Every September, thousands of college students pour into lecture halls where they learn that economics is the study of “the allocation of scarce resources.” Most of them accept this premise without question. For the rest of the semester, they learn to see the world in terms of scarcity. They are trained to speak in a new language, with words like tradeoffs, incentives, and constraints. They take this mindset with them into their jobs, their politics, and their everyday lives, where they find it to be a useful approach.
Scarcity explains a lot about the world. It does not take an economics class to realize that most people are working with very limited means.
But what if ample means exist? What if some people simply cannot acquire them?
In my book Letter to the One Percent, I proposed a series of programs designed to reduce inequality by improving the lives of the American poor and middle class. These programs cost money. Like Amartya Sen, I aim to prove that scarcity is not an obstacle. There is more than enough money to fund these programs without harming the economy.
In my next few Substack posts, I will identify a series of revenue sources that the federal government can tap. Over the next decade, I estimate that these revenue sources are worth over $20 trillion. I’m not suggesting that the government raise all $20 trillion. All the programs in Letter to the One Percent combined would not even add up to $20 trillion. I’m merely providing policymakers with as many options as possible — and in so doing, demonstrating just how abundant our resources really are.
Abundance is not a word you hear much in political discussions. When the federal budget comes up in conversations, it’s usually accompanied by words like deficit and debt and living beyond our means. The conventional wisdom seems to be, as Scripture tells us, “The poor you will always have with you,” because it costs too much to fix the problem. We are, as a society, helpless in the face of inequality.
In the days of Scripture, this was almost certainly true. Most of human history has been characterized by widespread poverty. “This poverty was not the elegant torture of the spirit which comes from contemplating another man’s more spacious possessions,” wrote the great economist John Kenneth Galbraith. “It was the unedifying mortification of the flesh — from hunger, sickness and cold.” Outside the nobility, few people held out hope that they would ever escape this grim lot in life. It is only in the last two hundred years or so that society developed what we would recognise as upward mobility and economic growth.
“No one would wish to argue that the ideas which interpreted this grim world of scarcity would serve equally well for the contemporary United States,” Galbraith pointed out as early as 1958. “Poverty was the all-pervasive fact of that world. Obviously it is not of ours.”
And yet, the way we talk about public policy still sounds as if we live in this world of scarcity.
“As a result,” said Galbraith, “we are guided, in part, by ideas that are relevant to another world; and as a further result, we do many things that are unnecessary, some that are unwise, and a few that are insane. Some are a threat to affluence itself.”
This resistance to change is not surprising. It’s reminiscent of the famous experiment by the psychologists Martin Seligman and Steve Maier in the late 1960s.
They subjected two groups of dogs to electric shocks. One group could stop the electricity by pushing a lever. The other group was helpless; their lever did not work. After the experience, the second group remained helpless in life, lying about in chronic depression.
When Seligman and Maier put the dogs in a new experiment requiring them to jump over a low wall to escape electric shocks, the first group easily cleared the wall, while the second group did not even try. They had the ability to fix the problem, but they did not believe it because they had learned helplessness.
In a similar way, human beings learned helplessness over centuries of entrenched inequality, but we are not living in that world of scarcity anymore.
The resources to level the playing field are well within our grasp.
This is the second in a series of Substack posts that will show how the United States can raise trillions of dollars in revenues to reduce inequality. Come back next week for Part 3…
Would Seligman and Maier even be able to do their experiments nowadays? Shocking rats and making them depressed ... Isn't that, well, ... shocking?!