The Baldy Center Podcast

The Baldy Center for Law and Social Policy at the University at Buffalo
Podcast Season 4, Episode 28
Podcast recording date: March 10, 2022
Host-producer: Edgar Girtain
Speaker: Matthew Dimick
Contact information: baldycenter@buffalo.edu

Podcast transcript begins.

Edgar: Should legal rules be used to redistribute income? Or should income taxation be the exclusive means for reducing income inequality? I'm your host Edgar Girtain, and welcome to the Baldy Center for Law and Social Policy podcast. Today, you're going to hear all about wealth inequality, wealth redistribution, and social welfare from Matthew Dimick, who is professor here at the School of Law in the University at Buffalo. Our conversation was centered around a recent publication of Professor Dimick's titled, “The Law and Economics of Redistribution,” which you can find in the 2019 Annual Review of Law & Social Science. Without any further ado, this is a bit of a long one, I hope you enjoy this conversation with professor Matthew Dimick.

First of all, thank you for being here. Welcome.

Matthew: Thanks for inviting me.

Edgar: So to get the ball rolling, I'll play devil's advocate here, and I'm going to say that, right now, Jeff Bezos may be out on the open seas enjoying his 500 million super yacht, while in Venezuela, an entire country is starving because not even a month salary can buy a dozen eggs.

Matthew: Yeah.

Edgar: So there's no doubt that we live in a time of jarring global wealth inequality. But why is this my problem? After all, I enjoy the privileges I have because I work hard for my money. Why should I be interested in wealth redistribution at all? After all, in America, this is a land of opportunity, why can't the poor just work harder to earn more money?

Matthew: Yeah, that's a fantastic question. I love raising this question with my own students, because it turns out that a lot of people have, you know, kind of a gut level concern about vast disparities of wealth inequality, but we don't always articulate why that is. Right? So, there's a couple in this book project that I'm working on, it starts from a very much an economist point of view. And for economists, they're really just concerned about just the fairness of the distribution, to the extent that economists are concerned about inequality at all. Sometimes they're not. Sometimes they are of that opinion, which is, well, you know, it's, uh, what you get is what you work for. So, if you are poor, you just need to work harder. Other economists understand that the distribution of income is sometimes arbitrary. You know, sometimes people are born with different talents, maybe some more than others. And so, some inequality is not earned in the sense of it's just a choice, right? And so that there is a kind of an unfairness in the distribution of income. And so that should be in some way. So, it's really just kind of a fairness or an injustice issue. Also for economists, they think about maximizing overall wellbeing.

Edgar: Who's wellbeing? Wellbeing according to who?

Matthew: Everybody. Well, I mean, that opens up a huge can of worms. But let's give the economist some credit. They think every individual sort of counts in terms of their possibility for happiness or utility or enjoyment, right? And I don't know if you've taken a basic level economics course, but a core principle in economics is this diminishing marginal utility, right? This basic idea in economics, which fuels a lot of other parts of economics, right, is, you know, think about a hot dog. You consume one hot dog, it's great. You have a second one. Yeah, that was pretty good too, but right. There's only so many before you're like, yeah, no, that's enough. Right? So, each unit of consumption sort of has declining, marginal utility.

Well, the same thing applies to something like money. We don't eat money, but we use it for other things, but still, right? If you've got a lot of money, the value of one more dollar to Jeff Bezos is minuscule, right? If he loses a dollar on this street, that's probably not gonna hurt 'em that much. Whereas someone who's very poor, right? Every dollar counts. So interestingly, right, the value of an additional dollar to Jeff Bezos is smaller than the value of additional dollar to a poor person. So, for an economist, if you take this strictly a, you know, this idea of marginal utility strictly you could take $1 from Jeff Bezos and give it to a poor person. And because Jeff Bezos values that dollar less than a poor person, you've actually raised overall wellbeing in society through redistribution. I think when it comes down to, sort of, a pure economist take a on redistribution, that's kind of it, they believe that there's this marginal utility principle and you can make society overall happier or have more utility by redistributing income.

Now there's a hundred different ways to poke holes in that story. Some economists will agree with that, some don't. Anyway, that's kind of how they approach it. Now, that's not necessarily my, sort of, concern for inequality and why redistribution should take place. But that's one. And that's one that I deal with in the book. I think another important one that we're seeing more traction of - I'm actually reviewing right now, I was asked to review a book called “The Anti-Oligarchy Constitution.” It’s written by Joseph Fishkin and William Forbath, two law professors at University of Texas. I think Fishkin just moved to UCLA. But for them, the concern with wealth inequality is that it corrupts the government. And this, they take this idea all the way back to the framers of the constitution. And they argue that their vision of the government was a government from the domination of aristocrats, oligarchs, people with power and wealth. And so, we might be concerned like economists about the distribution of wellbeing when there's an inequality of money, but for others, inequality and wealth, you know, undermines good government. And that makes it harder for, you know, the poor to try to improve themselves because usually those in power, you know, make it harder for other people to do that.

Edgar: So, this is a really complex question, or this is a really complex topic, right? I said, there's a lot of different rabbit holes we could go down here. So, what then would you say is your scholarly interest in economic redistribution?

Matthew: So, in this book that I'm working on, I kind of assume that inequality is bad and that we want to do something about it. And so, in the book, I'm kind of asking, well, what's the best way to do something about it? And there's this very, uh, influential argument, at least among law school people that dabble in economics, that income taxation is the best and should be the only method used for redistributing income. And I'm challenging that idea. I'm saying, no, there are other tools. Maybe the minimum wage, maybe labor unions, maybe we want to tinker with anti-trust law or housing regulation. We have these other tools to influence the distribution of income. A lot of economists say, no, we should just let – “the free labor market is the best labor market. We shouldn't interfere with it with a minimum wage. If you're concerned about poverty or inequality, you should just use the tax system.” So that's the dimension that I'm interested in debating, I guess.

Edgar: So, when I read your article, this is the first introduction that I had to Kaplow and Shavell’s Double-Distortion Rule. And, for those who are unaware, it's a longstanding rule which argues that using the tax and legal systems in tandem to address economic inequality creates an undesirable, quote, double-distortion, which contorts incentives and drives markets away from optimal Pareto efficiency?

Matthew: Pareto optimal. Yeah.

Edgar: Yeah. And I was really surprised when I read it, because it, to me, it seemed that, like, I don't know if it's antiquated? But to put, like, just those two things as tools into the problem seems to me, like, to not really have a full grasp of the, I guess, the scale of inequality? It seems like the focus is much more narrower than the task requires. Right. You know, sticking with Jeff Bezos for an example, right. In 2020, his salary, uh, CEO of Amazon was $80,000, right? You know, so how effective can redistribution, you know, through just the tax code and the legal system be, you know, when the wealthiest members of our society are clearly living outside the bounds of the tax system, and I would say probably the legal system too.

Matthew: Yeah, yeah. No, for sure. There's been some writing, sort of, reacting to that. Because it turns out that, at least Kaplow, probably Shavell, too, you know, even when it comes to taxes, the only kind of tax you should use, if you wanna redistribute, is the income tax, you know. Not inheritance taxes, not sales taxes, or like they use in Europe, a value added tax, you know, just the income tax. So, some people have responded to that and saying, no, we need to use the whole sort of range of kinds of taxes and maybe introduce new wealth taxes, right? Like, I think that’s what you're hinting at, right? Is that Jeff Bezos basically has all of his money, you know, sheltered in assets of various kinds, right? Stocks and probably property and yachts and, and all that stuff.

So, yeah, this was my first reaction too, when I read Kaplow and Shavell, too. I was like, wow, this is just a really narrow way of looking at the problem. But then when you read them more, you find that it's, sort of, more convincing than you initially thought. And it requires a better than maybe, you know, sort of, the first obvious take. So that's kind of why I even bothered to undertake this project, because it is a more sophisticated argument than at first glance. And because it is widely influential among a lot of legal academics. So, there was another way that I think it's narrow, which is that it kind of brackets the whole, sort of, political problem, right? Which is that, why isn't the income tax responding to this inequality, right? And it's, well, if you've got inequality, they're gonna make it harder to change the tax system to respond to redistribution. So, that's kind of another way that they're - they kind of bracket the whole politics of inequality, I would say. Yeah.

Edgar: All right. So, not to build up a straw man here, but, maybe you could tell me, what is so convincing about their argument?

Matthew: Um, so, one thing it took me a while to appreciate when reading this is that, you know, they will admit, right, that maybe a minimum wage can redistribute income. So, they're not saying that legal rules can't redistribute income, right? And they would even concede that maybe in some cases, a minimum wage might not only redistribute income, but also increase efficiency or increase total wellbeing, right? Economists think about, sort of, making the pie as big as possible. And the pie is either usually, you know, like wellbeing or utility, like I was talking about before, or just wealth, right? So, think of the small rural town with only one employer, right? You don't have a lot of other choices to work for. That gives the employer some power to lower wages than would be the case in a better functioning, more efficient labor market, right? And so you might say in that case, you know, a minimum wage could actually increase efficiency by bringing the wage up to where it should be according to, you know, the economists, kind of this ideal, like you were saying earlier, the ideal Pareto optimal market allocation.

But then Kaplow and Shavell would say, that's great, right? Because it's efficient. Not because it's necessarily redistributive. So it might lower income inequality, but because it's also efficient, it's also restoring, bringing us back to this Pareto level allocation, then it doesn't really defeat their argument. So, their argument really just applies to cases where there's redistribution that they think is inefficient that causes a loss of wealth or utility. And like you said, with the double-distortion argument, they say that's always gonna be the case with legal rules, but not with the income tax.

Edgar: What is exactly the Pareto efficient or coefficient?

Matthew: Yeah, that standard just says, you know, you've reached a Pareto optimal allocation of resources. You know, if you wanna think about Robinson Crusoe stories, right? You got oranges and coconuts on a deserted island with Robinson and Friday, they’re trading, the optimal allocation between them, between both of them, for oranges and coconuts. And so, Pareto-optimal is when you can't make one better off without making the other worse off.

Edgar: And why is that optimal?

Matthew: Because we've kind of reached a limit, right? So, think about Robinson Crusoe and Friday, say that that neither of 'em have any oranges or coconuts, right? And you start doling out oranges and coconuts, that makes them both better off. So, they both can be made better off by allocating oranges and coconuts in the proper dimension, right? But once you've reached the Pareto optimal point, you can only make one better off at the expense of the other. And so in that sense, we've kind of reached the limit where you can make everybody better off, and then it becomes purely a distributive problem, right? So, once it becomes a purely a distributive problem, we've made the pie as big as possible now, right? And so, any further changes will just be distributive and not efficient, not in the direction of efficiency, which again, is maximizing the pie. Again, whether you wanna think about it in terms of wealth or wellbeing.

Edgar: But is it ever possible to reach that kind of optimization?

Matthew: Yeah, I mean, I think most economists would agree that this is really just kind of an ideal standard, right? That we can use this ideal standard to measure current arrangements and current institutions and current legal rules against, right? But that we were, for various reasons, economists call them market failures, we're probably not actually at that beautiful bliss point of Pareto optimality. But nevertheless, it becomes almost like a more normative standard against which we can kind of assess current institutions.

Edgar: I mean, it seems to me more like a threshold than, uh, a standard, right? Because once you read each that threshold, the rules of the game change completely, because questions of distribution are very different when there's finite resources and when there's infinite resources, right? I mean, again, just a layman's understanding of it. You know, it seems to me kind of dangerous to use that as an optimization, to form a view of an ideal economy, right? Because something that's so far away from what's possible, right?

Matthew: Yeah. And, and something else I think you're getting at too is, economists will think about Pareto optimality like a frontier. Like, you can imagine like a curve, right? And so, they get two people and their wellbeing and you make this Pareto optimal curve, right? So on one end, somebody has all this stuff and then the other person has nothing. On the other end, it's just the opposite. And right, there's basically an infinite number of Pareto optimal points, but it says nothing about how it should be distributed. So, a lot of people do say optimal is sort of vacuous as a policy principle, because what we really need to know is how, like - we always have distributive problems, even at the Pareto frontier, and Pareto optimality tells us nothing about how we should divide the pie.

Edgar: Right. I mean, Pareto was a theorist, an economist that lived at the very beginning of the industrial revolution, right? I mean, he understood a world that's very different from the globalized, you know, mess that we, that we live in today. Um, so I mean, you're writing a book you're, you know, on the frontier of knowledge, you know, for these kind of things. You're kind of like, asking questions. You're generating new knowledge. So, I think it's pretty easy for many of our listeners to understand how taxation plays a role in distribution, right? We pay taxes on our earned income, that money goes to the government, which then, you know, and the degree varies by country, redistributes that money through spending on social programs like public education, or healthcare, et cetera. But I think redistribution through legal rules, it's kind of a little bit mysterious, you know? So, what are some common forms that a redistributive legal rule might take?

Matthew: You know, another example that I briefly mentioned, I mean, it wasn't really answering the question, but the minimum wage, right? So, I mean, I think that's probably the easiest one to grasp, you know, and the idea is that, uh, you don't believe workers are paid enough. Employers like Jeff Bezos, right, they're sitting pretty. And so, you mandate a minimum wage so that those at the bottom of the, the wage scale, right, will get paid more. Economists debate about really how effective that is, right? Because their argument is, if you raise wages, you're gonna dis-employ some workers. They're gonna be unemployed now, and now they're worse off, right? So you're hurting the people that the minimum wage is intended to benefit. And because, you know, Johnny who lives in the Hamptons with wealthy parents, you know, he takes a job at Starbucks for the summer. He's also earning the minimum wage, but he doesn't come from a poor household. So the minimum wage, according to economists is also mistargeted, right? So those are usually the two objections that economists bring up about the minimum wage. I think there are a number of ways to respond to that. But at least I think, you know, everyone understands that at least the initial impetus behind the idea of a minimum wage it's meant to help those at the bottom of the labor market.

Edgar: So, if you were made president of the world tomorrow and were charged with redistributing wealth in an equitable way, you know, in a realistic way, aside from a Marxist revolution, leaving that off the table.

Matthew: Yeah.

Edgar: Yeah. What would be the best way to go about it, you think?

Matthew: Oh, wow. That's a big question. I mean, I don't wanna see a violent solution. You know, one of the concerns with inequality, right, is that it will become violent and that's one necessary reason to address it. But, you know, I do think things that Marx talked about, such as cooperative ownership of industry, right, worker owned businesses, is one, sort of, piece of the puzzle. You know, if you look at the countries that have the lowest levels of income inequality, they use a combination of strong labor unions that bargain for everybody in the workforce, you know, not just, sort, of a subset of workers, and they have a lot of redistribution through, you know, what people will call universal programs like, you know, pensions or unemployment insurance, uh, healthcare, public social goods that are available to everybody. And so, I guess, you know, just as a start to the list, you know, those would be, you know, on the top. But definitely there's a lot of tools out there for sure. And yeah, part of the book is to say, we need to open this up and get beyond just the income tax and talk about all the other options that are out there.

Edgar: And so, are those the options that you, you outline in your book? Or are there others that you'd wanna talk about?

Matthew: Yeah, those are some of them. I also talk about antitrust law. Again, antitrust is an area where it's sort of deceptively redistributive. But if you think about it from a Kaplow and Shavell perspective, you know, combating monopoly is not just redistributing. It's also more efficient. It's also increasing the pie. What I say in the book is maybe we would want to actually take an inefficient policy with respect to antitrust, because it redistributes more than the efficient one, and it does so better than taxes.

Edgar: Just so I can follow what you're saying here, so how does breaking up a trust increase the size of the pie?

Matthew: Yeah, so the problem with respect to efficiency with monopoly is that when a producer corners the market, they actually can restrict supply, and that's one way of raising prices, right? And so, that means there's less stuff out there basically, right? And so, if you force them to compete with other businesses or lower their prices, that should actually produce more output. So, it actually, it also increases the size of the pie.

Edgar: Okay, good. So, keep going from there then.

Matthew: Okay, yeah. So then Kaplow and Shavell would say, you know, well, if you're increasing the size of the pie, we don't have a problem with that. You know, maybe that also reduces the wealth of the shareholders in the monopoly, right? Because the prices aren't as high, and it benefits consumers who are poorer on average because prices are lower. But from a Kaplow and Shavell perspective, that's just sort of incidental effect. Really what they care about is the fact that antitrust can make the product market more efficient. And so, what I say in the book is, well, maybe there's another antitrust policy out there. Maybe we would want to stop a merger, you know, say, between what was it - in Sprint and T-Mobile that wanted to merge recently. And, you know, maybe allowing them to merge would create some economies of scale that would, you know, only have a modest of effect on prices.

And so, that, maybe there's a little bit of monopoly effect by allowing them to merge, but there's also some efficiency advantage to doing so. So maybe it increases inequality, but as long as it's efficient, again, because for economists, the distributive impact is secondary. We might wanna allow the merger on efficiency grounds. And in the book I argue, well, maybe, you know, as long as stopping the merger, which will have some inefficient effects - as long as those inefficiencies are smaller than what you could do with the income tax system, then it might be worth it. It might be better than using the income tax, because the greater inequality from the merger offsets the loss and wealth.

Edgar: So why is double-distortion even a problem? Like, why isn't it better to use the tax system, the legal system, you know, everything that we have at our disposal to address the problem? You know, wouldn't that be like a more powerful, multifaceted way of getting at it?

Matthew: Yeah. I mean, I think that's kind of the intuitive way, right? And that's what I wanna argue in the book. The double-distortion argument kinda works like this: any redistribution you can do with the legal rule, sort of setting aside whatever the income tax is, right? It causes two losses of the pie. One is - one they call of the labor supply effect, right? So, let me take a step back and approach it this way, I was thinking of this might be an easier way to approach it, right? So, for economists, taxation always causes a loss of wealth, right? Because you tax somebody's income, they're not gonna work as much. They're not gonna supply as much labor to the labor market. Um, you're raising an eyebrow, right? You know, economists estimate these effects. And sometimes the effects are really, really small. So, you know, these effects are debatable.

Again, sort of for the purposes of the book, I just sort of say, okay, let's assume that argument for the sake of argument. So, a tax, right? You don't get as much money from your income. So, you don’t work as much, right? And that causes a drop in output, that's a loss of efficiency. Now, even for some economists that might be worth it, right? Because after the redistribution, that might cause a change in the wellbeing, and like I was saying before, right? The poor value an additional dollar more than the rich. So, the loss in wealth might be justified by the increase in overall wellbeing with redistributive taxation. So that's the idea with taxation. What Kaplow and Shavell say, if you do that with legal rules, they're also gonna change people's labor supply. So, it's gonna have an effect just like taxes. People are gonna reduce their labor supply, and it's gonna be - cause a loss of wealth and income.

But because legal rules don't just regulate labor supply, they also regulate whatever behavior the legal rule is targeted at - you know, say in the case of tort policy, we're thinking about how people take precautions against risk - it's also gonna create distortions in those other behaviors. So, the idea is that you could do the same amount of redistribution with the income tax as you could with the legal rule, but then you would also always avoid this second double-distortion. So that's why, for them, the income tax is always ways better. And so you don't want to use more instruments because they just create more distortion and you can reduce the distortions if you just focus on the income tax. So that's, in the nutshell, their argument.

Edgar: I mean, that just can't be right.

Matthew: Again, that was exactly my reaction when I first read this, and yet, you know, at least in my field, people take this really seriously and they say, yep, Kaplow and Shavell's right.

Edgar: It sounds like it might be right in a hermetic, economic sense, right? But we're talking about impacts that are extra-economic that have consequences in the economic field, right? The idea of using a law or a legal rule to redistribute wealth is more on the moral or ethical side, or, you know, it is exactly about governing people's behavior, right? More than, necessarily, strictly economic element of the equation here. I mean, it seems like the double-distortion would be the point, if not just the consequence of, of, of the thing. Because to get people's behavior to change, right, yhat would be the idea. You need to do that to redistribute the wealth in some kind of way. And so, I'm not exactly sure where you fall in relation to Kaplow and Shavell, because you said that you initially rejected it, but then because your colleagues in the field take it seriously that it's more serious that it seems, it's more sound than initially seems. But then in your book, you ultimately are proposing other things, right?

Matthew: Yeah. Ultimately, at the end of the day, I do disagree with Kaplow and Shavell. I think they're wrong. I think you can redistribute income with legal rules in a way that's even more efficient than the income tax.

Edgar: And so one of the things you said was minimum wage.

Matthew: Yep.

Edgar: What are some more things?

Matthew: I also talk about labor unions and collective bargaining. I talk about antitrust. And again, with antitrust, you know, again, it's complicated because there's an obvious redistributive impact. But what I say is that maybe we would even want to use inefficient antitrust rules as long as they're less inefficient than the income tax. That's sort of the caveat, right? Whereas Kaplow and Shavell wouldn't accept that.

Edgar: I mean, how does someone figure that out? I mean, how do you figure out if it's more or less efficient?

Matthew: Yeah. I mean, economists have surprisingly clever ways of, sort of, they can estimate, right? They even have an index. I think it's called the Herfindahl-something Index, and they can estimate what'll happen if you remove, you know, so many goods from a product market and what the effect will be on prices. You know, they can estimate what economists would call the elasticity of demand, elasticity of supply. And so they can come up with measurements of how much prices will change based on regulatory policies. And so that allows them to make some judgements about, you know, should we allow this merger or not. So I don't spend too much time talking about those measurement things just because is there out there, so. And it wouldn't be an objection to my argument because economists measure these things, and as long as they can, we can still sort of determine which policy would be more efficient, which would be more redistributive and so on and so forth. Um, I also talk about housing regulation. I talk about intellectual property, right? There's good evidence that intellectual property concentrates income and wealth into fewer and fewer hands. So, we might wanna adjust those rules in the interest of redistribution.

Edgar: So what do you think is going on with the housing market right now? Why are houses so expensive?

Matthew: I haven't taken a close look at this, but I suspect a lot of it has to do with - real estate is seen as a great investment these days. So a lot of money is coming into real estate as an investment, right? So, you know, people with a lot of money are buying second homes, not to live in them, but to rent them. Or maybe just to have a second home and live in it, right, and that makes fewer homes for the rest of us. You know, again, economists will always say, oh, this is because of bad zoning laws, right? You're just not allowing enough building to go on. And, you know, they'll point to places like Berkeley or even Elmwood Village here in Buffalo and say, you know, people that live there like the town, they don't want it to change. And so, they limit building, and so, you know, that drives up home prices.

That's probably some of it, but if I had to take a guess, I would think, you know, sort of, this financialization of housing, you know, people approaching it, not as a necessity - as a need of a place to live - but using it as an investment vehicle also has a lot to do with changing house prices. And that's directly a function of inequality, right? You know, the more wealth people have, the more they need to find a place to invest it, right? They don't wanna just sit on their cash. They need to have that cash doing work for them. So, you know, real estate has become a great place to park that money.

Edgar: Right. And on the other side of the coin, if you're poor, it's all that more urgent to find affordable housing and even have an asset to work with.

Matthew: Yeah, exactly. Yeah. Economics is a very rarefied discourse and it’s very frustrating sometimes. Cause it really, it's like, it's not only like they're speaking a different language, like, it's a completely different culture, you know? But for them, you know, they have these like, you know, marginal diminishing of utility, right. They have these very basic principles and you know, they weave a whole sort of worldview out of those basic principles. And I think that's why it seems strange to us, right? Because you know, they've actually sat around and thought, how are we gonna apply these basic principles in these different areas? And they come up with stuff like the double-distortion argument, right? Which seems counterintuitive. It just seems like - I totally agree with you, when I first read that, I thought this has gotta be wrong. This just sounds insane. And the more you read it, you think, I still think it's wrong, but you know, I can't just dismiss it. I've gotta make an argument to demonstrate why it's wrong.

I mean, so again, you know, when economists like Kaplow and Shavell, or any economists, when they talk about it, of distortion, you know, what they mean is a loss of wealth, a decrease in that pie, right? And so what, you know, what they're saying with legal rules is that you are redistributing, but it's coming at the cost of too much loss of the pie. And so if we just switch to income tax rules, which don't have as great of loss in the pie, there'll be more in the end to redistribute, right? So again, you know, they say any distribution of income you can think of that you can achieve with legal rules, you can get the same amount with the income tax, but at less loss of wealth, and therefore, there's just more at the end of the day to go to the people that need it. You know, when I understood that that was so or what made me say, okay, well, you know, I want to help the poor, you know, so if they're saying their approach will help the poor even more than mine, you know, I sort of had to pay attention to that.

Edgar: From my point of view, it's a philosophical problem with a lot of economics, you know, that just comes from the beginning, the starting assumptions, right? Like to accept a lot of the starting assumptions in economic theory, I mean, you already have to take so many steps far away, you know, to even have a rational argument that it, like, it makes it very difficult to engage with in good faith because it very quickly becomes like, you know, I wonder like, what are we talking about? Because when we talk about, you know, things like economic equality and wealth, right, the shadow on the whole conversation is political power, right?

Matthew: Yeah.

Edgar: And these are things that have tremendous consequences, right? You know, like, yeah, we can use the tax system to take money from the rich and give it to the poor, right? And have an economic theory for that. But that isn't going to solve the underlying problem that makes the lower classes suffer from inequality in the first place, right? Which it's, you know, they don't suffer from economic inequality just because they don't have money, right. It's because they don't have power or access to the opportunities that increase their level of economic productivity.

Matthew: Yeah.

Edgar: So it's a, like, a lot of the economic problems, they're more social than they are economic, and to not include the social perspective in it seems - to me it's confounding.

Matthew: Yeah.

Edgar: You know, reading. And when I was reading this, like, I'm following the argument, but I'm also like, I'm kind of, like, getting ready to, like, throw my chair, you know, out the window, you know? I mean, at some the claims that these, these people make.

Matthew: Yeah. I have to agree. If you've ever read the first chapter of Capital by Karl Marx that's basically he, what his argument is, right? He talks about the commodity, and he talks about the value that we attach to the commodity, and to, what we would call an economist and what he would call a political economist - because that's what the field was called back then - this value, it's almost like the commodity's weight, right? Its value is some sort of natural property of the commodity. And Marx thought that was insane. He said no, we only have value, prices, money in certain kinds of societies with certain kinds of social relations. So, so, you know, Marx would totally agree with you 100%. He'd say these are social questions and there's a whole bunch of social foundations that the economy rests on, but you political economists, all you're seeing is, you know, the tip of that iceberg. And you're assuming - mistakenly - that these things have some sort of natural, trans-historical validity to them. When in fact they're just the product of a certain kind of society in a certain period of time, and therefore changeable and, you know, adaptable. If capitalism doesn't work, we should find some other way of satisfying human needs and wants and goals.

Edgar: So are you an anti-capitalist or a Marxist?

Matthew: I do really like Karl Marx. And I think there are better ways of organizing the economy, you know. I can't answer, you know, what those are now, but I'm kind of skeptical that capitalism is be all and end all of everything. You know, you think about the new deal, right? I think a lot of the people during the new deal think we solved a lot of these problems. The new deal came after the Gilded Age. There was vast amount of income inequality, vast amounts of labor strife, and all kinds of social problems, poverty, income inequality. And I think after the new deal, people had thought that they'd solve these things and that you could address the problems of capitalism within capitalism. And yet today we - all those same problems are coming back. All of 'em, every single one. Inequality, poverty, social discord, you know, even flirtations with fascism, even, right? If you want to go that far.

And so I worry if we just, sort of, if we just tinker, we're doing a disservice to future generations by not really, not fully solving the problem, but just sort of, you know, fixing it for the time being. But then, you know, when another crisis comes along, like in the seventies, you know, we probably can expect the people in power to say, well, we don't need all this pro-poor legislation or, or welfare, or high taxes anymore. This is what's hurting the economy. And then, you know, we should get rid of that and then we'll be back in the same problem that we are now. Right?

Edgar: Yeah, well, the stakes are much higher now than they were, you know, back in the new deal, right? Because that, I mean, with climate change and everything it's uh -

Matthew: Yeah.

Edgar: We gotta get this right, like, yesterday.

Matthew: Yeah, exactly. Exactly. Yeah. Yeah. Some people would say it's already too late. Yeah, you're right. The stakes are bigger, right? Especially with the climate. I mean, there is no planet B, right?

Edgar: On that note! So, thank you. You know, thank you for being so generous with your time and your, your mind and having this conversation with me.

Matthew: Sounds good. Yeah. Thank you. I really enjoyed that. Thanks for great questions.

Edgar: Thank you. My pleasure. Bye-bye.

You just heard a conversation with Matthew Dimick, professor in the School of Law here at the University at Buffalo. This has been the Baldy Center for Law and Social Policy podcast, and you can learn more about the center on our website, buffalo.edu/baldycenter. We would also like to hear your thoughts about this podcast. Tweet us at @BaldyCenter, or send us an email at BaldyCenter@buffalo.edu.

By the way, you like the music you hear in the background? If so, it was composed by Matias Homar, a PhD student here in the Department of Music in the University at Buffalo. I'm Edgar Girtain, your host. Thanks for listening, and y'all take care. See ya.