31 October 2015

Economic Philosophy on the Left and Right

The usual explanation for different approaches to economic policy from the political left and right leaves much to be desired. To suggest that economic policy debates are really, at their deepest, just disagreements about ways to achieve the same goal of maximum prosperity is ignorant of the severe differences between proposals about fiscal policy on the left and right. These debates do not stem from disagreements about how to set up the welfare system or how big the welfare system should be; they arise out of a disconnect on what kinds of behavior and outcomes ought to be prioritized by the government.

The discourse on the right is dominated by an idolization of employment and for Pareto efficiency. Proposals seeking to substantially reduce taxes on labor and investment reflect these priorities. Lower and flatter income taxes are consistent with incentivizing people to work longer hours and with removing some of the alleged Pareto suboptimality that arises when higher incomes are deliberately taxed more than lower incomes. Lower taxes on investment serve this purpose as well; they reduce the problematic progressive taxation that, rather than helping to bring the poor up and the rich down, reduce everyone’s income. Meanwhile, anti-welfare policies are supported because of their effectiveness at bringing conservatives closer to their two-fold economic purpose. Programs like unemployment insurance and food stamps make it easier for people to not work and increase the income of the poor at the expense of everyone and must therefore be annihilated.

In contrast, left-wing discussion is primarily concerned with minimizing involuntary employment and raising the average level of welfare in the population. These two ideals inspire proposals that would provide healthcare for all and make sure that anyone in the country has the ability to survive regardless of circumstances. A completely private health system may very well be maximally efficient, but it is heavily tilted against those on the lower income scale. Nationalization makes sense; some efficiency will be lost because of the monopoly, but the health of the average constituent can allegedly be raised and so must be raised. More broad welfare programs are also consistent with these goals. Unemployment insurance, pensions, and food stamps serve as subsidies for those who find themselves unable or unwilling to work at any point in time and serve the purpose of raising the average income, especially the income for those at the low end of the income and wealth distribution.

The clash between left and right should not be seen simply as a clash over the appropriate size of government or the optimal method of achieving the same goals. It is more fundamental, more substantive than that. Conservatives emphasize the inefficiency of government provision and the distortion of progressive taxation while liberals emphasize the broad welfare gains that can be had in spite of the distortion and inefficiency that government necessitates. The most probable reality is one in which both sides are correct and the costs and benefits of each government program must be carefully weighed before implementation.

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