The (income) differential, the plateau & the abyss

Rick Bookstaber has a very, very interesting post called Accidental Egalitarian:

“The flatter the plateau and the more sudden and deep the abyss, the stronger the argument for social programs, because the costs of redistribution for those on the plateau are lower in practical terms, and the fall from the plateau is more crushing. In the limit, if the plateau is completely flat, so that there is no practical difference in income within the upper range, people should be indifferent about moving along that plateau toward the cliff if at the same time the cliff can be securely fenced off.

Put in other terms, more akin to the way we think about financial trade-offs, there is both the expected value of one’s income (measured by what it does for you in practical terms) and the uncertainty surrounding it. As the means from one person to the next converge, the uncertainty takes on increasing significance. As the “how you spend your time” differential shrinks, a reduction in uncertainty through an improvement in the safety net becomes of increasing importance. Indeed, in the limit, if everyone is typically spending their time doing the same things, reducing this uncertainty is all that matters.”

I’ve been having some very interesting conversations (like with Kay and Mike of HISG) about asset-based community development where people can leverage what they have not only mitigate that uncertainty but also to impact community development. What Rick outlined in his post is very compelling – at the end of the day, what are you going to do with that extra billion dollars? It’s not really going to impact your lifestyle – but that extra billion can reduce the uncertainty of you reaching the edge of the plateau and reaching the bottom of the abyss. That might be another form of the safety net that Rick is proposing – it could be a private initiative that helps people who are closer to the edge and fence them off from the edge of the plateau.


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