Income Redistribution vs. Grade Redistribution: An Economic Sophism

This argument tends to crop up every once in a while. Young America’s Foundation, which is responsible for the above video, describes it thusly (emphasis in original):

[W]hen students at Carthage where asked if they would be willing to sign a petition to redistribute GPA points from the top 10% to the rest of the college, most of them said NO. One student said, “No, because I worked hard for my grades!”

Another said, “At Carthage, each student has an equal opportunity to get the GPA they desire.” And another, “I don‘t want my GPA being taken away from me if I had an ’A’.”

When the petitioners told students that oftentimes outside factors leave students at an unfair disadvantage, a student said, “No. I’m low-income and a minority, and I have a fairly decent GPA, so…” 

Fittingly, some not in the upper 10% welcomed the free points. “Why not? I’m down,” said one student with a low GPA  (eagerly signing the petition), but then the student’s friend standing next to him said, “It takes away from people working hard… and obviously it’s paid off with their higher GPA.” Later in the conversation, when the first student told his friend to sign the petition, the friend responded, “How about trying harder for a semester?”

The main purpose of the study is to point out the ‘hypocrisy’ of being in favor of income redistribution while refusing to redistribute one’s own grades. The fact is, however, that this entire argument is based on fallacious reasoning, or more specifically, a false analogy.

To make it easier for people living in countries that do not use the GPA system, let us stick with percentage points. Typically, grades are assigned a value between 0 and 100%. What this means is that if one’s percentage points were to be ‘redistributed’, this would detract from one’s final grade the exact amount of percentage points that were redistributed. This should be obvious. Let us think of the matter in utilitarian terms, with the assumption that each person assigns the same value to each percentage point. What this means is, that the top 10% lose utility in exactly the same proportion that the others gain that utility. This, however, goes against one’s natural sense of justice: why should one person be harmed so that other, undeserving, people gain? In economic terminology this sort of situation is known as Pareto optimality, which means that no one can gain without someone else losing.

Now let us imagine a slightly different, but still plausible scenario. Occasionally some schoolwork allows for bonus points, where if one scores over 100%, the extra percentage point(s) can be transferred to another paper. It is quite common for students to calculate exactly the grades they need on the remaining assignments and/or tests in their class in order to get the grade they want. So imagine that a student has amassed a very large number of bonus points—so many that even if she receives a zero on all of her subsequent assignments and tests, she will still receive a final grade of 100% in the course.

It is this latter case which corresponds to the acquisition of income in the real world, rather than the case presented in the video. It is no doubt the case that anyone with a net worth of a million dollars would be able to live a relatively comfortable life without working, provided they do not concern themselves with extravagances. Even if a disaster occurred, e.g. one’s house caught on fire, one would still be able to make up the loss without needing to fear for one’s future financial security. In the same way, if a student has exactly the amount of bonus points to guarantee that he will have a final grade of 100%, he will be indifferent about any more bonus points that he is given; he loses nothing by having his extra percentage points redistributed, so he has no reason to object to redistribution. To return to economic terminology, the state of our fictitious economy prior to redistribution is not Pareto optimal: because the redistribution of extra bonus points (above the aforementioned threshold) does not harm the high-grade student, other, low-grade students can be made better off without making the high-grade student worse off.

To drive home the point, the only way that the analogy expressed in the video would be applicable to real life would be if there were a maximum income, after which point taxation became 100% (with, perhaps, infrequent ‘bonuses’), which is obviously not the case.

Hence, the only relevant questions remaining to be asked about the data in our imaginary scenario are 1) whether the bonus points are the property of the top-grade student, to be used any way s/he wishes, as, e.g., in a scenario where bonus points can be spent on luxury goods; and 2) whether it is people’s own fault that they are unable to become wealthy, or whether society is ultimately to blame—i.e. to whose agency a given person’s poverty should be attributed. These, however, are at root metaphysical questions, the kind that philosophers have thought about for millenia, and for which no solution is likely forthcoming. So it would seem that much of the public debate about welfare revolves around different attempts of patching up various gaping holes in philosophy. Moreover, the particular type of attempt to which one gravitates is typically chosen without any conscious contemplation, but often more or less out of habit, i.e. by what views one has previously been exposed to.

Suffice it to say, then, that appeals to metaphysical concepts are insufficient to convince people of whether welfare is justified. In other words, the vast majority of public discourse on the topic of welfare can safely be thrown in the garbage without a second thought. If we hope to say anything meaningful at all about such issues, our best best would be to focus on empiricism, i.e. such questions as whether the value added by such measures (in terms of increased productivity, decreased need for health care, etc.) is sufficient to justify their cost.

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About Graham Joncas

We are a way for capital to know itself.

Posted on October 5, 2012, in Economics, Philosophy, Politics and tagged , , , , , , . Bookmark the permalink. 2 Comments.

  1. The analogy is especially odd when you consider scarcity. One person getting an A does not have any impact whatsoever on another person’s capacity to get an A. (Barring curves, I suppose — related query: does grading on a curve contribute to “academic inflation”?) Meanwhile, in the purely hypothetical case in which the top 5% of a nation owns over 60% of the net wealth, it is mathematically impossible for the other 19 vigintiles to command a comparable sum.

  2. Hear, hear. It’s embarrassing that the analogy has stuck around for so long.

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