It's the same the whole world over... - RSA

It's the same the whole world over...


Thank you to all those who offered words of comfort and support after my less than impressive Moral Maze performance this week. I have been inspired to write another post on one aspect of the debate about responsibility.

On the Maze, I found it hard to distinguish between two arguments. The first – which I wanted to make - is this: as people from disadvantaged backgrounds are more likely to commit certain types of criminal offence than the well-off, we have a moral responsibility to show these people more understanding.  This is because at least some of the causes of their actions lie in circumstances which are beyond their personal control and are, at some level, the consequences of choices we have made as a society (for example, the abandonment by Government of full employment as a policy goal). The second argument - which was pretty successfully stuck on me by David Green and my fellow panellists - is this: poor people are not responsible for their actions (note how much easier the latter is to express than the former).    

The argument that people are fully personally responsible is forcibly made by referring to actions undertaken by individuals. When, for example, we think about a teenager throwing a brick through a window, the proximate cause – his decision to throw – is so much more compelling that any wider contextual cause (whether that’s poverty, family breakdown or an absence of appropriate social norms).

This is simply the way things are. It is one of the reasons why the authoritarian response is so much easier to articulate in debates about law and order than the liberal progressive. However, given the way people’s views generally line up, it is interesting to see how things change when it comes to a different argument which has been raging this week.

The Treasury review of whether the 50 pence tax rate raises money in net terms will not report until next year. But we know key aspects of the case against the rate from the letter by twenty economists sent this week to the Financial Times. At the heart of the case is an argument about incentives and behaviour. The economists suggest that the tax rate will discourage entrepreneurs. The lower rate of return they will personally receive as a consequence of the tax will either lead them to work less hard or leave the country. This is an argument about incentive effects at the level of the whole economy, but how does it look when we apply it to individual actions?

The economists’ analysis is that a hypothetical entrepreneur who is already in the top 1% of the richest people in Britain (and the top one tenth of 1% in the world), and who has the capacity to create new business and new jobs to the benefit of his fellow citizens, would choose not to apply his talents for the sole reason that he will get ten pence in the pound less of any extra money he earns (over and above, that is, the money that has already put him in the top 1%). In other words a slight deceleration in the pace at which our entrepreneur outstrips the income of other people is enough for him to down tools and abandon a nation in which he has already become very wealthy. Don’t forget our entrepreneur is making this decision at a time when all around him people are making much bigger sacrifices in the face of economic problems (which, by the way, were in no small part created by attempts of other rich people to get even richer). If we knew such a person, what would we think if they acted like this?

The entrepreneurs I know tell me they are driven much less by money than by the thrill of making a business work, innovating successfully and creating value for the community in terms of new jobs and products. The entrepreneur upon which the analysis in the FT letter is premised is a very different, much less attractive, beast. In fact would we really want to change Government policy – much less abandon much needed national income - to accommodate someone who thought and acted like this? 

But, the FT economists will protest, we aren't really talking about specific individuals. We are describing what can be demonstrated to happen when incentives change at the level of the whole economy. And, as long as it is accepted that this part of the broader debate is a question for empirical assessment not moralising, it may well be concluded that the economists are correct.

But my challenge to those who combine unqualified condemnation of criminality among the disadvantaged with warnings about the effect higher taxes on entrepreneurial incentives is this: why are macro-social causes credible and acceptable (and individual moralising irrelevant) when it comes to explaining the regrettable behaviour of the rich but not when discussing the misdemeanours of the poor?

PS I love lively debate on my comment pages but it has got just a little bit too lively in the last day or so, please, folks, cool it.This isn't Comment is Free !

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