Sunday, July 29, 2012

Mobility: good or bad?

Paul Krugman weighs in on an econ-blogosphere mini-kerfuffle about whether economic mobility is a good thing. (He thinks it is, by the way.) You can follow the links and see what it's about, but the basic issue is simple. Economists measure mobility, whether within or between generations, by seeing how much churn there is within the income distribution. In a more mobile society, where individuals or generations have a greater chance of moving up the ladder relative to others, there is also by implication a greater chance of moving down. If there is no mobility, the rich stay rich and the poor stay poor. If there is lots of mobility, many poor become rich, and many rich become poor.

Now it turns out that careful studies tend to find that there is no more mobility, and probably less, in capitalistic America than there is in socialistic northern Europe. Tyler Cowen offers some arguments for why mobility thus measured is overrated. One of these is that if habit formation and loss aversion are important, moving down the ladder is a LOT worse than moving up the ladder, so the net effect of more mobility is less total happiness. Krugman and DeLong make fun of this, but I don't see why. They are both fans, I would guess, of Bob Frank's work on relative consumption, and Cowen's conclusion follows quite logically from Frank and the work of many behavioral economists. I think Cowen makes one additional very important point: if possible, we should count international mobility in our calculations. Rich countries that are more open to immigrants from poor countries should get mobility credit for that.

I happen to agree that mobility is good, but a utilitarian defense of it is difficult. Better justifications rest on democratic values and a critique of caste, and/or equality of opportunity. And in most such arguments, I suspect, we will view mobility as a consequence and thus indicator of something we value, rather than as an end in itself.

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