Social tradeoffs

At last, we have someone explaining this social mobility problem as it actually is.

First, they need to be clear which of the two fundamentally different versions of social mobility — absolute and relative — they are most concerned about. Absolute mobility defines how much better off we all are compared with our parents, telling us how a whole generation is doing compared with a previous one.

Relative mobility, however, concerns itself with a more problematic question: what are the chances of children from less privileged homes prospering in adult life compared with those from richer backgrounds?

A common analogy used is to think of the nation as a long caravan crossing the desert, with the poor struggling to keep up at the rear and the rich racing ahead at the front. An increase in absolute mobility would see everyone speed up and progress more quickly across the full length of the caravan, but no one would change position.

An increase in relative mobility, however, would see those undernourished but naturally strong travellers at the back advance more quickly than the rest, overtaking others in front of them at the start of the journey.

This isn't the way that Lee Elliot Major (of the SuttonTrust) wants us to think of this of course, but I would argue that the absolute mobility of the society is the most important. Major, having defined the two types simply assumes that the relative mobility is what we should concern ourselves with...which causes a number of problems. For example, there is talk about the waste of talent not being able to rise. Something which is of course true. But there is no talk of the costs of whatever engineering of society is necessary to increase such relative mobility.

Some will argue that there are no such costs, that a rejigging that allows all talents to shine will make us all richer in aggregate, that a rise in relative mobility will increase absolute mobility: I'd agree up to a point. What matters though are the methods used to promote such. For example, we could increase downward mobility (and thus upward, as these things have to balance) by 100% inheritance taxation. This would however have a crippling effect upon absolute mobility of the society as a whole for we would be turning, to a large extent, the capital needed by the next generation into consumption by the present.

But what we really need is some grand economic study, one that looks at the effects of concentrating upon equity as opposed to concentrating on that absolute mobility. Fortunately, we have one. It's the SRES, the economic models upon which the whole of climate change science is based, the model which feeds into the IPCC's reports.

Using a fairly broad brush, there are four families of models of the future,. A1, A2, B1, B2. Again, very roughly, A means gung ho for growth and equity (or as we might say here, relative mobility) be damned. B means concerning ourselves with equity rather than that absolute mobility. 1 and 2 mean globalisation or regionalisation of the global economy (for yes, we are talking of the global, not UK economy here). What are the outcomes in 2100? You'll need to have a look through that link to see it in detail but there's a huge difference in living standards between the A and the B families (and also between the 1 and the 2).

Leaving aside the effects of globalisation (which are substantial) comparing the A1 result (globalisation and growth) with the B1 (globalisation and equity) the average GDP per capita in 2100 is $78,000 to $50,000.

Now I agree, this is all terribly broad brush, I'm certainly using the SRES for a purpose it was never intended for. However, this is the only large scale and long term study of various options for the global economy that I know of. It also gives us a very interesting result. We can indeed concentrate on that relative mobility, upon equity, but it comes at a cost. The absolute wealth, the absolute mobility of society, would be over 50% higher in a century's time if we didn't so concentrate.

Which outcome you prefer is of course a moral question, not one that is the province of economics and most certainly not one where I can tell you the right answer. There is only preference. But there is a cost, to concentrate upon equity or relative mobility is not something that we can do for free.

I think our great grandchildren would like to be richer and still unequal rather than poorer than they need to be and more equal. What say you?

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