Should there be a limit on how much income a wealthy person can hold?

Ingrid Robeyns asks that question at Crooked Timber, The most blasphemous idea in contemporary discourse?, Sept. 21, 2019:

I have no idea how he found it, but George Monbiot read an (open access) academic article that I wrote, with the title “What, if Anything, is Wrong with Extreme Wealth?’ In this paper I outline some arguments for the view that there should be an upper limit to how much income and wealth a person can hold, which I called (economic) limitarianism. Monbiot endorses limitarianism, saying that it is inevitable if we want to safeguard life on Earth.

As Monbiot’s piece rightly points out, there are many reasons to believe that there should be a cap on how much money we can have. Having too much money is statistically highly likely to lead to taking much more than one’s fair share from the atmosphere’s greenhouse gasses absorbing capacity and other ecological commons; it is a threat to genuine democracy; it is harmful to the psychological wellbeing of the children of the rich, and to the capacity of the rich to act autonomously when it concerns moral questions (which includes the reduced capacity for empathy of the rich); and, as I’ve argued in a short Dutch book on the topic that I published earlier this year, extreme wealth is hardly ever (if ever at all) deserved. And if those reasons weren’t enough, one can still add the line of Peter Singer and the effective altruists that excess money would have much greater moral and prudential value if it were spent on genuine needs, rather than on frivolous wants.

Monbiot wrote: “This call for a levelling down is perhaps the most blasphemous idea in contemporary discourse.”

I agree that mainstream capitalist societies operate on the assumption that the sky is the limit. But it is important to point out that the idea that there should be a cap on how much we can have, is not at all new. Historically, thinkers from many corners of the world and writing in very different times, have either given reasons why no-one should become excessively rich, or have proposed economic institutions that would have as an effect that no-one would become superrich (I suppose Marx would be in that latter category). Matthias Kramm and I have joint research on this that I’ll happily post on this blog once it is published. But to give a flavour of the range of support for the view that there should be upper limits, here are three very different sources. (I’ll leave out any comments on Socrates and Plato, since John and Belle are the obvious experts on those thinkers).

And so forth.

I posted the following comment:

A book that has influenced my thinking quite a bit is David Boehm's Hierarchy in the Forest: The Evolution of Egalitarian Behavior (1999). Boehm is interested in accounting for the apparent egalitarian behavior of hunter-gatherer bands, the most basic form of human social organization. While individuals can assume a leadership role for specific occasions, e.g. a hunt, there are no permanent leaders in such bands. Boehm does not argue that such bands are egalitarian utopias; on the contrary, primitive egalitarianism is uneasy and fraught with tension. But it is real. Boehm finds this puzzling because, in all likelihood, our immediate primate ancestors had well-developed status hierarchies. Boehm ends up adopting the notion that the hierarchical behavioral patterns of our primate heritage are overlain, but not eradicated or replaced, by a more recent egalitarian social regime. Other than suggesting that this more recent regime is genetic Boehm has little to say about it.

What I like about this is the idea that our social behavior is mediated by (at least) two behavioral systems, which are organized on very different principles: hierarchy and dominance vs. equality and anarchy (in the sense of self-organizing w/out orders from above). So let's accept that as a premise. That is in our 'nature'. I'm also going to postulate our 'nature' has no way of giving priority to one of these systems. Rather, than is something that is done by 'culture' according to local social circumstances.

In this view, one of the things we're working out over the course of history, then, is the relationship between these two systems. The (phylogenetically older) hierarchical system is perfectly happy with extreme wealth because the resulting inequality is consistent with it. But the (phylogenetically newer) system doesn't like it at all. I don't see any inherently 'right' way to resolve this interaction, but I note that neither system is going to disappear. Both 'make demands' on our behavior.

So, it's all well and good for the economists to tell us that a rising tide floats all boats. But there's going to be a point where the peasants in the little rafts and zodiacs are going to be angry with the plutocrats and oligarchs in their megayachts sailing around the sea like they own it.

* * * * *

We can see this two-systems dynamic on display in Shakespeare. Consider Much Ado About Nothing. We've got two couples. Claudio and Hero interact through the hierarchical system. How does Claudio pursue Hero? Without speaking to Hero at all, he approaches his military commander to broach the matter with her father. Her father accepts on her behalf, all without conferring with her. Beatrice and Benedick, on the other hand, confront one another as equals, and one of the joys of this play is their wit combats. While both are aristocrats (as are all the principals in Shakespeare's plays), neither is rigidly fixed in the aristocracy. And so the play moves back and forth between the stories of these two couples. Of course, the play has a happen ending; both couples are to be married. But that ending has required the interaction of both of these plot lines.

How do you get a letter or recommendation from Paul Romer? Chat with him at Burning Man.

Emily Badger, A Nobel-Winning Economist Goes to Burning Man, NYTimes, Sept 5, 2019. It's about ideas:

But Mr. Romer, in a seminal 1990 paper, showed that ideas were central to progress. His model of economic growth incorporating them enabled economists to ask entirely new questions about the modern “knowledge economy”: Where do ideas come from? How do they spread? Why are cities such hotbeds for creating them?

By the late aughts, Mr. Romer was sure that cities were the urgent subject of the 21st century. He had a new idea: “charter cities” that would be built in the developing world but governed by nations with more advanced economies and more rules protecting, say, property rights and independent judges. He was picturing British-era Hong Kong, replicated 50 times over.

Some developing-world politicians were intrigued. Critics cried neocolonialism. Libertarians largely misread Mr. Romer’s intentions: They saw new territory where capitalists could shrug off government rules. To Mr. Romer, the idea was about seeding the right government rules.

The proposal forced Mr. Romer to learn the mechanics of cities. He persuaded N.Y.U. to create a new institute devoted to them, and two planning experts gave him an education.

Anarchy?

Today, the event’s six “founders” are the people who reconstituted Burning Man after 1996, including Ms. Dubois. The anarchists drifted away. And the founders created a street grid, an early version of what would become a semicircular city with all arterial roads converging on a giant, flammable male figure in the center.

They “invented a sense of superordinate civic order — so there would be rules, and structure, and streets, and orienting spaces, and situations where people would feel a common purpose together; where people could become real to one another,” Larry Harvey, one of the founders, recounted in an oral history before his death last year.

“It had gone beyond a bit of pranksterism in the desert,” he said. “We had made a city, and no one wanted to take responsibility for it.”

To Mr. Romer, this was a teachable moment. “Anarchy doesn’t scale!” he said.

Most of the structure that has been added since feels invisible to the people who come: the streets that are surveyed to be exactly 40 feet wide, the plazas that steer people together without crowding them, the 430 fire extinguishers around town, each tracked by its own QR code.

The goal now, one planner explained to Mr. Romer, is to make Black Rock City just safe enough that people can joke about dying without actually dying.

“It’s a metaphor for my sense of economics,” Mr. Romer said. “I picture an economist showing up at Burning Man and saying: ‘Oh, look! This is the miracle of the invisible hand. All of this stuff happens by self-interest, and it just magically appears.’ And there’s this huge amount of planning that actually is what’s required beneath it to make the order emerge.”

On this point, the economist and the Burners kept converging: Freedom requires some structure, creativity some constraints.

Just like jazz, my friends, just like jazz.

The market is the problem, and the city is an answer to it:

Helter-skelter is a decent description of the force from which economists believe ideas emerge. When people live close to one another, rather than close to the land, they hatch plans, they trade services, they discuss terrible ideas until they eventually arrive at good ones.

This is more or less what happens at Burning Man, too. But other cities have become symbols of greed and consumption, Mr. Roger said. And that greed is killing our Earth Mother.

“I think I have some of the same anxieties, but I’m coming to the view that it’s the market which is the danger, not the city,” Mr. Romer said.

“I’m afraid economists have really been serious contributors to this problem. This whole ideology of ‘government is bad, government is the problem’ has I think provided cover for rich people and rich firms to take advantage of things for their selfish benefit.”

A gift economy?

Levi, 35, was part of a camp running a 24-hour bar up the street, and we learned that he had lately been riding motorbikes across Africa but was about to apply to graduate school to study cognitive science.

Levi, who did not know whom he was talking to, mentioned to Mr. Romer that his hero was Daniel Kahneman, the 2002 winner of the Nobel in economic sciences.

“Well, I won the Nobel prize last year,” Mr. Romer said. “So Danny is a fellow laureate.”

Levi’s face lit up, and we then spent the next 45 minutes wandering around the neighborhood talking about economics and human behavior and scarcity. Nearly everything in Black Rock City is effectively free. But you’re supposed to respond with some type of gift to the people around you: a piece of advice, a turn in a hammock, a hot dog.

At Levi’s bar, we were given cups of something cold and orange and alcoholic. Mr. Romer, in a comparable act of generosity, then offered Levi his email address. He would happily write a recommendation for grad school, he said. Levi, floored, went in for another hug.

Can you get rich, and do good, by giving away 50% of your top line revenue? [TALENT SEARCH]

I was looking through the archives and WHAM! this jumped out at me. On point for TALENT SEARCH WEEK at New Savanna. Crazy? I suppose so. But we need this kind of crazy right now.

Sometime last year – late Summer or early Fall – my friend Zeal handed me a roll of papers, telling me it was the business plan for the World Tourism Foundation & World Tourism Network (alas, the link is now dead). It was the darnedest business plan I’d ever seen, large-format pages (perhaps 18 inches by 24 inches), lots of prose in columns and boxes, boxes connected by arrows so they looked like flow charts, but nowhere an executive summary. Looked like I’d have to go through the whole thing just to get a flavor for it.

I was not a happy camper. But Zeal wanted me to do read through it. So I scratched my head, rolled up my sleeves, and unrolled the WTF/WTN business plan.

It turned out to be crazy, but also freakin’ brilliant. So I ended up helping the founders of the WTF/WTN, [the late] Ed Beauchamp and C. J. Duffy, write an executive summary for their plan. The general idea is to give travel intermediaries, such as Expedia and Orbitz, some serious competition while making a healthy profit and goosing the world-wide tourist industry. The key to the whole plan is to take 50% off the top-line revenue and put it into a non-profit foundation – the World Tourism Foundation.

Whoa there, son! You said 50% off the top? They’re going to give it away? There’s no profit in that, no sir!

That’s what I said, 50% off the top. My reaction was like yours at first. I didn’t believe it. Sure, I saw the numbers in the business plan . . .

Now, son, I’ve seen lots of business plans. Everyone knows those numbers aren’t real. Why . . .

I know, I know. Those pro forma financials aren’t about predicting the future. They’re there to show that the entrepreneur can add, subtract, multiply, and divide and that they know what a profitable business looks like on paper. If you can’t show a profit when you’re allowed to make the numbers up, you sure as heck aren’t going to show a profit when reality has a say in the numbers.

As I was sayin’, 50% off the top. To understand why that works you have to understand a thing or two about the intermediary segment of travel business. First, advertising costs are high. Beauchamp tells me that Expedia, for example, spent 44% of their revenue on advertising in 2006 on advertising and 34% in 2009. What if you could drop that to zero?

What, no advertising! Are you nuts, son? Are you outa’ your ever lovin’ mind?

Hold on old man, hold on. We’ll get there in a minute. A few more facts. Here’s what Beauchamp tells me about the deals Expedia cuts with suppliers (airlines, hotels, etc.):

From the Building Blocks of Human Relationships to Starving Artists

As I’ve said in a number of posts, I find the idea of a board game such as chess to be a useful way of thinking about the relationship between our biological endowment and the cultural elaboration of that endowment. Biology provides the game board, the pieces, and the rules of the game. But it is culture that discovers and accumulates the tactics and strategies underlying successful gameplay. In recent years Christopher Boehm and Alan Fiske have made interesting suggestions about the basic building blocks of social interaction. The next four paragraphs are slightly expanded from an old post, Hierarchy and Equality: The Essential Tension in Human Nature.

* * * * *

Let us consider Christopher Boehm’s Hierarchy in the Forest: The Evolution of Egalitarian Behavior (1999), which speaks to issues of class and equality. Boehm is interested in accounting for the apparent egalitarian behavior of hunter-gatherer bands, the most basic form of human social organization. While individuals can assume a leadership role for specific occasions, e.g. a hunt, there are no permanent leaders in such bands. Boehm does not argue that such bands are egalitarian utopias; on the contrary, primitive egalitarianism is uneasy and fraught with tension. But it is real.

Boehm finds this puzzling because, in all likelihood, our immediate primate ancestors had well-developed status hierarchies. Boehm ends up adopting the notion that the hierarchical behavioral patterns of our primate heritage are overlain, but not eradicated or replaced, by a more recent egalitarian social regime. Other than suggesting that this more recent regime is genetic Boehm has little to say about it.

The 50/50 Model—Another step toward a gift economy?

A bit over two months ago I blogged about prospective business consisting of a for-profit corporation, The World Tourism Network (WTN), and a not-for-profit corporation, The World Tourism Foundation (WTF). In effect, the WTN outsourced its marketing to the WTF and, in compensation, sorta, donated 50% of its top-line revenue to the WTN. Sounds crazy, I know – read the post for the nuances. One of the principals in the WTF/WTN, Ed Beauchamp, has alerted me to an up-and-running business that is based on a similar 50/50 scheme.

Back in 2006 Steve Strauss reported on GoodSearch.com in USA Today:

The idea behind this excellent search engine (powered by Yahoo) is simple and brilliant — 50% of all ad revenue generated from the site is donated to the charity of the user's choice, and the money GoodSearch donates comes from its advertisers, so it doesn't cost the users or the organizations a penny.

Here's how it works: By going to GoodSearch.com (or downloading the GoodSearch toolbar to your browser), you can search just as you would on any other search engine, the difference being that half of all ad revenue your searches generate, approximately a penny a search, goes to the charity of your choice. . . .

More than 22,000 non-profits and schools are now generating revenue from the site and more than 100 charities and schools are registering daily.

According to their website, GoodSearch has gotten a fair amount of press.

Meanwhile, Google’s been dancing with Darth Vader, though, of course, he doesn't look like DV. But that's how the man operates.

Life in the fast lane.