Corporations and generosity
Do corporations have a responsibility to help the economy?
Daniel Gross has a front-page article on Slate claiming that certain specific companies can “afford” to match employee 401(k) contributions again; companies like UPS and FedEx put their matching programs on hold during the worst of the recession.
The article uses two facts to assert its conclusion:
- It would be good if workers had more money
- At least some companies have cash reserves
What Gross doesn’t seem to understand is that corporations don’t have an obligation to The Economy — they have obligations to their shareholders (and, of course, to comply with government regulations).
This would be a simple and quite charming misconception if thinking like this didn’t end up on the front page of popular national publications.
What’s pernicious about Gross’s position is that it doesn’t make a call for any action that might actually help. Corporations are not likely to be shamed into providing benefits higher than they must. If wages must go up, employees will have to demand them, governments will have to mandate them, or employees will have to deliver more value. (I tend to prefer the last.) If Gross valued the long-term health of the economy he would have an eye on international competitiveness and productivity, not the short-term marginal compensation of a few thousand employees.
-John
Image courtesy Wikicommons.
Performance and reward in the public sector
California Governor Arnold Schwarzenegger has called for the salaries of top local government officials to be made public in the wake of a pay scandal in the city of Bell, where three top officials (who have since resigned) drew a combined salary of nearly $1.6 million, despite 16% unemployment and a 17% poverty rate in the Los Angeles County city. Meanwhile Congress debates pay raises for the military and perennial questions about teacher salaries are dealt with in today’s constrained budget environment.
These cases bring to mind the question of appropriate compensation. What is the appropriate pay for a soldier, judge, teacher, or police chief? And how do we determine the appropriate relationship between performance and reward? The private sector generally relies on the logic of supply and demand. But compensation for public employees is far more difficult to determine, especially when analogous examples in the private sector are lacking. Different value systems that place differing weights on the relative contribution of each to society will arrive at different answers.
-Charles
Photo by Flickr user liewcf used under a Creative Commons Attribution license.
Money for nothing
A story over at Newsweek profiles three people who want to bring the estate tax back. The main arguments for this tax concerned the deficit:
To Julian Robertson, the founder of hedge fund giant Tiger Management and a major philanthropist, the economic and moral case for an estate tax increase was simple. “You get out of a credit crisis by getting your house in order, and in America’s case bringing your deficit down. This implies tax increases.” The fairest way to do it, he said, is to tax “the least deserving recipients of wealth, which are the inheritors.
I’ve written earlier this week about the concept of desert, but it is interesting to consider where the concept of fairness combines with desert in this and similar arguments.
-Han
Photo by Flickr user propertytaxonline used under a Creative Commons Attribution license.
Born with a plastic spoon in my mouth
Theories of desert and the distribution of wealth
An op-ed in The New York Times laments the existence of “dynasty trusts,” which allow rich Americans to provide generations of heirs with tax-free estates. The article argues that this will result in the rise of a new aristocracy, which is un-American.
Americans have always assumed that wealth comes and goes. A poor person can work hard, become rich and pass his money on to his children and grandchildren. But then, if those descendants do not manage it wisely, they may lose it. “Shirtsleeves to shirtsleeves in three generations,” the saying goes, and it conforms to our preference for meritocracy over aristocracy.
The assumption here seems to be that meritocracies are preferable because they only bestow wealth upon those who deserve it. What exactly does the concept of desert amount to? I will explore three possibilities. Read more
Morality, meet the financial crisis
Many things have been blamed for the economic crisis, including easy credit, consumer (and banker) irrationality, poor regulation, unmonitored derivatives trading, the inappropriate use of government-sponsored enterprises, and the underlying forces of the global real-estate bubble. In a Project Syndicate article, Raghuram Rajan, a finance professor at the University of Chicago and former chief economist of the IMF, has a particularly interesting and unique take on the root causes of the crisis. According to Rajan, the proximate cause of the financial crisis was easy credit, with inequality at its root. Inequality led policymakers to pursue policies that encouraged consumption rather than addressing the root problem of stagnant middle-and-lower class incomes in an increasingly skill-biased economy.
So it turns out that inequality –- an issue generally seen as normative — may play an explanatory role in the most consequential economic challenge of our time. Could this be true of other things generally thought of in moral terms, such as freedom, order, peace, or justice? Are these only moral goods in their own right, or do they also have real bearing on outcomes that we might consider desirable?
–Charles
Image used under a Creative Commons attribution license from Flickr user saxarocks
Who should make you eat your brussels sprouts?
The market, responsibility and perfectionism
The New York Times has an article from last week on a duo of internet filmmakers, known as the Internet Celebrities, who use humor and YouTube to spread a unique brand of social criticism. One of their most watched videos has them entering the world of Bronx food bodegas to highlight the diverse, yet disgusting food options available to many New Yorkers.
Beyond the humor – for example, the bodega food pyramid – their video raises important normative questions about the availability of healthy foods in low-income communities.
It is a well documented fact that middle- and upper-income communities have many times more supermarkets than low-income neighborhoods. As a result, people in these communities are forced to purchase food at corner markets, convenience stores and bodegas. And these food providers have little in the way of healthy options. This matters because a diet short on healthy foods increases the risk of diabetes, heart disease, cancer, obesity and other illnesses. So if healthy foods have such a direct impact on the life of individuals, whose responsibility is it to ensure that everyone, including those in low-income communities has access to them?
Tea Partyers for Medicare
Inconsistency or philosophical conservatism?
The New York Times had a fascinating look yesterday at the demographic and ideological makeup on the Tea Party movement. Long discussed, but little studied, The New York Times and CBS commissioned a poll this month to get a detailed look at the profile and attitudes of Tea Party supporters.
The poll found that the 18 percent of Americans who associate with the Tea Party movement tend to be white, male, married, over 45 and on the “very conservative” end of the ideological spectrum. Tea Partyers express “fierce animosity toward Washington, and the president in particular, [ ] rooted in deep pessimism about the direction of the country and the conviction that the policies of the Obama administration are disproportionately directed at helping the poor rather than the middle class or the rich.”
But here’s the surprising stuff. While Tea Party supporters believe the goal of their movement is reduce the size of government and favor doing so even if it means cutting domestic programs, most happily partake in the three most expensive domestic programs: public education, medicare and social security. And they assert that these programs are “worth the cost to taxpayers.”
So what gives? Read more
What if equality and growth were compatible?
How one economist could change egalitarian distributive justice forever
An interesting article in the Santa Fe Reporter last week on an economist whose work has major implications for theories of economic distributive justice. Samuel Bowles of the Santa Fe Institute, a research institution dedicated to the study of complexity, is one of the leading economists in a movement challenging the assumptions of the Milton Friedman/Chicago School of free-market economics.
According to the Chicago School, distributive inequality is an inevitable consequence of economic growth. Bowles challenges this notion, claiming that while the theories of the Chicago School may work in ideal models, in the real world the story is much different. The Chicago School assumes an economy that is efficiently organized. But in reality, economies are actually quite inefficient, those with greater inequality, Bowles contends, particularly so. Instead of the distribution of wealth being dependent on economic growth, economic growth is dependent on the distribution of wealth.
Is the homebuyers tax credit immoral?
Should government incentivize/disincentivize behavior?
My girlfriend dragged 
me to a bunch of open houses on Sunday. At each, the real estate agent eagerly advertised the federal government’s homebuyer tax credit, which gives up to $8000 in tax credits to first-time homebuyers and long-time homeowners buying a replacement principal residence before April 30, 2010.
The tax credit is an example of the government incentivizing certain behavior – in this case purchasing a home in order to stimulate the economy. And it got me thinking: what other kinds of behavior does the government incentivize…and should it? Read more
Justice? Yes, but at what cost?
How far must society go to accommodate the blind?
Driving around DC this weekend, I noticed for the first time signs along one street that read “Blind Child.” Intrigued, I did some research and discovered that that many states will, if requested, post street signs around the houses of deaf and blind children alerting drivers to be extra cautious. Such signs are a relatively inexpensive way society can help increase the safety of children for whom circumstance has unfairly made dangerous the most basic of activities.
The signs got me thinking. What else could society do to help eliminate some of the unequal consequences of blindness? Read more
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