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Equality of Opportunity Theory & Applications. John E. Roemer Yale University. Key Idea: Leveling the playing field. How well an individual does should reflect his/her effort, not his circumstances, where Effort comprises those actions a person can control and
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Equality of OpportunityTheory & Applications John E. Roemer Yale University
Key Idea: Leveling the playing field How well an individual does should reflect his/her effort, not his circumstances, where Effort comprises those actions a person can control and Circumstances comprise those influences he/she cannot control (social & biological environment)
The language • objective: the kind of advantage being sought • circumstances: those things that influence objective and are beyond a person’s control • effort : .... influences within control • type: set of people with the same circumstances • policy: intervention to affect objective outcomes
The EOp policy is... • that policy that renders as equal as possible, the distributions of the objective across all types • in other words: one’s chances for acquiring degrees of the objective are independent of one’s type (i.e, circumstances)
Demarcation between circumstances and effort Consider the problem of equalizing opportunities for wage-earning capacity, using school finance as the policy Circumstances could include: parental social class, parental education, race, gender, IQ, etc. The more influences we choose to call circumstances the more egalitarian will the EOp policy be. The most conservative view: everything is effort, nothing is circumstance. The most radical view: everything is circumstance, nothing is effort
If everything is effort, then the EOp policy is laissez-faire with protection against discrimination If everything is circumstance, and all people are different, then the EOp policy is equality of outcomes (each person would be a type) I’ll argue here that even a quite conservative view of what comprises circumstances implies quite radical EOp policies
EOp vs. Meritocracy Meritocracy generally means rewards according to talents, even if talents are in-born or socially derived This contrasts with EOp, in which rewards are only justifiable in proportion to effort; unlike meritocracy, the source of effort matters
What the Eop policy is • Goal: to use policy so that the distributions of the outcomes, in each type are as close together as possible • No attempt to decrease the variance within distributions • In many problems, this amounts to maximizing the average outcome of the type that is most disadvantaged
Formalization Types 1,2,….,T Policies Outcomes u is increasing in e Distributions of effort argue that outcome rank is sterilized measure of effort degree
Suppose we look at one degree of effort, Would like to choose policy to maximin the outcomes of all types at : Call the solution . One policy for each degree of effort. Compromise: weight each -objective function equally, for the -tranche Goal: choose to
Suppose, as is often the case in applications, that there is an unambiguous worst-off type, i.e., a t* such that Then ie. choose that policy that maximizes the average value of the objective for the worst-off type
Here’s an examplewith 3 CDFs of income if outomce is income then the v functions are the inverses of these CDFs
1. Equalizing opportunities for wage-earning capacity: US data, Betts and Roemer (2003) Objective: wage at age 30 Circumstances: the education of the mother Types: four levels of maternal education Effort: all other causes of wage formation Policy: educational finance Population: American males, late 1960s adolescents
Reiteration: To allocate a fixed budget so as to maximize the average wage-earning capacity of the type that has the lowest such capacity where type is defined by the mother’s level of education
The last column says that the average wage would increase under the EOp policy, compared to what it would be with the ER policy I.O.W., the ER policy is inefficient with regard to maximizing average income.
With this typology, note the EOp policy reduces the average wage. I.O.W., society has to pay a cost of approximately 2% of national income to equalize opportunities w.r.t. this typology The EOp policy requires radical redistribution in part because the elasticity of wages w.r.t. educational spending appears to be very small A contested area of labor economics...
Caveats These calculations presume no change in the ‘educational technology’ Other instruments/policies (providing jobs) might be more effective At least we see: What the EOp policy is depends upon the conception of type, the policy, and the budget available Sharp difference between ‘equal resources’ and ‘EOp’
2. EOp for income acquisition:an international study • (J. Pub Econ., 2003) • Objective: post-fisc income • Circumstance: education of more educated parent • Effort: all other influences on income • Types: three levels of parental ed’n • Policy: linear income taxation
Here are the three CDFs at the EOp policy ? Note the scales are different on the two graphs
The EOp calculation • policy: constant marginal tax rate income taxation & lumpsum benefit • Each marginal tax rate and lumpsum benefit will elicit a labor supply and post-fisc income for all wage rates • calculate the tax regime that maximizes the average income of the worst-off type
Caveat Income taxation is (probably) not the best instrument for equalizing opportunities for income A full analysis of that problem would compare the benefits and costs with different instruments -- educational policy, taxation,BIG, Ackerman and Alstott $80k endowment The Nordic countries are not necessarily overtaxing from the EOp viewpoint: recall we here use a v. conservative conception of circumstance.
Scope of EOp Should we equalize opportunities for short people to play on professional basketball teams? Being short is a circumstance... Probably not. EOp trade-off: the welfare of those who hold positions vs. the welfare of those who consume what the first group produce To adjudicate, require a full theory of distributive justice for community as a whole. EOp addresses just one part...
An example Americans tend to oppose affirmative action in hiring but support it in educational institutions Some exceptions: the Americans with Disabilities Act (ADA) But most decisions have ruled in favor of employers
This suggests a scope for EOp today: EOp during the process of education and training but Meritocracy in hiring. Of course, a slippery slope ... example of affirmative action admissions to medical schools
Scientific conclusions • What policy is best from the EOp viewpoint depends on: choice of circumstances (types), choice of instrument/policy, and budget • Even conservative (limited) delineation of circumstances implies quite redistributive policies • Nordic countries appear to be doing v. well according to an EOp ethic
Political conclusions • Important to separate conceptually what is desirable from what is politically feasible • Correct approach: attempt to implement the feasible policy that is closest to the optimal one, once the latter is known • Most citizens embrace a concept of EOp that has far-reaching policy implications
