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“The Veil of Ignorance” by John Edward
John Edward, a resident of Chelmsford who earned his master’s degree at UMass Lowell and is an adjunct professor of economics at Bentley University, contributes the following column which deserves to be read by everyone.
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Where ignorance is bliss, ‘Tis folly to be wise
Thomas Gray
If ignorance is bliss, does that mean politicians are a perfect match for their job? To the contrary, lawmakers would craft better economic policy if they learned to be more ignorant.
The federal budget deficit was front and center during the 2010 elections. Many pundits interpreted the national results as a repudiation of excessive government spending. Regardless of how accurate that reading might be, do not expect much to change. Congress knows too much to allow that to happen.
Our elected representatives are responsible for setting the rules of the game. Lawmakers, and the voters who put them in office, form opinions based on what they know. The life we experience drives what we know. We take for granted how much our experience is based on the initial hand we are dealt in life.
John Rawls, an influential 20th century philosopher, suggested we set the rules of the game based on a “veil of ignorance.” He was not advocating ignorance of the facts when adopting public policy positions. Rather, we should ignore our own position in society and how policy will affect us personally. If we applied Rawls’ philosophy today, the result would be a better tomorrow for society as a whole.
Lawmakers respond to special interests. That is wrong, no matter who the interest is, or how special they are.
Applying the veil of ignorance, we would not sacrifice sound public policy at the altar of special-interest politics. Legislators would pass laws as if they did not know what social standing, market power, or health status we start out with.
Take health care for example. Insurers work hard to protect their profits. People who already get government-subsidized health insurance through their employer do not want to spend money subsidizing the uninsured. Others resent being forced into getting insurance because they happen to be healthy. Members of Congress get excellent coverage and may not be able to relate to what it is like to get sick with poor coverage or none at all.
We should formulate policy without knowing what cards we will be dealt in life – the veil of ignorance. You could be born to an affluent couple in a quiet suburb or to a poor single parent in a violent inner city. You may end up in Mensa, or programs for the developmentally challenged. You could be blessed with good health or cursed with lifelong medical problems.
If we applied the veil of ignorance, a system where everyone gets health insurance is compelling. It would insure individuals against being dealt a bad hand, and the final collective cost would be lower.
Our elected officials should not be representing the loudest interest group, the most generous donators, or only the people that voted for them. They should represent all of us.
This does not excuse any of us from taking personal responsibility for what we do with our endowment. It means society must take responsibility for endowing everyone with the opportunity to do something with what they have.
Taxes are another example. We should not base tax policy on a belief or claim that a tax would hurt a specific industry, that it would discourage a particular investment, or encourage a certain behavior. Taxes should generate the revenue required to provide services in a manner that promotes the common good.
How much we pay is not as important as who pays. Taxes must above all be fair. If we apply the veil of ignorance, we should all be satisfied with the result, even if we did not know in advance how much we would pay.
Under the veil of ignorance, a tax policy where the poor pay a much higher rate than the wealthy does not make sense. Yet, that is what we have in the Commonwealth of Massachusetts. Meanwhile, powerful interest groups are pushing for lower corporate taxes, lower taxes on capital gains, and tax breaks based on age rather than ability to pay.
It is not about equality of results. Rather the objective should be equality of opportunity. The only way we get that result is if we are impartial — if we assume the veil of ignorance.
However, lawmakers know too much. The Tea Party is pushing Congress to adopt a ban on adding earmarks to spending bills. While the idea has merit, it stands no chance without a veil of ignorance.
Members of the 112th Congress will know what spending programs benefit their district. They know voters will be appeased if the overall economy improves and their work in the Capital is perceived as creating jobs back home. Incumbents know how to improve their chances of being re-elected.
It is not folly to be wise. The wise thing to do would be to heed John Rawls when he said: “we must nullify the effects of special contingencies which put men at odds and tempt them to exploit social and natural circumstances to their own advantage.” Next time you consider a public policy issue, try applying the veil of ignorance.
There are a couple of points I’d like to respond to. The first is that there seems to be a fundamental flaw with the veil of ignorance as a mechanism for deciding public policy: it assumes we are risk averse. However, it is probably wrong to assume that all individuals would have the same personality behind a veil of ignorance. And if conformity is required for the veil to work, then we have to ask whether the personality type we expect is in fact the correct one. If we assume a veil of ignorance for individuals who are risk takers, what results should we expect? I think ones that are different from what Rawls asserts. From psychology we know that humans are risk adverse when there is potential for gain, but risk prone when there is potential for loses, but the veil of ignorance does away with these conditions. This means that you, in effect, have nothing to lose and nothing to gain, meaning that all that matters is probability. If you have an equal probability of being in the top 1% as being in the bottom 1%, what sort of system would you choose? Rawls seems to assume that we are risk adverse. Yet what is acceptable risk? What if your personal preference is to simply be in the top 60%? Then you would be inclined to take the risk that you’d be in the bottom 40% and design a system that benefits the top 60% more. This all being said, I do think the veil of ignorance is an important tool for writing public policy. I just wanted to establish that there are shortcomings.
Then you make this claim: “Applying the veil of ignorance, we would not sacrifice sound public policy at the altar of special-interest politics.” But, as I have been reminded several times by the readers of this blog, we are all effectively special interests. For example, I’m a college student, so there are certain government policies that will benefit me and a few million other Americans. College students are a special interest. But is catering to that special interest necessarily a bad thing for society? (This is rather irrelevant, but the claim also strikes me as rather utilitarian if you accept that any given group of citizens is a special interest. I wonder how Rawls would react to this. I’d also like to be clear that I don’t consider “utilitarian” to be derogatory in any way).
Moving on, I feel that taxes being fair is only half the conversation. What of efficiency? From what you’ve written I assume that you feel that the dead weight loss of a fair tax system is not that large a problem. But other economists would disagree. I’m not sure it’s clear either side has a stronger argument; there’s obviously a trade-off, but I feel that any discussion about which direction that trade-off should lean is an ethical, not economic, question.
As for taxes, perhaps income or capital gains taxes are not the most efficient? The Europeans seem to be doing a better job of providing social welfare programs by relying on the VAT. I know it’s regressive, but it’s less distortionary, so once again we return to the question of fairness versus efficiency.
I study biology, so I’m afraid I have to take issue with the idea of equality of opportunity as well. It’s not that I oppose the idea; I think it’s the ideal our society should be striving for. But it’s biologically impossible. Individuals are influence by genes, environment, and the interplay between the two. The genetic differences, I think, are ethically impossible to deal with. Or at least, that is my opinion and the opinion of any professor I’ve had who has taught genetics. We can, however, make improvements to environment. One thing that is always ignored is the uterine environment. Exposure to toxins while in the womb has a life-long negative impact on individuals. This is why laws such as the Clear Air Act and the Clean Water Act are so vital. It’s not just that they protect us adults, but they also protect fetuses from suffering from developmental disorders. As for the environment after birth, that gets more complicated. There is only so much public policy can do and, if we are honest about this, not all parents are equally good at raising their children. So short of replacing everyone with a population of clones grown in a lab and raised by computers, equality of opportunity is impossible. Again, I agree with the sentiment and I think our public policy should be striving towards that goal; I simply wanted to point out the difficulties in achieving it.
As a final point, you seem to have argued that earmarks are a bad thing. I’m not sure I agree with that. They certainly aren’t efficient from an economic standpoint. But I can’t help but think that our elected representatives do have an obligation to serve their district as well as the country. The majority of earmarks are for programs and expenditures that have to occur somewhere. Is it necessarily a bad thing that members of Congress try to achieve a more even distribution of federal spending? Yes, there are wasteful earmarks. But there are also very useful ones. And I don’t think anyone has made it clear what the ratio is between the two.