Wednesday, June 17, 2015

Equality of Opportunity and Equality of Result

In discussions about inequality of income or wealth, it's common to hear an argument along the following lines: "I'm not much bothered by inequality of results, as long as there is fairly good equality of opportunity."

As a quick example of this distinction, consider two siblings of the same gender that grow up in the same family, attend the same schools and colleges, and get similar jobs. However, one sibling saves money for retirement, while the other does not. When the two of them reach retirement, one sibling can afford around-the-world cruises and extensive pampering of the grandchildren, while the other sibling can afford the early-bird discount diner buffet line. This inequality of after-retirement results between the two siblings doesn't seem especially bothersome, because of the earlier equality of opportunities.

However, the notion that the inequality resulting from different opportunities or discrimination can be more-or-less separated from the inequality that results from choices and effort, while appealing at an intuitive level,  turns out to quite difficult in practice. Ravi Kanbur Adam Wagstaf discuss the isseus in "How Useful Is Inequality of Opportunity as a Policy Construct?" in World Bank Policy Research Working Paper 6980 (July 2014). The authors have also written a recent short summary/overview of the arguments. As a starting point, they write:
In policy and political discourse, “equality of opportunity” is the new motherhood and apple pie. It is often contrasted with equality of outcomes, with the latter coming off worse. Equality of outcomes is seen variously as Utopian, as infeasible, as detrimental to incentives, and even as inequitable if outcomes are the result of differing efforts. Equality of opportunity, on the other hand, is interchangeable with phrases such as ‘leveling the playing field’, ‘giving everybody an equal start’ and ‘making the most of inherent talents.’ In its strongest form, the position is that equality of outcomes should be irrelevant to policy; what matters is equality of opportunity. ... However, attempts to quantify and apply the concept of equality of opportunity in a policy context have also revealed a host of problems of a conceptual and empirical nature, problems which may in the end even question the practical usefulness of the concept.
My sense that their argument can be divided into two parts. One problem is that it's not easy to divide up the inequalities that are observed in society into one portion based on differences in opportunity, which should be rooted in the circumstances in which people find themselves through no decision or fault of their own, and another portion based on the choices or efforts that people make. The other problem is that moral intuition in some cases suggests an aggressive role for acting against unequal opportunities, and other cases where the moral intuition is not as strong: for example, the argument for fighting race and gender discrimination in support of equality of opportunity seems considerably stronger than the argument for seeking to offset most differences in genetic talent as a way of ensuring equal opportunity. I won't attempt so summarize their arguments here, but instead just to point out some key issues. In no particular order:

1) Opportunity is entangled with incentives. Those in a society who have greater opportunities--for whatever reason--will also typically have greater incentives to put forward work and effort and take advantage of those opportunities. There may be some other cases where someone with limited opportunities becomes determined to work twice as hard, or someone with expansive opportunities is more willing to goof off. But in any of these cases, treating opportunities as separate from personal effort and choice seems like a treacherous starting point.

2) Some people are especially favored or disfavored in the labor market by traits like physical or intellectual talent, height or attractiveness--or the lack of these traits. Others are favored or disfavored by factors like race and gender. All of these factors create "inequality of opportunity," but it's not clear these various types of inequality should be of equal importance to policy-makers.

3) If government policies to reduce inequality are based on outcomes, they will also affect underlying incentives. For example, steps to equalize income or wealth levels will means less incentive to earn at both ends of the income spectrum: that is, high income or wealth taxes reduce incentives at the upper end, and high levels of income-based support can reduce incentives to work at the lower end.  Similarly, steps to assure or to equalize retirement income will mean less incentive to save during working life.

4) Thinking about opportunity and choice raises an intergenerational problem. Consider one group of parents who choose to put substantial time and energy into the skills of their children, and another group of parents who does not. It seems plausible that one's family and community have an effect attitudes about work, saving , risk-taking, belief that effort is worthwhile, and so on. It seems implausible that true  "equality of opportunity" should require that the distribution of these beliefs about work, saving, risk, and effort be randomly distributed across children of different family types and socioeconomic classes.

5) Many people may prefer to live in a society which allow combination of risk-taking with an element element of luck affecting the outcome. For example, the authors quote a comments from Milton Friedman:  "Individuals choose occupations, investments and the like partly in accordance with their tastes for uncertainty. The girl who tries to become a movie actress rather than a civil servant is deliberately choosing to enter a lottery, so is the individual who invests in penny uranium stocks rather than government bonds.” This argument suggests that there will be inequalities of result that are the result of risk-taking and lottery-like outcomes, and not the result  of differences in either inequality of opportunity or inequalities from effort and choice.

6) It seems important to separate "inequality" in its literal sense from concerns over destitution or poverty. There are many ways, with many different implications for inequality, in which society can finance support for the impoverished. There is no intellectual inconsistency in favoring a safety net for the poor but also arguing that, other than that safety net, the government shouldn't worry much about remaining inequality.

The difficult bottom line here is that seeking to draw a distinction between equality of opportunity and equality of results hides a deeper question: What sources of unequal results should a society regard as acceptable or justified, and what sources of unequal results should we regard as unacceptable or unjustified? It's easy to claim that such a distinction exists, but knowing in practical terms where it can be difficult.

In a 1965 speech, President Lyndon Johnson discussed the importance of true equality of opportunity in a famous passage:
But freedom is not enough. You do not wipe away the scars of centuries by saying: Now you are free to go where you want, and do as you desire, and choose the leaders you please. You do not take a person who, for years, has been hobbled by chains and liberate him, bring him up to the starting line of a race and then say, "you are free to compete with all the others," and still justly believe that you have been completely fair. Thus it is not enough just to open the gates of opportunity. All our citizens must have the ability to walk through those gates.
Johnson's comment contains a deep truth, but the poetic phrasing about starting lines of races and walking through gates of opportunity offers a hint that practical difficulties are being sidestepped.

For example, it is straightforward to argue that children should have at least some minimum level of opportunity, a feeling which is expressed by laws requiring compulsory and taxpayer-funded schooling and public health measures like vaccinations. But beyond that minimum, the extent to which society should intervene with parents or seek to counterbalance or offset parental decisions about raising children can become quite controversial. It is straightforward to argue that racial and ethnic discrimination should be banned. But beyond the essential step of banning explicit discrimination in employment or housing or public services, the extent to which society should act to offset the results of past discrimination becomes controversial, too. Similarly, it seems straightforward to argue that (at least in high-income societies) everyone should have access to health insurance. But beyond that minimum, the extent to which everyone should (or can) have access to all possible treatments is unclear. Moreover, many health conditions are a combination of accident or environmental effects, genetics, and personal choices, in a way where it would be difficult to draw a clear distinction between health conditions resulting from inequality of initial conditions (saym, genetic heritage) or differences in personal choices and efforts that make up a health lifestyle.

Overall, it seems that the distinction between equality of opportunity and equality of result can be the starting point for some minimum level of public policy to reduce certain causes of unequal outcomes. But given the analytical problem with separating why unequal results occur, the equality of opportunity/equality of result distinction is often not much help in resolving how aggressive such inequality-reducing policie should be.