Friday, June 26, 2009

Height Taxes: In Which The Utilitarian Eats Mankiw's Counterexample With Rawlsian Mustard

I was traveling when Matt linked Greg Mankiw and Matthew Weinzierl's paper on why utilitarians should support a height tax, so I didn't get a chance to dig into the whole thing at that time. But now I have, and it's looking to me like a height tax would be a good thing, when considered on its own as a piece of fiscal and social policy. I'm less impressed with Mankiw's attempt to use this as a counterexample to utilitarianism. Supporting a height tax might seem like a bitter pill to swallow, but the empirical considerations in Mankiw's paper end up making it quite tasty.

Here's how Mankiw's argument goes: Utilitarians want to use taxation to push incomes towards equality, because of the diminishing marginal utility of money. (Mankiw is right that we utilitarians generally like this -- extra money does much more for a poor person's happiness than a rich person's, so moving money down the income scale by progressive taxation will generate more happiness, and that's what utilitarians are all about.) However, insofar as income levels are correlated with effort, this sort of taxation will have negative effects on people's effort, and you don't want that because people expending less effort results in the creation of less awesome. So if you can find something that's correlated with income, but which is disconnected from effort, you have a reason to tax it. And it turns out that height is like that. So on a utilitarian view, height should be taxed. But taxing height? That's crazy! And in the view of one of the authors, this is a reductio ad absurdum of utilitarianism.

I was struck with the weirdness of a height tax the first time I heard about it. But I was also quite struck by these numbers from early in Mankiw and Weinzierl's paper:
Judge and Cable (2004) report that “an individual who is 72 in. tall could be expected to earn $5,525 [in 2002 dollars] more per year than someone who is 65 in. tall, even after controlling for gender, weight, and age.” Persico, Postlewaite, and Silverman (2004) find similar results and report that "among adult white men in the United States, every additional inch of height as an adult is associated with a 1.8 percent increase in wages." Case and Paxson (2006) write that "For both men and additional inch of height [is] associated with a one to two percent increase in earnings."
Updating the Judge and Cable result to 2009 money, the difference between being 5'5" and 6 feet adds up to $6,568 per year, even with the gender, weight, and age controls in place. One study explains this in terms of beneficial self-esteem effects coming from being the tall kid in adolescence, while another explains it in terms of childhood nutrition that affects a bunch of useful abilities like cognitive ability that actually cause the salary difference. Either way, taxing height would seem like a good idea to a utilitarian social planner. Taxing height wouldn't reduce anyone's effort, and unless parents decided to feed their children less to make them shorter or something ridiculous like that it wouldn't reduce total productive capacity in any significant way.

Even if height ends up being correlated with something particularly useful like cognitive ability, explaining both of these things in terms of childhood nutrition starts making a height tax look benign. Let's run an argument kinda like one Rawls uses in A Theory of Justice. Does any one child deserve to be fed and cared for better than another child? Of course not! All children equally deserve good nutrition and care from their parents. If the differences between the rich and poor come from the fact that the rich were well-fed as children while the poor were ill-fed, we have no reason to leave income levels where they are. "You deserve to make less money than him, because of differences resulting from how you were fed poorly as a child while he was fed well" is just madness.

Some people might want to push this argument further and say that we have positive reasons to undo differences that come from factors like childhood nutrition. Being a utilitarian, I'm not quite going to go there. But I'm going to ride the Rawlsian point far enough to say that there's no reason to maintain these income disparities. When you think about how much extra money tall people make, and the causes of the salary differences, the reasons for opposing a height tax lose their force. The Rawlsian point undercuts our anti-height-tax intuitions, so we have no reason to oppose a height tax. And then it's time for utilitarian considerations regarding the diminishing marginal utility of money to do the positive work, and push us to a height tax.

(Lots of people are probably freaked out by a height tax because we're generally freaked out when the government treats people differently because of uncontrollable bodily attributes like skin color and gender. It's interesting to look at affirmative action policies in this light. It's definitely wrong for the government to entrench unfair systems by treating different bodies differently. But is it okay for the government to treat different bodies differently to overturn unfair systems? Well, people disagree. But make no mistake -- when you look at the empirical data, that's what a height tax would be doing, and there's at least some support for that sort of thing.)

In the end, I'm unimpressed by the height tax argument against utilitarianism. Sure, height taxes are counterintuitive before you think about the relevant empirical data. But I feel like the content of Mankiw and Weinzierl's study undermines the anti-utilitarian punchline.

And it's not that utilitarianism is the most intuitive ethical theory. There's plenty of places where it looks counterintuitive -- 90% of people go against it in the fat man version of the trolley problem. One of the papers I'm presenting in my current tour around the country is on how to defend utilitarianism despite its counterintuitiveness. But if Mankiw was trying to throw a counterexample at utilitarianism, well, it's among the easier ones to outsmart.


Unknown said...

The argument for a height tax ignores that some careers may have stronger height correlations than others (the commonly held belief that tall people are selectively chosen for management positions while there is probably less selection for, say, computer programing).

By taxing height you selectively punish tall people for choosing jobs that don't reward height.

Even worse, arguing that you should tax on height ignores that height may not be the cause of economic advantage. Just as a thought, if your parents are wealthy that gives you better access to education as well as nutrition. It seems disingenuous to me that the earning adjustments of the study take into account gender, weight, and age but not education level. It seems entirely plausible that children of wealthy parents are more economically successful because of the improved access to education and -completely incidentally- also get enough nutrition to result in a noticeable height increase. In which case, a height tax gives a significant advantage to genetically short children of wealthy parents, while punishing genetically tall children of poor parents.

Jonathan Jenkins Ichikawa said...

How realistic is this meant to be? If we include into the equation the plausible fact that, for example, the public on the whole would perceive the taxation as grossly unfair, and that the right-wing talking heads would use it to great effect to undermine support for more moderate progressive/utilitarian policies, like affirmative action or even progressive taxation, it's not at all obvious, to say the least, that enacting a policy like this would maximize utility.

Neil Sinhababu said...

I like the considerations you guys raise, and they're definitely important to whether we should actually have a height tax. My thought here was not to say the definitive thing about whether height taxes maximize utility, but just to handle Mankiw's proposed counterexample.

So I'm treating Mankiw kind of like a philosopher presenting the "cut up one guy to get his organs and save five lives" counterexample to utilitarianism. I sort of allow the Mankiw paper to stipulate a relatively clean counterfactual situation where we can assume no height-correlation in careers and no Limbaughs using height taxes to destroy progressive taxation. And I take that bull by the horns.

dr said...

I like the philosophical hook here. The idea that the right sorts of things to tax are things which are correlated with income while disconnected from merit is a neat one which seems to be straightforwardly implied by egalitarian commitments. You don't see that idea articulated much -- or I don't -- and my inner Kansan wonders how you reply to the tall person who says "what did I do to deserve this tax burden?"

The force of the Kansan's objection here seems to be, though, just a fundamental disagreement about how costs and benefits ought to be allocated. As an egalitarian+utilitarian, desert is a less powerful consideration for you than it is for the Kansan. But maybe this is just implicit in what JI said above, and your response to it.

I find myself generating several other problem cases more or less in the same vein as Ben's objections. For example, since first generation immigrants tend to be taller than their parents, this would be a tax on immigrant families. Or, again, height is correllated with ethnic heritage, so this would be a tax on taller ethnicities at the expense of shorter ones. These cases may seem to be problems both for the sort of intra-group reasons Ben raised, and also because it's not so clear that the inter-group discrimination is justified.

The underlying fact at work here, I think, has to do with what we know when we know that height is correlated with income. That kind of knowledge is established by looking at height in connection with numerous other variables and using moderately difficult math (multivariate analysis, I think you call it, but it's all beyond me) to account for the effects of each of the other variables. So the story goes that after allowing for the effects of SES, or ethnicity, or what have you, then it turns out that remaining differences in income can be explained by height.

What I want to say is that if this is what we know about height, then the right way to structure the height tax would require that we account for each of these variables. So you'd need to have not one height tax, but lots and lots of narrowly tailored brackets corresponding to the various other factors that explain differences in income.

Maybe this is another one of those objections where the committed utilitarian egalitarian says 'so what?' I don't know. But in the face of this kind of apparent complexity, I wonder whether the egalitarian utilitarian might not just as well advocate simpler schemes more directly aimed at existing disparities in wealth.

Brock said...

Whatever the underlying cause of the height/income correlation, personal experience makes me skeptical about the "self-esteem" explanation.

I was the tall kid as an adolescent, and I was always very self-conscious about it.

That said, I'd accept the extra taxation if I could be guaranteed a few more inches of legroom in coach. Flying really sucks when you're 6'5".

Neil Sinhababu said...

the right way to structure the height tax would require that we account for each of these variables

Yeah, Mankiw says in the paper that that would be a better way, if we could do that. He proceeds from the assumption that there's no good way to do it.

Brock, when a tall person has a window seat and I have the aisle, I usually ask if they want to switch so they can have the sideways leg room. Of course, I do prefer the window.

John B. said...

If Mankiw is asserting that income is strongly correlated with effort, I assume he has some way of quantifying effort, right?

My objection to a height tax is that height isn't an inherent advantage since there are situations where it's clearly a disadvantage (planes, small cars, etc.). It's really only an advantage to the extent that our culture rewards it. So it makes more sense to tax the rewards rather than the quality itself. This has the additional benefit of taxing other qualities that correlate with income but have nothing to do with effort, like sex, race, age, and class background. An income tax taxes qualities like those as much as it taxes effort. I suspect that's why people who benefit more from one or more of those qualities are so eager to argue against it.

jdb said...

I just had to second Brock's comment. I was tall as a child (still am, although not insanely tall at 6'3"). But I have always and continue to struggle with depression, anxiety and low self esteem.

If we had a height tax, would we also have to have a graduated deduction of some sort if you've been treated for depression or esteem issues and your height is over the taxation threshold?

As the height of the average american increases, would the threshold be increased? or would we just end up slowly taxing more and more people as a way to get more revenue for the government in the long-term? That would be shady.

I vote no on the height-tax proposition! :)

Eric said...

This is ridiculous; genes play a far greater role in determining a person's height than their upbringing. Have none of you ever met a tall poor person? A height tax would arbitrarily punish people for the genes their parents gave them.

Neil Sinhababu said...

The issue of tall poor people could be dealt with rather well by making the height tax progressive. So an unemployed 7-footer wouldn't pay any extra taxes, a 7-footer making $50K would pay a modest additional fee, and a 7-foot tall millionaire would be paying really huge taxes.

I don't think it matters that much for the purposes of this argument whether height comes from genetics or environment. But people should be aware that environment has a huge impact on height. Historians can tell when people of some country are getting more to eat by seeing how much taller they are than their parents' generation.

Anonymous said...

As someone who is 6'9'', I would only support a height tax if some of the revenue was diverted to compensate tall people for the relative scarcity of tall-size pants and for the discomfort caused in engaging in any form of commercial travel. Such a compromise might even win the support of the influential tall-person lobby.

arithmoquine said...

I'm with John on this one:

[I]t makes more sense to tax the rewards rather than the quality itself. This has the additional benefit of taxing other qualities that correlate with income but have nothing to do with effort, like sex, race, age, and class background. An income tax taxes qualities like those as much as it taxes effort.

But, as a determinist, I don't see what's wrong with taxing effort (whatever that means exactly) as long as the tax does not provide a disincentive for continued work. So a progressive tax on income or wealth makes much more sense than one on height. And, for your purposes, you can still argue that a tax on height would be acceptable if it were perfectly correlated with income/wealth, but in fact it is not. Since it is not, the height-tax would require either manifest unfairness (such as taxing unemployed 7-footers at excessive rates) or massive complexity (i.e. accounting for all the correlated factors) when what we really want to tax anyway is the thing with which they are correlated. It's basically just backwards to argue that A correlates with wealth/income, so we're justified in taxing people based on A. Why? Because it's correlated with wealth/income. Why not just tax people on that instead of on things that imperfectly correlate with it? As far as I can tell, the only reason to be concerned about "effort", besides potential disincentives, is the Nozick Wilt Chamberlain argument. Ultimately a utilitarian is better off addressing that argument on its own merits separately.

Anonymous said...

I think anyone who writes a post on this topic should be compelled to disclose their own height in a hilarious italicized note at the end of the post.

Drew Miller said...

They didn't control for race? Immigration status? I imagine that immigrants tend to be shorter and probably have lower paying jobs.

Neil Sinhababu said...

I don't see what's wrong with taxing effort (whatever that means exactly) as long as the tax does not provide a disincentive for continued work.

Actually, that's exactly it. And I totally agree -- as long as income taxes don't decrease incentives to work, we should just do it that way. Which is to say, we should just do it that way, because really I don't think that current levels of income taxation actually present disincentives to work.

One of the features of this post, as I mention above, is that I'm disregarding a bunch of things the utilitarian could say against height taxes just to more fully take Mankiw's bull by the horns. And I think that when you take Mankiw's hypothetical head-on and forget about other stuff, the conclusion he thinks is so counterintuitive actually comes out to be intuitive.

David, I'm 5'10, which I think is barely above the height of the average American. So I'd probably get a small height tax, though probably a little less than all the excise taxes on a year's worth of booze.