In light of today’s discussion, I’m curious to hear what Sen/Nussbaum would think of Yellen’s take on inequality. Yellen seems to be focused on wealth and income as the solutions in addressing inequality by ensuring families have the means to raise children, can afford education, have the financing to take on entrepreneurial risks, etc. It seems to be purely financially focused. To me, these solutions seem to be more in line with Rawlsian “primary goods” than Sen’s capabilities approach. Yet, they certainly seem to increase the real opportunities an individual has and improve their life. Would providing the financial means to pursue the opportunities listed above meet Sen’s standard or are these things still too focused on economic means and not enough on the individual?
On another note, I found Yellen’s stance on the issue, as the Federal Reserve Chair, to be very bold. Even more so when compared with Ben Bernanke’s comments in 2007: “I will not draw any firm conclusions about the extent to which policy should attempt to offset inequality in economic outcomes; that determination inherently depends on values and social trade-offs and is thus properly left to the political process.”
This also highlights one of the problems that the Fed and Rawls/Sen share. Namely that once you are stuck with multiple goals you will need to have a way to prioritize among them. Since the Fed, unlike most Western central banks which are charged solely with the goal of keeping inflation at a certain level, has to balance the inflation target with an unemployment goal (and, apparently, a resource allocation goal), trade-offs become necessary. Likewise, the Rawlsian model appears fairly straightforward when it only deals with one kind of inequality but, as discussed in class, if you include for instance gender equality as a goal to be considered you might end up in situations where there is no Pareto optimal course of action (transferring wealth from a man with 95 resource units to a woman who owns 100 units will reduce gender inequality in society but increase resource inequality for example).
Now how does one figure out the relative weights to assign to each goal? We are stuck in a situation where we either let the market figure it all out but this would all but make an institution like the Fed obsolete. And if we want to address perceived injustices we have to introduce some level of coercion in the system which means that a pure market solution is no longer available to us. This is where our old friend the information problem comes into play.
In light of today’s discussion, I’m curious to hear what Sen/Nussbaum would think of Yellen’s take on inequality. Yellen seems to be focused on wealth and income as the solutions in addressing inequality by ensuring families have the means to raise children, can afford education, have the financing to take on entrepreneurial risks, etc. It seems to be purely financially focused. To me, these solutions seem to be more in line with Rawlsian “primary goods” than Sen’s capabilities approach. Yet, they certainly seem to increase the real opportunities an individual has and improve their life. Would providing the financial means to pursue the opportunities listed above meet Sen’s standard or are these things still too focused on economic means and not enough on the individual?
ReplyDeleteOn another note, I found Yellen’s stance on the issue, as the Federal Reserve Chair, to be very bold. Even more so when compared with Ben Bernanke’s comments in 2007: “I will not draw any firm conclusions about the extent to which policy should attempt to offset inequality in economic outcomes; that determination inherently depends on values and social trade-offs and is thus properly left to the political process.”
This also highlights one of the problems that the Fed and Rawls/Sen share. Namely that once you are stuck with multiple goals you will need to have a way to prioritize among them. Since the Fed, unlike most Western central banks which are charged solely with the goal of keeping inflation at a certain level, has to balance the inflation target with an unemployment goal (and, apparently, a resource allocation goal), trade-offs become necessary. Likewise, the Rawlsian model appears fairly straightforward when it only deals with one kind of inequality but, as discussed in class, if you include for instance gender equality as a goal to be considered you might end up in situations where there is no Pareto optimal course of action (transferring wealth from a man with 95 resource units to a woman who owns 100 units will reduce gender inequality in society but increase resource inequality for example).
ReplyDeleteNow how does one figure out the relative weights to assign to each goal? We are stuck in a situation where we either let the market figure it all out but this would all but make an institution like the Fed obsolete. And if we want to address perceived injustices we have to introduce some level of coercion in the system which means that a pure market solution is no longer available to us. This is where our old friend the information problem comes into play.