Transcript Liberalism and ‘Asset

A Modest Proposal? Basic Capital
versus Higher Education Subsidies
Stuart White
Jesus College, Oxford
[email protected]
Presentation for seminar at the Havens Center, University of
Wisconsin, September 2009
The questions
Overarching question: Do governments spend money on
young adults in ways that correspond, equitably, to the
interests which such spending should serve?
Specific question: Is it more just to use the funds we put
into education subsidies, in particular higher education
subsidies (HES), to pay a basic capital grant to all young
adults instead?
What to do for Mr. Bast?
‘‘Something must be done for Mr Bast’: his conditions must be improved without impairing
his independence; he must have a free library, or free tennis courts; his rent must be
paid in such a way that he did not know it was being paid; it must be made worth his
while to join the Territorials; he must be forcibly parted from his uninspiring wife, the
money going to her as compensation; he must be assigned a Twin Star, some
member of the leisured classes who would watch over him ceaselessly…; he must be
given food but no clothes, clothes but no food, a third-return ticket to Venice, without
either food or clothes when he arrived. In short, he might be given anything and
everything so long as it was not the money itself.
And here Margaret interrupted….
‘Give them a chance. Give them money. Don’t dole them out poetry, books and
railway tickets like babies….give people cash for it is the warp of civilization, whatever
the woof may be. The imagination ought to play upon money and realize it vividly, for
it’s the – second most important thing in the world. It is so slurred over and hushed
up, there is so little clear thinking – oh, political economy, of course, but so few of us
think clearly about our own private incomes, and admit that independent thoughts are
in nine cases out of ten the result of independent means. Money: give Mr Bast
money, and don’t bother about his ideals. He’ll pick those up for himself.’
She leant back while the more earnest members of the club began to
misconstrue her….’ – E.M. Forster, Howards End, chapter XV
Basic capital
Basic Capital: all citizens (persons) should receive a large capital grant
on maturity.
Example: Ackerman and Alstott (1999) propose an $80,000 grant for all
US citizens at age 21, financed from wealth/inheritance tax.
Note: $80,000 figure reached by asking how much a high quality
higher education in the US costs.
UK Child Trust Fund (CTF): all children (born after September 2002)
receive a grant at birth, plus additional grant at age 7, which is
invested on their behalf and held in trust until 18 when they may
use it as they like. Families may contribute into the CTF as well up
to £1,200 per year.
For related US policy proposals, see:
http://www.newamerica.net/programs/asset_building#
Why basic capital?
Tom Paine on ‘beginning the world’:
‘When a young couple begin the world, the difference is exceedingly
great whether they begin the world with nothing or with fifteen
pounds apiece. With this aid they could buy a cow, and implements
to cultivate a few acres of land; and instead of becoming burdens
upon society...would be put in the way of becoming useful and
profitable citizens.’ (Paine, 1987 [1797], p.483, italics added.)
Interest in adequate opportunity for ambition formation: an interest one
has in one’s early adult years in being able to approach life with
ambition (not necessarily in the narrow materialist or positional
senses of the term); an interest in being able to meaningfully pose,
and act on one’s considered answer to, the question: ‘What do I
want to do with my life?’
Why basic capital (ctd.)?
Why do we have an interest in opportunity for ambition
formation in early adulthood?
(1) All individuals have a fundamental interest in having an
autonomous life; that is, a life in which they have the
capacity to frame and revise their conception of the good
(Raz, 1987, Rawls, 1993).
(2) Empirical claim: The interest in (1) is strongly affected
by the degree to which individuals have opportunity for
ambition formation in their early adult years.
(3) Therefore, individuals have a strong interest in having
adequate opportunity for ambition formation in their early
adult years.
Why basic capital? (ctd.)
But: Why is ownership of capital important to having adequate
opportunity for ambition formation in early adulthood?
Distraction effect: Those who lack wealth are consequently too caught
up in the battle to keep their financial heads above the water to have
the time and energy to reflect on their goals and commitments in the
searching way that autonomy involves (Ackerman and Alstott, 1999).
Horizons effect: Those who lack wealth do not have the resources to
make ambitious life-projects feasible, and so, to the extent that they
do probe their basic goals and commitments, they are tempted to do
so in a very circumscribed and unimaginative way (Ackerman and
Alstott, 1999).
Why basic capital (ctd.)?
So the argument is:
(1) All individuals have a fundamental interest in having an autonomous
life; that is, a life in which they have the capacity to frame and revise
their conception of the good.
(2) Empirical claim 1: The interest in (1) is strongly affected by the
degree to which individuals have opportunity for ambition formation
in their early adult years.
(3) Therefore, individuals have a strong interest in having adequate
opportunity for ambition formation in their early adult years.
(4) Empirical claim 2: One condition for satisfying the interest in (3) is
that individuals have some capital in their early adult years.
(5) Therefore, individuals have a strong interest in having some capital
in their early adult years.
Equity objections to HE subsidies
(1) Academic ability-based inequality in resource commitments in young
adulthood: relative to BC, HES leads to young people at the top of the
academic ability range getting more resources to launch into adult life
than those lower down the academic ability range.
(2) Academic ability-based inequality in opportunity for ambition formation:
relative to BC, HES ensures young people at the top of the academic
ability range have adequate opportunity to formulate ambition, but does
little or nothing in this respect for young people lower down the academic
ability range.
(3) Class-based inequality in resource commitments in young adulthood: given
that academic ability (at 18) correlates with social class, (1) above implies
that, relative to BC, HES leads to (even greater) class-based inequality in
resource commitments in young adulthood.
(4) Class-based inequality in opportunity for ambition formation: given that
academic ability (at 18) correlates with social class, (2) above implies
that, relative to BC, HES leads to (even greater) class-based inequality in
adequate opportunity for ambition formation among young adults.
Possible policy responses to the inequities
(1)
If we can enact policies which break the correlation between
academic ability at 18 and parental social class, then objections 3
and 4 fall.
(2)
If we recoup HES through the tax system (e.g., graduate tax) then
this can meet objection 1.
(3)
But what about objection 2: inequality in having adequate
opportunity for ambition formation depending on academic ability?
Doesn’t this point towards basic capital?
Defending education subsidies
‘Revised HES’: It is possible to reduce inequalities in
resource commitments and/or opportunity for ambition
formation by academic ability and social class by
complementing HES with generous support for other
forms of post-18 education and training (if need be,
diverting some resources from HES to these other
areas).
The need for further argument(s)
(1) Residual inequity: Revised HES is unlikely to remove
inequity fully because some young people lack the
ability to make effective use of any further educational
opportunity.
(2) So a response to the equity objection is going to have
to at least combine revised HES with another
consideration or set of considerations - something that
is supposed to outweigh the remaining inequity (of
revised HES relative to basic capital).
(3) What might these further considerations be?
The individual return argument
The individual return thesis: Public support in early adulthood which
takes the form of an education subsidy tends to produce a higher
rate of return for the individual enjoying the subsidy than if the
subsidies were used to pay every young adult basic capital; this is
true (a) where return is understood in a commercial sense and (b)
where return is understood in a personal development sense.
Intuition behind the thesis: basic capital is vulnerable to the problem of
‘stakeblowing’ (Ackerman and Alstott, 1999): imprudent or unlucky
use of capital leading to low/zero return in commercial or personal
development terms.
The individual return argument: although less equitable than basic
capital, revised HES is justified paternalistically by the higher
individual return from education subsidies compared to basic capital.
Assessing the individual return argument
Objections:
(1)
Reverses a general presumption against paternalism (for young
adults).
(2)
The risk of ‘stakeblowing’ might be reduced through policy design,
e.g., appropriate education in schools (Paxton and White, 2006).
(3)
Ambiguity of stakeblowing: Apparent stakeblowing can teach
lessons: even when people lose their basic capital, e.g., through
business failure, they can learn valuable skills along the way that
set them in good stead for the future.
Assessing the individual return argument (ctd.)
(4) Ambiguity of stakeblowing: personal development return might be high even
if commercial return is low.
(5) Actual returns on HE are in fact very variable: individual return to HE differs
markedly according to degree and institution – in the UK, there is a much
lower return outside of the ‘Russell Group’ universities. But these are the
universities most accessible to children from lower social classes (Keep and
Mayhew, 2004). So the HE subsidy approach tends to encourage children
from lower social classes to make investments with a likely low rate of
return. Could they do better with basic capital?
(6) Main problem with the individual return argument: If we select revised HES
over basic capital we thereby deprive some people of resources to support
ambition formation. Call this the ‘denied group’. Why should members of the
denied group agree to this major loss just because revised HES is better for
others who (allegedly) do get some resources under this policy?
The social return argument
The social return thesis: Public support in early adulthood
which takes the form of an education subsidy tends to
produce a higher rate of return for the wider society than
equivalent public support in the form of basic capital; this
is true (a) where return is understood in a commercial
sense and (b) where return is understood in personal
development sense.
The social return argument: although revised HES is less
equitable than basic capital in an immediate sense this is
justified by the higher social return which we get from
revised HES.
Assessing the social return argument
Objections:
(1) Higher social return per se does not necessarily address the
interests of the ‘denied group’. Higher social return must be
harnessed in such a way as to raise their prospects.
(2) Imagine that the denied group has higher income prospects under
revised HES than under basic capital. This still doesn’t necessarily
justify revised HES because it is not clear that higher income for
members of the denied group justifies the cost to them in terms of
reduced opportunity for ambition formation in early adulthood.
Assessing the social return argument
(3) Will there be a higher social return? All the reasons for questioning the
individual return thesis apply also to the social return thesis. Social returns
seem very variable by subject and institution. Estimated average social rate
of return on arts degrees in the UK estimated at zero (Wolf, 2002, p.33,
citing Harkness and Machin, 1999).
(4) In addition, conventional estimates of social returns, inferred from individual
returns, may be exaggerated. To some extent HE raises individual earnings
through signalling not through genuine increases in human capital. Pushing
resources into HE could generate social waste if it simply increases the
amount of education people need to signal a given level of ability (Wolf,
2002, 2004).
‘...jobs which twenty years ago were done by people who had left school at
sixteen or eighteen now go only to new entrants with degrees’ (Wolf, 2002,
p.51.)
Conclusion: taking basic capital seriously
I have not shown that basic capital is clearly preferable to education
subsidies.
But I think we do have reason to treat basic capital seriously as an
alternative to education subsidies.
‘Education, education, education.’ Social democratic strategy became
increasingly reduced in the course of the twentieth-century to a
focus on education as the key lever for promoting (various kinds of)
equality (and ‘marrying’ equality-promotion with efficiency).
‘It’s the distribution of wealth,…’ Should social democratic strategy
refocus directly on wealth distribution? The basic capital alternative
to education subsidies might be a part of such a change in
orientation.
References
Ackerman, Bruce, and Alstott, Anne, The Stakeholder Society (New Haven,
Yale University Press, 1999).
------, ‘Macro-Freedom’, in Bruce Ackerman, Anne Alstott and Philippe Van
Parijs, Redesigning Distribution: Proposals for a More Egalitarian Capitalism
(London, Verso, 2006), pp.209-216.
Grözinger, Gerd, Maschke, Michael, and Offe, Claus, Die Teilhabegesellschaft:
Modell eines neuen Wohlfahrtsstaates (Frankfurt/New York, Campus
Verlag, 2006).
Harkness, Susan, and Machin, Stephen, Graduate Earnings in Britain, 1974-95
(London, Department for Education and Employment, 1999).
Haveman, Robert, Starting Even: An Equal Opportunity Program to Combat the
Nation’s New Poverty (New York, Simon and Schuster, 1988).
Keep, Ewart, and Mayhew, Ken, ‘The Economic and Distributional Implications
of Current Policies on Higher Education’, Oxford Review of Economic Policy
20, 2004, pp.298-314.
Kelly, Gavin, and Lissauer, Rachel, Ownership for All (London, Institute for
Public Policy Research, 2000).
References (ctd.)
Nissan, David, and Le Grand, Julian, A Capital Idea: Start-Up Grants for Young
People (London, Fabian Society, 2000).
Paine, Thomas, Agrarian Justice, in Michael Foot and Isaac Kramnick, eds.,
The Thomas Paine Reader (Harmondsworth, Penguin, 1987 [1797]),
pp.471-489.
Paxton, Will, and White, Stuart, ‘Universal Capital Grants: The Issue of
Responsible Use’, in Will Paxton and Stuart White with Dominic Maxwell,
eds., The Citizen’s Stake: Exploring the Future of Universal Asset Policies
(Bristol, Policy Press, 2006), pp.121-134.
Rawls, John, Political Liberalism (New York, Columbia University Press, 1993).
Raz, Joseph, The Morality of Freedom (Oxford, Oxford University Press, 1987).
Wolf, Alison, Does Education Matter? (Harmondsworth, Penguin, 2002).
------, ‘Education and Economic Performance: Simplistic Theories and their
Policy Consequences’, Oxford Review of Economic Policy 20, 2004,
pp.315-333.