Moving Brad DeLong’s Time Machine behind John Rawls’ veil of ignorance

Brad DeLong set up a thought experiment to work out if we were better off than in the good old days. He asked how much money would you want to take with you if you had to step into a time machine to go back to some specific point in time and not be worse off for the trip in living standards and life expectancy. He was writing in 1995, talking about going back to 1895.

John Rawls asks a similar question by saying what type of society would you to agree to in a social contract if you’re behind a veil of ignorance. You didn’t know where you were going to be in society behind the veil of ignorance.

All you know you is you will be some random member of that society, at the top, bottom or somewhere in between.

…no one knows his place in society, his class position or social status; nor does he know his fortune in the distribution of natural assets and abilities, his intelligence and strength, and the like.

What social institutions would you agree in that society given you don’t know where you will be in it?

John Rawls also said that the society was fair if you didn’t mind showing up somewhere in it as a random member.

Let’s suppose a thought experiment which combines a time machine with a veil of ignorance:

  • Alien proctologists from outer space take time off from kidnapping rednecks at closing time at pubs to kidnap you instead;
  • After probing your nether regions, but before flying off to light years away where they came from without any further earthly contact they offer you the option of beaming back to where you came from but with a twist in time;
  • You can beam back to be a random member of your current society or a random member of a society in the past of your choice; but
  • Random reassignment to either the present or a past of your choosing are your only options as the alien kidnap victim.

Behind that inter-temporal veil of ignorance, would you choose to be a random member of your own society or prefer to beam back in time to before the ravages of neoliberalism destroyed the good old days?

Apparently, we not a cent better off compared to the 70s because all the income gains, every single cent, went into the pockets of the top 10%, if Senator Warren is to be believed in her recent Washington post op-ed:

image

When you line up by Senator Warren to go into the time machine, remember to leave your iPhones and air points at the door.

Would you rather make $50,000 in today’s New Zealand or $100,000 in the 1980s before neo-liberalism?

Ezra Klein and Matt O’Brien posed an interesting variation of Brad De Long’s Time Machine question. O’Brien asked:

Try this thought experiment. Adjusted for inflation, would you rather make $50,000 in today’s world or $100,000 in 1980’s? In other words, is an extra $50,000 enough to get you to give up the internet and TV and computer that you have now? The answer isn’t obvious.

And if $100,000 isn’t enough, what would be? $200,000? More? This might be the best way to get a sense of how much better technology has made our lives—not to mention the fact that people are living longer—the past 35 years, but the problem is it’s particular to you and your tastes. It’s not easy to generalize.

This doesn’t mean, though, that the middle class is doing well or even as well as it should be. Just that it’s doing better than the official numbers say it is.

Let them have iPhones is the new let them eat cake.

The same questions are asked in New Zealand in a different way when people go on about how much more unequal New Zealand is compared to the 1980s and how bad things have got because of that rise in inequality.

Would it better to be on the welfare benefit in the 1980s than on a benefit today in a less equal New Zealand than in the 1980s? It is certainly the case that the Gini coefficient is worse than it was in the 1980s – see figure 1.

Figure 1: Gini coefficient New Zealand 1980-2015

gini coefficient 1980-2005

Source: Bryan Perry, Household incomes in New Zealand: Trends in indicators of inequality and hardship 1982 to 2013. Ministry of Social Development (July 2014).

But household incomes on a real basis increased across the border in New Zealand – see figure 2 – including for Maori and Pasifika. As shown in figure 2 below, between 1994 and 2010, real equivalised median New Zealand household income rose by 47%; for Māori, this rise was 68%; for Pasifika, the rise in real equivalised median household income was 77%.

Figure 2: Real equivalised median household income (before housing costs) by ethnicity, 1988 to 2013 ($2013)

image

Source: Bryan Perry, Household incomes in New Zealand: Trends in indicators of inequality and hardship 1982 to 2013. Ministry of Social Development (July 2014).

The biggest worry for anyone longing to be on a welfare benefit or to be otherwise working back in the  good old days in the 1980s on the more equal incomes of back then is instant death.

Stepping into that Time Machine to go back to the more equal, more egalitarian 1980s shaves about five years off your life expectancy, if not more! Death certainly is the great leveller when it comes to Left over Left fantasies about the good old days before the economic reforms of the 1980s. Indeed, the 1980s was a period where life expectancies started to increase again after a hiatus in the 1960s and 1970s.

Time travel back to the good old days in the 1980s before neoliberalism would be particularly grim from Maori because of their much lower life expectancies of Maori back in the 1980s – see figure 3.

Figure 3: Life expectancy at birth, Maori and non-Maori by sex

image

Source: Statistics New Zealand.

The most apt summary of how bad it was in the 1980s compared to today is by veteran left-wing grumbler Max Rashbrooke. To paint pre-1984 New Zealand, pre-neoliberal New Zealand as an egalitarian paradise, he had to ignore the economic progress of two thirds of the population and the inequalities they suffered:

New Zealand up until the 1980s was fairly egalitarian, apart from Maori and women, our increasing income gap started in the late 1980s and early 1990s.

Would you step into a time machine to go back to the 70s glory days?

Apparently, we are not a cent better off compared to the 70s because all the income gains, every single cent, went into the pockets of the top 10%, if Senator Warren is to be believed in her recent Washington post op-ed.

image

If you’re willing to put your money where your grumpy socialist mouth is, you would step into a time machine to go back to the 70s because that would make you wealthier.

A way to grasp the conceptual difficulties of measuring changes in living standards and life expectancies across the decades is to step into Brad De Long’s time machine.

In this thought experiment, De Long asks how much you would want in additional income to agree to go back in time to a specific year. De Long was an economic historian examining the differences in American living standards since 1900.

Of course, to work how much you would want be paid (or were willing to pay to go back to the Senator Warren’s better times in the 1970), if you used a less biased estimate of price inflation, the answer is steady increases in incomes for the last 25 years so you would want to be paid.

Senator Warren’s linked article actually confirms the same results. For after-tax incomes, everybody is noticeably richer than 30 years ago, especially if you’re a woman.

Senior citizen socialists should take care and think deeply about entering that time machine. It might mean instant death for them because of higher life expectancy is now as compared to the 1970s.

When you do step into that time machine be very picky about what part of the USA you go to if you like air conditioning. There wasn’t as much air conditioning in homes in the 1970s  as compared to day, especially if you were poor.

Another thing is, don’t expect to take that many trips. Air travel was not as common in the 70s. Airline deregulation was at the very end of the 1970s.

To add to your boredom in your spare time, your chances of owning a car was a lot less back then than now despite Senator Warren’s assurance that there has been no income growth for the bottom 90% in the last 30 to 40 years. She said that, not me.

As for lifting yourself up in life, and living the American dream, which was the title of Senator Warren’s op-ed? You were much more likely to not go to college back in the glory days of the 70s than now, especially if you were poor.

The most curious anomaly in Senator Warren’s arguments is that many consumer goods are fallen rapidly in price over the last 40 years, but people are somehow unable to buy them from the same fixed income.

via America’s Growing Income Gap, by the Numbers – ProPublica and U.S. Wages Are Historically Great, Or They’re Awful. It Depends on Your Preferred Inflation Measure – Real Time Economics – WSJ.

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