Recently, President Obama appointed Richard Cordray to be the head of the new Consumer Financial Protection Bureau, created in the wake of the financial crisis to protect consumers. What exactly does it mean to 'protect consumers'?
To some, the goal of the agency is to protect the poor, by regulating companies that provide "payday loans" to poor consumers, often charging extremely high interest rates. I recently listened to an old episode of This American Life, entitled The Giant Pool of Money, which detailed the struggles of some who were given loans that they couldn't pay and the resulting human cost. As a liberal, I am prone to be sympathetic to whatever we can do to improve the lives of the lease fortunate among us.
However, the thing that angered me most in the episode was the story of a veteran who qualified for a Veteran's Home Administration loan, but was instead given a loan for which the mortgage broker received a higher commission, and now pays a 10% interest rate. This veteran has a job and continues to pay his mortgage, but clearly was taken advantage of by someone who likely presented themselves as working on his behalf, but instead wanted a better commission. According to the episode, the commission for this purchase was $18,000 and mortgage brokers at the time were earning $75-100 thousand dollars per month (for a job with little societal benefit).
There will always be a way for people to take advantage of others, whether due to the desperation/need of others or due to their lack of understanding. However, not all immoral ways of making a living are necessarily illegal. Republicans have been consistent in their criticism of the Dodd-Frank law which created the Consumer Financial Protection Bureau. Mitt Romney has promised to repeal it. There is something to be said for the idea that sometimes protecting the poor can cause inefficiencies in the economy and there is no doubt that the liberal impulse to help the poor, and extend them credit, was one of a number of contributing factors to the financial crisis, in that incentives were created to loan money to those who could not afford it. However, I think both liberals and conservatives would agree that when financial negotiations take place, steps should at least be taken to ensure that everyone understands the process.
Below is some data that is suggestive, though not definitive, that liberals and conservatives (as well as moderates and libertarians) might agree more about ensuring a fair process, as opposed to making sure that the poor are protected from predatory lenders. While liberals might feel that protecting the poor is a more immediate concern, the most consensus exists (higher wrongness scores for conservatives/libertarians) for ensuring that everyone completely understands the process when a negotiation occurs.
In the wake of his controversial nomination, Cordray himself positioned the agency as ensuring a fair process, rather than a fair outcome.
The battle between liberal and conservative ideas can be seen as the battle between the balance between ensuring a prosperous society and ensuring a society that cares for the least fortunate in it. Both goals are served by fair, open negotiations where all parties understand what is agreed to, and where people earn a living through activities that add societal value. Whether it is via Dodd-Frank, the Consumer Financial Protection Bureau, or some other means devised by Republicans, I'm hopeful that a consensus can occur around protecting consumers from those who might take advantage of their relative lack of information.
- Ravi Iyer
It is more effective to advocate for progressive taxation using arguments about equity or deservingness rather than arguments about how unequal American society has become.
I have written about this before, using different data, but with renewed attention being paid to rising inequality, leading liberals to continue to push for rising taxes for the rich, I feel like it bears repeating, this time with different data. While most Americans might prefer a more equal distribution of wealth, when positing such a distribution without considering who worked harder or contributed more, I doubt any study could show that any large group of people actually care about sharing some good equally more than adhering to the principle of deservingness. People care more that people get what they deserve than if everything is shared equally. Indeed if anybody knows of such a study, showing the oppositve, please share it with me.
Below is a graph of questions asking "how wrong" certain violations of fairness principles are. For example, a violation of procedural justice concerns situations like a trial being decided with misleading information or a law being made without the input of affected parties (alpha = .77). A violation of "lack of punishment" would concern a person going unpunished for a crime (alpha = .78). A violation of equity/deservingness concerns a person contributing to society and not being rewarded or a bonus being awarded without considering the relative contributions of employees (alpha = .76). A violation of equality concerns some employees being paid a lot while others are paid very little or a child inheriting a lot of money while another inherits nothing (alpha = .89).
To me, the interesting thing is not that liberals care more about equality than conservatives,or that liberals care less about punishing wrongdoers. Both facts make sense but are almost self-evident if one pays attention to politics and current events. Rather, the most interesting thing about this data (and any other data where I've pitted equality/deservingness against equality), is that everyone, including liberals, believes that equity/deservingness is a more important principle than equality.
There are certainly caveats to this data, in that it's a limited sample and the conclusions are somewhat reliant on the questions I choose to ask. However, this is but one of many datasets we have collected which tell the same story...that equity concerns trump equality concerns. Moreover, I think this idea is quite "post-dictable" meaning that most people who really think about it, realize that they themselves, no matter how liberal they are, care more about equity/deservingness than they care about making things more equal. This article from the Atlantic blog sums it up nicely:
I think very few (completely misguided) people resent “wealth” per se. I don’t remember anyone ever begrudging Bill Gates’ wealth, either. When people resent wealth, more often than not the resentment is directed at how the wealth is accrued rather than at who has accrued it. In certain instances, the how and the who become one and the resentment oozes toward the individual. I’m thinking of the Paris Hilton’s of the world in this instance. Here’s somebody who has done nothing of substance whatsoever; her wealth was accrued by virtue of genetic lottery. But those instances where people resent a particular person for their wealth are, I think, rather rare.
So how can liberals argue for progressive taxation as a matter of equity rather than equality? One problem for liberals is that research on system justification suggests that conservatives are more likely to believe that wealthy investors are more like Bill Gates than Paris Hilton. I don't have data on this (though I hope to collect it), but one example that worked for me recently is to frame progressive taxation policies in terms of rewarding work, as opposed to investment. Conservatives value hard work and I might even go as far as to say, anecdotally, that the conservatives I know work harder than the liberals I know (see this book which is tangentially related). Yet, we live in a country where someone who works hard for a living pays taxes at a higher rate (the income tax rate) compared to someone who happens to buy the right stock or the right real estate property at the right time, and sells it later for a gain (taxed at the capital gains rate). Or someone who inherits millions, and lives off their investments, a la Paris Hilton. Hard work is penalized relative to profiting by owning things. Is that fair?
- Ravi Iyer
My last post concerned moral maximizing and I believe the issue of migrant labor is one which relates. As Stephen Colbert uses satire to relate in the below video, the pragmatic reality is that vegetables are not going to be picked by Americans in the United States through the invisible hand of the free market.
Want proof of this reality? In June, the United Farm Workers union attempted an interesting experiment whereby it offered to train American citizens to replace migrant labor. Colbert testifies that 16 people took them up on the offer (him included) and press reports indicate that only 7 people took the offer. Whichever number it is, it seems fairly low. Still, immigration reform seems unlikely to pass anytime soon as it seems to stimulate conflicting ideas of what is 'fair'. Migrant workers are virtually powerless and easily taken advantage of....but they are also breaking the law by coming to this country, and these conflicting considerations are differentially appealing to liberals and conservatives.
The below graph illustrates this differential appeal with data from yourmorals.org. I asked individuals how 'wrong' different situations felt to them. Some concerned equity ("A person who contributes more to society is not rewarded.), equality ("A bonus is given to a work team for good performance and the money is not divided equally."), need("'A free meal is given to the rich, rather than to the hungry."), retribution ("A person commits a crime and goes unpunished."), and procedures ("A negotiation occurs without everyone completely understanding the process."). These situations may all be of varying severity, so it is difficult to interpret differences between dimensions, but one can make inferences about liberals and conservatives within dimensions. Specifically, liberals (in blue below) felt that violations of equality and need (which formed one factor) were more wrong than did conservatives. Similarly, conservatives (in red below) felt that violations of retributive justice principles were more wrong than did liberals.
Fair policies toward migrant workers depend on what you want to focus on....their lack of equal status, equal opportunity and need (which liberals seem to care about more). Or their illegal entry into the United States (which conservatives care more about). Colbert says as much in a rare break of character when responding to questions during the congressional hearing.
- Ravi Iyer
Democrats and Republicans agree that Justice & Fairness are about Equity, not Equality or Impartiality
I was browsing CNN today and I decided to expand my moral imagination by watching Glenn Beck Speak at the Conservative Political Action Committee meeting. I was surprised how reasonable his message sounded to me, as I my previous impression of him was not good.
I believe that people should be able to get what they deserve too. I don't begrudge small businesses who succeed through hard work. I appreciate hard work as much as anyone. Does that mean that I should switch parties?
None of my posts would be complete without a graph, so I decided to look at some of our data on justice and fairness from yourmorals.org. Below is a graph of how various ideologies would view changing a hypothetical allocation of a reward from ambiguous toward the use of some specific type of justice or fairness.
Equity concerns giving more to those who contribute more. Equality concerns making the distribution more equal. Need concerns giving more to those who need it more. Open information concerns making sure everyone understands the process. Equal voice concerns allowing everyone an equal say in how to make the allocation. Retribution concerns giving less reward to those who violate some relevant group norm. Higher bars indicate that making a change toward that principle is more desirable.
What did I learn from this graph? Liberals do care more about equality and need than conservatives and conservatives do care more about equity and retribution. However, both liberals and conservatives (and libertarians) find an equity based distribution (e.g. "Suppose the company instituted a way of quantifying each employee's contributions, and it then adjusted the bonuses up or down accordingly") to be more desirable to an equal distribution (e.g. "Suppose the company divided the money such that each employee received an equal share.") This somewhat captures how I feel about things. I care about people getting what they deserve, but perhaps I am willing to consider equality and need in some situations as well.
Below is another graph using different participants, which concerns endorsement of abstract principles rather than hypothetical allocations and again, we see that the proportionality principle (e.g. "Whether or not those who contribute more are rewarded more") is deemed most important.
The take home message for Democrats? Stop letting Republicans define policy as choices between equity and equality/need. Nobody is trying to stop small businesses from succeeding...few people want a completely equal society.
Rather, let's see if people are really getting what they deserve in life. Do investment bankers really deserve million dollar bonuses? I don't think they necessarily produce much more than many, and obviously in the past few years, their collective output has been negative. So I see taxing banks to recoup losses as a matter of equity/proportionality, not equality.
How about the working poor who work hard and then are bankrupted by a single medical expense? What percentage of Americans actually make enough money to pay for a chronic illness? We all need health care that doesn't go away when we get really sick and need to use it. So maybe health care isn't a right, but how can one argue with making sure the working poor and children all have health care? Does Glenn Beck's father, who owned a bakery and therefore would have immense trouble buying health care without a large risk pool, deserve health care less than those investment bankers who drove the economy into the ground with high risk derivatives? If not, maybe we should do something about that.
Democrats should welcome a debate about how to really give people what they deserve in life.
- Ravi Iyer