Equality of Opportunity Theory

1
Equality of OpportunityTheory Applications

• John E. Roemer
• Yale University

2
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)
3
The language

• objective the kind of advantage being sought
• circumstances those things that influence
  objective and are beyond a persons control
• effort .... influences within control
• type set of people with the same circumstances
• policy intervention to affect objective outcomes

4
The EOp policy is...

• that policy that renders as equal as possible,
  the distributions of the objective across all
  types
• in other words ones chances for acquiring
  degrees of the objective are independent of ones
  type (i.e, circumstances)

5
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
6
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) Ill argue here that even a quite
conservative view of what comprises circumstances
implies quite radical EOp policies
7
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
8
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

9
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
10
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
11
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
12
Heres an examplewith 3 CDFs of income
if outomce is income then the v functions are the
inverses of these CDFs
13
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
14
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 mothers level of
education
15
EOp investment policies Maternal educn typology
r x1 x2 x3 x4
2500 4,770 ????? ????? ??? ?????
3,480 ????? ????? ????? ????? ?????
16
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.
17
EOp policy Typology 2, SES x Race
r xLB xHB xLW xHW wEOp/wER
2,500 12,910 9,410 2,530 910 .980
3,898 14,690 11,250 3,410 2,500 .977
18
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...
19
Caveats
These calculations presume no change in the
educational technology Other instruments/policie
s (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
20
2. EOp for income acquisitionan 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 edn
• Policy linear income taxation

21
US Distribution of Pre-fisc incomes, three
types, 1990
22
Here are the three CDFs at the EOp policy ? Note
the scales are different on the two graphs
23
Denmark Distribution of pre-fisc incomes, 3 types
24
And here is pre-fisc distribution in Spain...
25
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

26
(No Transcript)
27
Refining the typologyIQ x Parents education 6
types
28
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.
29
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...
30
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
31
This suggests a scope for EOp today EOp during
the process of education and training but Meritocr
acy in hiring.
Of course, a slippery slope ... example of
affirmative action admissions to medical schools
32
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

33
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