How to realize fairness in market economy?

First, the economic mechanism can be divided into two parts to discuss, one is the social endowment resources (whether human capital or non-human capital) and their use process in production, and the other is the benefit distribution method of these resources. What we are interested in is whether there is freedom of income distribution in a society where the distribution of total capital and human capital is known, that is, income equality can be achieved through income distribution. Here, the efficiency of two kinds of income distribution is defined as: under the given conditions of social endowment resources, if people's average income is equal, two different income distributions are equal in static efficiency; If the income growth rate is equal, the dynamic efficiency is equal. Neo-liberals believe that there is only one dynamic and effective income distribution system, that is, all assets are private, the market is unrestricted, and the socially acceptable minimum income redistribution is realized through taxation. Socialists or social Democrats believe that under the premise of dynamic efficiency, there are two degrees of freedom, one is how to distribute the property rights of assets to members of society, and the other is how to redistribute income through taxes. The Social Democratic Party believes that there is only the second degree of freedom. For example, in Scandinavia, the property rights of enterprises are extremely privatized and the property rights are very unequal, but the income redistribution is very considerable. Some people think that this is enough to prove the existence of the second degree of freedom of redistribution. Scandinavian experience shows that as long as redistribution is achieved through taxation, wonderful income equality can be achieved. But both degrees of freedom need to be examined, because in some societies, the redistribution of asset ownership is easier to implement than the redistribution of income. This is not just a purely academic issue. For example, in China, if the tax system is not perfect, it may not be easy to realize redistribution through taxation. 2. Coordination, Incentive and Market Socialism Many people believe that the failure of planned economy in Europe in the 20th century proved that asset ownership cannot be socialized. But from the fact that the planned economy failed, we can only infer that it is not feasible to combine the following three systems: (1) the state owns assets; (2) Non-market distribution of resources and commodities; (3) political dictatorship. If we do an ideological experiment, imagine a society with multiple enterprises, and all members of the society hold the shares of these enterprises equally. Its market is competitive and there is also a political accountability mechanism attributed to the democratic system. If such a social system is to be stable for a long time, it is necessary to maintain the general equality of share ownership. This system can be designed to be efficient. I call it market socialism to distinguish it from social democracy. The difference between the two is that the latter has no special restrictions on asset ownership. Why is this system economically feasible and effective? To answer this question, we must first think about the basic functions of the market system. The market has two basic functions, one is to coordinate economic activities, and the other is to provide people with the power of self-training and innovation. The difference between these two functions is not accurately described here, but these two functions do have differences. So which of these two functions is more important? When we talk about the history of the Soviet Union, we often talk about the huge coordination failure. Factory managers must try their best to find raw materials, arrange various complicated barter transactions between enterprises, and need to queue up to buy consumer goods. There are also many stories about the failure of incentive mechanism. In recent years, some people have expressed doubts about the failure of the Soviet incentive mechanism. Workers in the planned economy are masters of turning waste into useful commodities. However, it is a simple fact that the national education level has not been reduced because of the lack of market mechanism, regardless of whether the incentive measures at that time failed or not. The same is true of Cuba, whose illiteracy rate is the lowest in Latin America. Generally speaking, the low rate of return on education has not made young people give up their studies. Even Hayek's incisive exposition of market socialism and central planning in the 1930s and 1940s basically did not involve the issue of incentives. Hayek assumed that the managers of Soviet enterprises were loyal and capable. The problem is that these people have no real price guidance and can't know the production cost, so they can't reduce the production cost. This is a question of coordination. Hayek also said that the market provides opportunities for entrepreneurship, thus taking advantage of people's desire to get rich. But even when it comes to this point, we should distinguish the coordinating function of the market, that is, the characteristics of the market gathering scattered information, from the encouraging function of the market, that is, the characteristics of the market mobilizing people to innovate and get rich. After World War II, the western anti-Soviet propaganda did not claim that the planned economy could not mobilize the enthusiasm of individuals, but focused on its lack of democracy and freedom. In the Soviet Union, the argument about economist Yevse Lieberman introducing the viewpoint of price mechanism did not discuss the incentive problem, but only talked about the reasonable calculation of cost. János Kornai said that soft budget constraint is a real incentive problem. It was not until 1970 that the principal-agent problem entered the vocabulary of economics, and then the planned economy was considered to have the defects of coordination failure and incentive failure in the west. 1960, British Conservative Prime Minister Harold Macmillan claimed that the Soviet Union would not be afraid of the West. They have nuclear weapons as powerful as the west, internal transportation network and prosperous economy, and they will soon surpass capitalist countries in the competition to create material wealth. Many senior observers held this view at that time. Therefore, in the absence of price, it is more reasonable to explain the later Soviet economic recession by coordinating the problems caused by the increasingly complex economic system than by the failure of incentives. After 1970' s, this view changed rapidly in the west, and the failure of the incentive mechanism of planned economy was regarded as the chief culprit. But we don't have a good Soviet economic history to evaluate the relative importance of coordination failure and incentive failure in the failure of planned economic system. If the main function of the market mechanism is to coordinate rather than encourage, then it is possible to redistribute the shares of enterprises without damaging the economic output while maintaining the market mechanism. Hayek believes that the vitality of capitalism lies in that it encourages entrepreneurs to think. It can be said that the hero of capitalist system is entrepreneurs. But later, to a great extent, entrepreneurs' enterprises have been replaced by large companies managed by salary managers, and innovation is mainly completed by salary researchers in schools and companies. In the 1970s, the key point of western economic problems was an effective supervisor, and the hero of capitalism correspondingly became the major shareholder of the supervisor, and the incentive also became the incentive of the supervisor, and the corporate predator, not the entrepreneur, who could buy the controlling stake of the poor company, fire the company manager and reorganize the company. The focus on market research has also changed from exploring the role of entrepreneurs to controlling the market and supervising managers through companies. Many scandals in recent years, such as Enron, show that the effect of market supervision of companies and their managers is far from perfect. Except for Britain and the United States, enterprises in other developed countries are not supervised by private major shareholders, but controlled by various institutions. In these countries, the main winners of corporate income are not directly involved in supervision. At least in Germany and Japan, ownership and control are separated. If this mechanism does not affect efficiency, but further separates the mechanism of supervising managers from the income distribution of enterprises, it will be different. Then what I call market socialism, which can distribute assets income more evenly without sacrificing effective management and supervision, becomes a possibility. Thirdly, income redistribution, income equality and education assume that in a country, the profits of enterprises are distributed to citizens in relatively equal, and a mechanism is established to prevent them from evolving into very unequal equity control. How to design such a mechanism is a big topic. I'm not sure whether it can be realized, but the existence of this mechanism is entirely possible. Of course, the industry of economics has not racked its brains on this issue like studying auctions. But in any case, the income distribution caused by this mechanism is not as praised by socialists and egalitarians. Large-scale income redistribution is economically feasible, and there are examples in Europe, especially in Northern Europe, with the five Nordic countries being the most important. Some conservatives claim that the welfare state is dying, but this is not the case. The welfare system in these countries has undergone irrelevant changes due to changes in population and immigration, rather than disappearing. Recently, the economist Peter Linder even thought that because of the clever tax system, the damage of income redistribution through taxation to the economic efficiency of Nordic countries basically did not exist. And there is basically no evidence that the economic growth rate of welfare countries is lower than that of other countries. The per capita income of many European countries is lower than that of the United States, but the reason is that Europeans have more leisure time than Americans, less working hours than Americans, and their productivity is not low. I suspect that the secret of the success of the income redistribution system in Nordic countries lies in the homogeneity of their social members. This view is not new, but my argument is different from what is usually said that the same sex brings unity. I think in the early period of welfare economic history, it is important to have members' risk identification, which is caused by educational identification. The identity of risks here does not mean that everyone's risks are interrelated, but that everyone's chances of having disabilities, diseases and other adverse situations are similar. Because the risks are the same, it is rational for workers to insure each other. On the contrary, if the premium is the same, it is irrational for a high-risk group and a low-risk group to insure each other. So the homogeneity of workers led to the earliest social insurance system in Northern Europe. And I guess, after the establishment of this system, people began to like this system, and sickness insurance and pension benefits brought a happy society. This state has also begun to be cherished by people, so the citizens there have further promoted the category of welfare society. At present, the welfare level of Nordic countries exceeds the level required for rational insurance based on personal interests. The reason is that the early insurance system made people develop a love for equality. It cannot be ignored that there is another factor in the Nordic countries, that is, the solidarity wage policy. In the 1950s, trade unions and employers in these countries conspired to make all enterprises in the same industry pay the same wages. This practice is not out of any moral concept, but to eliminate uncompetitive enterprises, which was considered necessary to maintain international competitiveness at that time. Later, solidarity wages extended to enterprises, which led to income equality in Nordic countries not only after financial distribution, but also before financial distribution. Nordic countries provide us with a valuable example, although this example cannot be widely copied. Social insurance brings people's love for equality, and the identity of social members is the premise of implementing social insurance. In Scandinavia, besides being a member of society, there is another factor, that is, the dependence on the export market makes wage equality a rational choice. Therefore, the Nordic model may not be imitated. But its value lies in refuting the central argument of the political right, that is, large-scale income distribution will destroy people's motivation and thus slow down economic development. Here, we are not discussing the political possibility of choosing a system different from capitalism (such as the above-mentioned market socialism of redistributing capital ownership), we only care about the economic feasibility of this system. Even if this system is economically feasible, due to the huge difference in labor income, it can not bring the income distribution expected by equalitarians. It is certainly meaningful to eliminate absolute poverty, but due to the inequality of human capital and labor income, family income will be extremely unequal. Profit, interest and rental income only account for 25% of the output of developed market economy countries, and the rest are labor income. Recent research by two economists shows that a major change has taken place in the United States in the last century. The people with the highest income of 0. 1% earned their income through labor rather than capital. Today, most of the richest people in America are movie stars, superstars or company presidents, unlike capitalists or interest-bearing creditors a century ago. If the income of these high-income earners is obtained under the competitive mechanism, and this possibility is very high, then orthodox Marxism's criticism of capitalism will lose its meaning to some extent. Obviously, even without the above high income figures, the average distribution of corporate equity will not lead to the average income distribution that many people want. In fact, the heterogeneity of labor is very important, although Marx's works, especially his most important book "Das Kapital", did not mention this point. I have calculated that if all the capital in the United States is owned by the public and products are distributed according to labor value, the Gini coefficient in the United States is 0.28. Only by raising the tax rate by 5% without changing the existing capital ownership distribution can this degree of equality be achieved. This result dramatically shows that at least in the United States, the current inequality lies in the inequality of ability, not in the inequality of capital ownership. Although public income accounts for 50% of the gross national income in Scandinavian countries, the homogeneity of social members is not a necessary condition for deep income redistribution through taxation. In fact, even in the United States, public revenue accounts for 30% of national income. However, in countries with diverse populations, education, as another way to correct inequality, must play a more important role. We must ask two questions about education. First, to what extent can education investment equalize human capital, that is, the ability to obtain salary? Second, can we expect democracy to bring necessary financial support to education in foreign countries? These two issues are related to the economic and political feasibility of achieving equality through educational reform. First of all, we must clarify the issue of economic feasibility. Under the market economy, people's different abilities will always bring different earning abilities. It is utopian to think that this difference can be completely eliminated through education. A more reasonable question is whether the correlation between parents' income and children's income can be eliminated on average. A certain expression of equal opportunity is that the income distribution of a group of workers has nothing to do with the mother's education. One study divided American male workers into three categories: mothers without high school education, mothers with only high school education and mothers with at least some higher education. In the early 1990s, the incomes of these three groups of people increased with the improvement of their mothers' educational level. Obviously, the future of children has a lot to do with the education level of mothers. Although this study is not enough for us to understand the specific reasons for the different incomes of these three types of people, it is conceivable that not only genes, but also social factors, such as the cultural environment of the family and the opportunities provided by the family, have great influence on the future income of children. In contrast, Denmark has done the same research, and the income of these three groups of people increases with the improvement of their mothers' educational level. But the income gap is smaller than that in the United States. The above differences between the United States and Denmark are not entirely due to the fiscal policy of education, but also to the policy of cultural homogeneity and solidarity wage. However, the fiscal policy of education must have some influence. In Denmark, the state invests equally in all children, and there are no private schools. In the United States, because school finance depends on the collection of local government real estate tax, the investment in education varies greatly from place to place, and the children of the rich get more investment than the children of the poor, not to mention private schools. Consider the following questions. Suppose we can redistribute the American education budget and invest different amounts in children from different social backgrounds. What kind of budget allocation can minimize the income difference of people with different backgrounds? To do this calculation, it is necessary to estimate the elastic coefficient between people's wages and education expenditures in different social backgrounds. In the United States, the observed school expenditure varies greatly in different urban areas, and this calculation can be done. I calculated it with Julian Betts, an American labor economist, using a partial equilibrium model. According to the education level of mothers, American children are divided into four categories, the education level of mothers