Redistribution vs. predistribution

There’s an ongoing debate in left-of-center policy circles between redistribution and “predistribution”, and it’s often framed like this:

The redistribution camp wants to let the market do its thing and then if (when) it creates winners and losers that camp suggests we should redistribute those gains using the tax system and various kinds of spending programs. Doing so would mean getting the best of both worlds, the thinking goes: the efficiency of the market with the welfare gains of redistribution.

The predistribution camp raises a number of objections to this and suggests that instead policy should directly aim to transform the market so that its outcomes are more just, even before taxes and transfers. The predistribution camp has a few different arguments; my list is certainly not comprehensive:

  1. Political economy: a society full of rich people will fight tooth and nail against redistribution.
  2. Fairness, dignity, and trust: People don’t want to be marked as an economic “loser” and then compensated for it. They want to feel they’ve earned a good living and they will lose trust in a system that doesn’t offer them that.
  3. Growth: Markets are highly imperfect and we’re actually leaving growth on the table when we sit back and leave things to “the market”, which is itself highly contingent.

These are good critiques, and I’m quite open to lots of predistribution ideas. The easy response is to say we need some of both.

But I do think this debate can sometimes misunderstand the role of redistribution. Specifically, it misses the sense in which today’s redistribution is tomorrow’s predistribution.

To see what I mean it’s easier to start in a very different context: cash transfers in developing countries. I have no strong view on the efficacy of cash transfers relative to other development interventions; my point is just to note that the argument for cash transfers in this context is that they spark economic development. Here’s economist Chris Blattman, who studies this, in 2013 (if you want more recent information on the effectiveness of cash transfers for development try here):

So how do you create “good” jobs and productive work? Another way of asking this question is “what is holding young people back?” or “what constrains them?”…

More and more, economists think that the real constraint is capital. Studies show that the poor, on average, have high-earning opportunities if they get a little cash or equipment. Studies with existing farmers or businesspeople have seen returns of 40 to 80% a year on cash grants.

This gels with economic theory, which says that infusions of capital should expand people’s choice of occupations, self-employment, and earnings. People can’t get access to that capital through loans because credit markets are so broken and expensive. This can be a development trap, or at the very least a drag on growth.

Redistribution in the U.S. is taking place in a very different context, of course. What’s true in developing countries might not be in developed ones. But when we talk about redistribution’s merits (or lack thereof) in the U.S. we ought to consider its ability to change economic fundamentals. And we have evidence that this sort of thing happens. Welfare state programs — including transfers like food stamps — increase entrepreneurship by helping to de-risk it. Likewise, Raj Chetty and colleagues have demonstrated that the combination of school performance and parents’ income predict the likelihood that a child will go on to file a patent. The “Einstein gap” that Chetty points to is an income gap. It’s at least plausible (if not likely) that if you substantially raised the incomes of parents, their kids’ likelihood of being a (well-compensated) inventor would increase dramatically. Today’s redistribution is tomorrow’s predistribution.

Of course, most left-of-center policy people get all this. And politicians in particular are keen not to pitch redistribution programs simply as static subsidies. Several 2020 primary candidates are doing a good job of proposing redistributive policy ideas in the context of a broader economic transformation. It’s when the more philosophical redistribution vs. predistribution debates get going that the problematic framing I’ve described typically seems to occur.

For example, when we frame the basic income as simply a way to subsidize a permanent underclass in the face of automation or when we treat the welfare state as merely a way to placate those who’ve lost the lottery of winner-take-all capitalism we miss at least part of redistribution’s potential. Transferring money from richer to poorer people changes the economy in important ways, and that’s a big part of its appeal.

That doesn’t mean we should rely solely on redistribution and neglect predistributionist ideas. Many of those ideas are great! And the predistributionists are right to have drawn the lesson that we’ve been too deferential to market outcomes, as if they were delivered from on high. Furthermore, none of what I’ve said addresses the political economy critique that certain market outcomes make certain policy changes harder.

Nonetheless, redistribution should be an important part of any economic policy agenda. And it shouldn’t be framed as simply a static transfer from “winners” to “losers” because that’s not what it is.

Too much entertainment

Here’s Matt Yglesias of Vox on The Weeds podcast, discussing the recent social media study I mentioned here:

The optimistic case is always ‘Well, it’s crowding out television’… But what you see in this study is that, while making people not use Facebook did crowd in extra television watching, it also crowded in extra socializing and extra exercising.

And:

You just put more stuff on the entertainment-options bus and this is what you get. It’s just kinda not great. To have so much of the innovation and progress… happening just specifically in the entertainment zone is maybe not actually great for peoples’ lives.

These are both really good points. I used to trot out the (important!) finding that internet users watched less television, usually sourcing it to Yochai Benkler’s book The Wealth of Networks which reviewed that evidence (p. 361).

But we’re past that. Social media isn’t just crowding out TV; it’s crowding out important stuff, too. As I wrote in my post What the Internet is Good For:

It may be that by the time we had email, we more or less had the big benefits we were going to gain from cheap communication.

Another theory would be that, whereas early internet communications were a substitute for TV but still a very different activity, much of today’s “communication” technologies like social media are more or less a TV equivalent. (In the language of economics, the internet has evolved to be a more-perfect substitute for TV.) In this view, we’re spending more and more time on media, much of it mindlessly entertaining ourselves watching videos and scrolling through photos…

The internet made communication and entertainment cheap, and put endless information at our fingertips. It seems likely that we’ve overdone it on cheap communication and entertainment, and underdone it on instant access to other forms of information.

The next phase of the internet needs to be less about entertainment and more about other things.

On fake news

Just clipping a couple things that caught my eye on this recently:

Why do people fall for fake news?

Much of the debate among researchers falls into two opposing camps. One group claims that our ability to reason is hijacked by our partisan convictions: that is, we’re prone to rationalization. The other group — to which the two of us belong — claims that the problem is that we often fail to exercise our critical faculties: that is, we’re mentally lazy.

And from Nieman Lab:

Building on a draft paper from last year, psychologists Gordon Pennycook and David Rand have a new study showing that people across the political spectrum rate mainstream news sources as more trustworthy than hyperpartisan and fake news sites — and that “politically balanced layperson ratings were strongly correlated with ratings provided by professional fact-checkers.”

And the sites fact checkers trust:

Screen Shot 2019-02-01 at 12.17.04 PM

And (from Nieman also):

I know that you’re right, but I don’t care. What do people do when their favored presidential candidate gets fact-checked? They do not change their minds, according to a new study in Political Behavior from Brendan Nyhan, Ethan Porter, Jason Reifler, and Thomas Wood. They conducted two studies of voters during the 2016 election, fact-checking Trump’s claims about crime and unemployment. They found that “people express more factually accurate beliefs after exposure to factchecks. These effects hold even when factchecks target their preferred candidate.” But “we find no evidence that changes in factual beliefs in a claim made by a candidate affect voter preferences during a presidential election.”

On social democracy

Two narratives commonly emerge in answer to this question. The first focuses on the struggle between democracy and its alternatives, pitting liberalism against fascism, National Socialism, and Marxist-Leninism. The second focuses on competition between capitalism and its alternatives, pitting liberals against socialists and communists. Democratic capitalism is simply the best, indeed the “natural” form of societal organization, these stories assert, and once Western Europe fully embraced it, all was well. This account obviously contains some truth: the century did witness a struggle between democracy and its enemies and the market and its alternatives. But it is only a partial truth, because it overlooks a crucial point: democracy and capitalism were historically at odds. An indispensable element of their joint victory, therefore, was the discovery of some way for them to coexist. In practice, that turned out to mean a willingness to use political power to protect citizens from the ravages of untrammeled markets. The ideology that triumphed was not liberalism, as the “End of History” folks would have it, it was social democracy.

Correctly understood social democracy should be seen as a distinctive ideology and movement all its own, built on a belief in the primacy of politics and communitarianism and representing a non-Marxist vision of socialism. The term social democracy has thus been incorrectly applied to a wide range of groups, with unfortunate consequences for an understanding of the movement’s true history and rationale. In addition, social democracy should also be seen as the most successful ideology and movement of the twentieth century: its principles and policies undergirded the most prosperous and harmonious period in European history by reconciling things that had hitherto seemed incompatible—a well functioning capitalist system, democracy, and social stability.

That’s from a paper by Sheri Berman, a political scientist at Barnard. Here’s one of her books on the topic, and a series of responses to it by the Crooked Timber folks.

More on social media and happiness

From NYT:

So what happens if you actually do quit [Facebook]? A new study, the most comprehensive to date, offers a preview.

Expect the consequences to be fairly immediate: More in-person time with friends and family. Less political knowledge, but also less partisan fever. A small bump in one’s daily moods and life satisfaction. And, for the average Facebook user, an extra hour a day of downtime.

The study itself.

Previous posts on this here and here.