Alex Tabarrok on Economic Mobility

 post by Bill Gardner

Tabarrok is interested in the moral significance, if any, of economic mobility. He first contrasts two societies, "Stasis" and "Churn".

In society one there is no generational mobility, each generation has the same income as the previous generation. Let’s call this society Stasis.

Society Stasis
Family	Generation 1	Generation 2
A	100	100
B	50	50
C	25	25
Total	175	175

In the second society, some generations rise and some generations fall but there is no growth, let’s call this society Churn.

Society Churn
Family	Generation 1	Generation 2
A	100	25
B	50	50
C	25	100
Total	175	175

He argues that there is little to prefer between Stasis and Churn. But there is a reason to prefer Churn: Relative to Stasis, the deprived of Generation 1 have the compensation of knowing that their children will do well. A and C are symmetrical: A does well in Gen₁ and poor in Gen₂, while the reverse is true for C. If you view families as bearers of well-being across generations, then the utilities of A and C accumulated across generations are equal and B is not too far behind. In this sense, Churn is fairer than Stasis. 

Perhaps the idea of families as bearers of utility is problematic. Tabarrok seems to assume that utility = income in each generation. But this is not necessarily the case: Suppose that the utility function for a parent in Gen₁ is

Utility(Gen₁) = a * Income(Gen₁) + (1 - a) * Income(Gen₂), 0 < a < 1.

Then the average utility is unchanged but the range and variance of utilities in any generation is less in Churn than in Stasis. If that matters to you, Churn is fairer. It might not matter to you: A utilitarian could well argue that such utility functions are wrong. This is because the function gives higher weight to the well-being of my children, violating the principle of treating each other person as having equal moral worth.

Otherwise, Tabarrok is right: Mobility in and of itself is not important to justice. We value mobility because, as one of his commenters points out, societies without mobility almost certainly lack fair equality of opportunity or, as Tabarrok points out, liberty.

He then considers a third society, Growth.

Society Growth
Family	Generation 1	Generation 2
A	100	200
B	50	100
C	25	50
Total	175	350

Growth seems clearly better than Stasis, because everyone is better off in Gen₂ in Growth than they would be in Stasis. Would Growth be still better if we added some Churn? Just a bit, I would say, for the reasons advanced above. However, seeking to add random Churn would be crazy. It would not improve fair equality of opportunity and would likely compromise liberty.

The problem with Growth, from a liberal egalitarian point of view is not that it lacks mobility. The key problem is that the worst-off group gains the least from Gen₁ to Gen₂. Rather than add random Churn, a sane liberal policy would look for ways to increase the gains for C. I think that Taborrak would agree that this, rather than mobility, is the fundamental problem with Growth. Of course, the next and harder questions are whether attempts to do this would increase or decrease average utility, and if so, how much decrease we can accept to achieve a more just distribution of gains. 

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