Follow up on "Utility, Taxes, Poverty, and Equality"

In yesterday's post, I talked about Mankiw's critique of utilitarianism justified income transfers. One of the things that disappointed me about most responses on the internet is that they didn't grapple with the philosophical argument Mankiw was advancing. That's why I was happy to read Noah Smith's response where he takes on the "just desserts" framework that Mankiw proposes to replace the utilitarian thinking.

Mankiw's economist arch-rival, Noah Smith! 

Smith's post is definitely worth a read, but I think he's still missing Mankiw's point. Smith interprets Mankiw's theory as saying that whatever the market allocates is what constitutes one's just desserts, but that's not what Mankiw is getting at. Instead, Mankiw is saying that if we want to take money from the rich and give it to the poor, we should do it only insofar as it seems fair, instead of saying, "poor dude Y gets more utility from consumption than CEO X! Given that CEO X's elasticity of labor supply is 0.43, we should tax 34.8% of his income to theoretically maximize utility."

Although I think Mankiw does favor less redistribution than bloggers like Noah Smith or myself, I think his essay was misnamed. Mankiw is not proposing (at least not so much in that article) that we redistribute less, he's merely saying we should argue about redistribution using a different framework. As the professor himself writes,

"This alternative perspective [just desserts] on the income distribution is a radical departure from the utilitarian perspective that has long influenced economists, including Okun and Mirrlees. But it is not entirely new. It harkens back about a century to the tradition of “just taxation” suggested by Knut Wicksell (1896, translated 1958) and Erik Lindahl (1919, translated 1958). More important, I believe it is more consistent with our innate moral intuitions. Indeed, many of the arguments of the left discussed earlier are easier to reconcile with the just-deserts theory than they are with utilitarianism. My disagreement with the left lies not in the nature of their arguments, but rather in the factual basis of their conclusions."

Or as he wrote in a 2010 piece on a similar topic,

"In the end, I don’t think the Just Deserts Theory necessarily calls for radical changes
in policy toward taxes and income distribution. It does, however, suggest that we
focus on a different set of questions when thinking about policy design. A utilitarian
asks how quickly marginal utility falls as income rises and how much people respond
to the disincentive effects of redistributive tax policy. A Just Deserts Theorist admits
that questions regarding utility functions and incentive effects may enter into the
analysis, but they are the wrong place to start. Rather, he begins by asking whether
people’s compensation reflects the contributions they make to society and how much
they benefit from government actions."

 Now, I think Mankiw is wrong and that utilitarianism is an important part of justifying income redistribution, as I discussed in my previous post.