an illusion concocted by our conscious mind.  A quick debunking can be done, however.  If all adults have equal levels of free agency, we ought to see a random distribution of ability across all socioeconomic demographics.  Just as say, 20-20 vision, the ability to walk upright, or speak language is distributed evenly across groups, so to would behaviors that are purported to arise from man's free agency. 

Of course they do not.  In fact, one can predict life outcomes before people are even born, simply based on their mother's environment.  Things like neighborhood, environmental toxicity, parental education level, income, and others are very predictive of life success.  A child born in a ghetto is simply much more likely to have lower levels of self-efficacy, or agency than one born in a wealthy suburb. 

Libertarians and conservatives deny this reality.  Some might claim they accept it, but claim that there is nothing to be done - that government intervention won't help.  But this is simply not true, both for those who are currently experiencing the effects of structural disadvantage, as well as young children who could be thriving with adequate government intervention at home and at school.  Further, if we accept that free agency is a myth, then we accept that humans are socially determined.  This has consequences not only for our treatment of the less fortunate, but for the fortunate.  Wealthy people, to the extent that they benefit from social structural inequalities, have no right to their wealth.

Now, deciding what to do about all of this as a practical matter is quite difficult.  But before we can even begin that project, we must as a society come to terms with the transformative notion that free agency is a myth, and that true freedom lies in accepting our limitations as conscious beings.

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