Socrates, a Pig and Progressive Taxation: A Mirrleesian Morality Tale

Socrates and a pig walk into a bar. Socrates orders a fine bottle of claret and argues for hours with the bartender about Romantic poetry. Being infuriated by the bartender’s base reading of Ozymandias, Socrates attempts to stab the bartender in the heart with his pocketknife. He is so drunk on claret that he misses completely. In the meantime, the pig has ordered several pints of mud and poured them over himself. The bartender slips over in the mud, lands on the pig’s pocketknife and is stabbed in the heart. Who is morally better – Socrates or the pig? And please show your working.

For Utilitarians like Bentham and Mill, the answer lies in the felicitus calculus: the sum total of the happiness produced in the consequences of any given action or inaction. In Socrates’ encounter with the bartender, the sum total of happiness was far greater than in the bartender’s encounter with the pig. In spite of Socrates’ nefarious intentions, he is more morally virtuous in this situation than the pig. For utilitarians, only the consequences matter. Variations of this calculation can, and often are, applied to pressing, social, economic and political questions. For example, as the subject of this seminar, how much should we tax the rich?

For Utilitarians like Nobel prize winning economist James Mirrlees – and his former PhD student Ravi Kanbur, our esteemed speaker – the ‘right’ answer is that which produces the greatest happiness for the greatest number. Mirrlees developed a calculation for working out what tax rate would maximise the sum of utilities or, in ordinary language, which would make the most people most happy. He concluded that a progressive rate of taxation – where the rich are taxed a lot and their wealth is redistributed to the poor – would produce the greatest happiness for the greatest number. Therefore, utilitarian calculations can provide evidence for arguments for progressive taxation.

It sounds strange to think that the ‘right’ way to tax people is based on the total amount of happiness produced by taxation. What about justice? Shouldn’t taxation be about evening the playing field which has, through accident of birth, allowed some people to make more money than others? Isn’t ‘happiness’ a crude and naïve way to measure what is best for complex human beings? Can it also be used to justify some types of inequality? For example, if the ‘sum’ of happiness is the most desirable outcome, we are committed to preferring a society where 40% are desperately unhappy and 60% are deliriously happy over a society where 100% are quite happy. All of these are critiques launched at utilitarian approaches by egalitarians who, in this context, we can take to mean creatures who think that inequality is fundamentally bad and who would like to find ways of reducing it.

What Kanbur is saying is that these egalitarians, while some of their critiques of utilitarianism hold water, shouldn’t be so sneering at utilitarianism. Why? For two key reasons. First, the Mirrleesian formula provides egalitarians with key evidence to support progressive taxation. In the face of those arguing ‘We shouldn’t tax the rich because if we do, we incentivise them to work less hard and our economy will become inefficient’, egalitarians have a ready-made response in Mirrlees’ calculus. By using Mirrlees they can show exactly how much you can tax the rich before they will reduce their labour supply. Mirrlees’ formula clearly demonstrates that efficiency is not compromised by a progressive tax rate. Utilitarianism therefore, according to Kanbur, gives egalitarians an anchor to argue for progressive taxation.

Secondly, Kanbur builds his case for utilitarian approach to taxation by arguing that non-consequentialist approaches to taxation proposed by egalitarians as alternatives to utilitarianism, can actually support non-progressive taxation. For example, an approach based on equality of opportunity, as opposed to outcome/consequence, can paradoxically lead us down a non-egalitarian route towards a non-progressive tax rate. In an approach which attempts to level the playing field by adjusting for equality of opportunity, we have to demarcate between inequalities that are due to circumstance and inequalities that are due to lack of effort. In following the logic inherent within a framework such as this, Kanbur says, we would end up arguing for a non-progressive rate of tax. Kanbur argues, in abandoning our calculation of consequences and focusing instead on non-consequentialist approaches to taxation, egalitarians are driving themselves down into a non-egalitarian cul-de-sac. This is the last thing that they want!

Therefore, Kabur is arguing that people who are interested in reducing inequality should stop sneering at utilitarianism and actually make use of it in their arguments for progressive taxation. He says, despite their apparent incompatibility, utilitarianism, isn’t all that bad a doctrine for egalitarians!

I would like to ask two questions about this argument. The first is – is utilitarianism useful to egalitarians or is it really only Mirrlees who is useful? On the one hand, utilitarianism positions the ‘right’ action as the one which produces the greatest happiness for the greatest number. On the other hand, the ‘right’ action for egalitarians is that which produces the greatest decrease in the gap between rich and poor. Mirrlees set out with a utilitarian aim of creating a taxation system which maximises the sum of happiness – it just so happened accidentally that the utilitarian outcome was a progressive rate of tax. Utilitarians would accept a non-progressive tax if that was proven to be the one which maximises happiness, but egalitarians would never accept this. While Mirrlees’ position on progressive tax converges with the ideal outcome for egalitarians on this occasion, it is only really an accidental quirk of Mirrlees’ findings. If another calculation were applied or if circumstances changed, the greatest happiness for the greatest number might be a taxation system which increases inequality. In this sense therefore, egalitarians are perfectly sensible to reject utilitarian frameworks. Sure, Mirrlees’ framework happens to help them out on this occasion but does utilitarianism in and of itself really do them any favours?

Secondly, do egalitarians really need the help of utilitarian approaches? Can they argue for progressive taxation without resting on a utilitarian crutch? The equality of opportunity approach is only one alternative to utilitarian consequentialism which, admittedly leads to non-progressive arguments. As Kanbur himself pointed out in his talk, alternatives to consequentialism ‘may, but not always, lead to non-egalitarian arguments’. Other alternatives to consequentialism – such as Rawlsian theories of justice and other deontological approaches – don’t lead to arguments for non-progressive taxation. So my final question is – why should egalitarians cautiously use consequentialist utilitarianism when they can confidently use non-consequentialist egalitarian arguments?


This post was written by Cathy Wilcock and first appeared on Development@Manchester.

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