2 votes

Dispersion causes discohesion

1 comment

  1. skybrian
    From the article: [...]

    From the article:

    Some people argue that mobility is an answer to dispersion, that it’s okay, great even, to have extremely unequal outcomes as long as it is possible for people who begin poor to end up rich (and vice versa). I’ve argued against that before. This post will further explain why I think celebrating the combination of inequality and social mobility is a particularly dumb idea.

    We’ll start with a simple, tragic fact. In a society where there is both a high dispersion of outcomes (income, wealth, status, whatever people aspire to) and a high degree of mobility, from most individuals’ perspective, it’s more profitable to engage in distributional conflict to advance within the distribution than to cooperate to help shift the distribution, without competing to improve ones' own rank.


    Not all competition takes the form of competitive supply into open and contestable markets that economics textbooks tell us maximize output and eliminate markups. I think it’s particularly important to distinguish this kind of economic competition from tournament competition, whereunder people compete for a relatively fixed numbers of slots with high payouts. Too often in the United States we use “competition” as a broad, bland term to legitimate almost any sort of outcome. That is dumb. When warlords pummel one another’s villages until, finally, one of them gains supremacy, I think we’d all agree that is a hypercompetitive process. But, as the smoking wreckage attests, it is a negative-sum game, it is bad not good. Similarly, the tournament that selects admission into Harvard is certainly competitive, but when you add all the resources expended by the losers as well as winners into activities they would not have undertaken for personal development, that tournament is probably also negative-sum. If you have achieved a lucrative partnership at a top law firm, you have brutally competed for your entire career. But if you didn’t win that partnership, someone else would have. Your gain was someone else’s losses. The costs of these usually negative-sum tournaments may be somewhat offset by the virtue of putting the most talented people in places where they can do outsized good. But that depends on very particular circumstances. In a society where economic competition is far from perfect, where firms with outsize market power dominate to harvest outsize markups, individual prospects are largely determined by tournaments for positions within those dominant firms. A world like this is certainly “competitive”, but in a way that should lend it no legitimacy at all. The tournaments for lucrative slots are negative-sum internally, and the external effect of this form of organization is to curtail the textbook economic competition that might otherwise contribute to aggregate well-being.

    2 votes