Sunday, November 27, 2011

The why and what of equality (from an economics view)

I recently read " In any case, Equality to me is also equal rights, equal justice, and equal opportunity."

I'd been thinking about equal rights again.  The largest problem with the various "isms" is two-fold.  First, "others" are not different enough.   If they were, then discrimination would make sense.  Would probably still be resented, but it would at least make sense.

Second, discrimination tends to be inefficient.  Skipping academic institutions, businesses with affirmative action programs out-perform those without.  This indicates (though does not prove) that there is enough discrimination without such programs that such a program makes a business a more effective competitor.  Which means that those without such programs are underutilizing their human capital.

Which leads to the economics of equality.  Proper equality leads to more efficiency in markets.  Mechanisms to promote equality are regulations of the market to improve efficiency and to improve the accuracy of information and transactions.

People tend to forget that much of what goes on in regulation exists to improve the efficiency and accuracy of information in the market.  Markets work better as the information flow is clearer, more accurate and more reliable.

That is a core duty of government, but one I rarely see invoked when analyzing equality and what it should mean or how it should be approached.

It has weaknesses (e.g. the arguments for keeping men from playing in the WNBA are very similar to those for keeping Blacks from playing in the NBA), but it adds another layer of understanding, one I think is valuable.

And no, before someone goes all Coase invariance theorem on me, governments are a method by which people negotiate rights, and I suspect that slavery, racial inequality and the rise of feminism all reflect the generational nature (and inefficiency) of private parties attempting to negotiate rights of of the type covered by equal rights theory and laws. 

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