Helicopter Drops and the Problem of Desert

In the September/October 2014 issue of Foreign Affairs, economists Mark Blyth and Eric Lonergan argue in favour of "helicopter drops", the idea that central banks should give money directly to households in order to stimulate a flatlining economy.

They suggest that part of the resistance to this idea is ideological: American conservatives, for example, don't like it because it smacks of socialism; and, more generally, as Lonergan notes in an interview in Vox, people tend to think that it would be immoral simply to give money to people regardless of whether they've earned it - basically, people shouldn't get something for nothing.

This objection that people shouldn't get something for nothing can be presented in its best light by giving it some rudimentary philosophical clothes. There is a long established idea that justice requires that people attract the rewards and punishments they deserve. In Plato’s Republic, for example, it is espoused by Polemarchus, who argues that “it is right to give every man his due,” an idea that later appeared in Latin as suum cuique tribuere – to allocate to each his own. In these terms, the objection to a helicopter drop is that it doesn't pay sufficient regard to desert: the immigrant worker with two jobs, sending part of their income home to support family in their country of origin, receives no more reward for their labours than the privileged American blogger, who uses Patreon to sustain their Macbook Pro and Caffè macchiato habit.

Lonergan offers a defence against this sort of objection that runs as follows. Yes, ideally, the system would be sensitive to desert. However, let's compare a helicopter drop with what we've got at the moment, which basically amounts to raising or lowering interest rates. The current system is arbitrarily discriminative - if you lower interest rates, for example, you're rewarding those who borrow and penalising those who save, and you're doing so for no reason that has to do with their borrowing or saving, which is inherently unjust. A helicopter drop in comparison is much fairer:

We're not discriminating, or if we are, it's toward people with lower incomes. We're saying, as a political judgment, if you want to do something about inequality, you can skew this toward the end of the income distribution. But we're not saying people who've borrowed money deserve something for nothing and people saving money should be arbitrarily penalized. We're treating all individuals equally.

This defence has legs, of course, but it runs into a difficulty, namely, that people contract in to the risks (and the potential for reward) associated with borrowing and saving. If you take out a mortgage, you accept that interest rates might rise; if you put your life savings into a bank, you accept they might plummet, or that the bank might get into trouble with the consequent loss of your savings. This makes a moral difference. People contract in to the capriciousness of the current system, which undermines the claim that seemingly arbitrary changes in interest rates have effects that are inherently unjust. If that's right, then ceteris paribus the current system when compared to helicopter drops comes out ahead in the justice stakes.

A possible rejoinder here is to argue that people haven't in any meaningful sense contracted in to zero interest rates, for example, or to the possibility that their savings might become worthless as a result of a banking crisis. These events were so far outside what would have been considered realistic that they couldn't have been anticipated when people signed contracts for mortgages or opened savings accounts. However, for two reasons, it's not clear this rejoinder works.

First, we do routinely contract in to possibilities we do not seriously countenance. For example, it is unlikely that anybody really anticipates dying as a result of routine dental surgery, especially not of necrotizing fasciistis, but we wouldn't accept that their consent had therefore been invalid, or that they had been done an injustice simply because things turned out unexpectedly badly.

Second, helicopter drops are not going to be retroactively implemented: they're a policy tool for the future, and if they are implemented, it will be in a world in which people, because of the lessons of the immediate past, should expect the unexpected when entering into certain kinds of financial agreement. In other words, going forwards, it can reasonably be said that people will be contracting in to the capriciousness of the current system, which means it cannot easily be argued that an injustice will occur if they happen to do much better or worse than expected. In this respect, the current system enjoys an advantage over helicopter drops, in that the latter perpetrate an injustice in being insufficiently sensitive to issues of desert (whereas the former does not perpetrate an injustice in the arbitariness of its rewards and punishments).

There is complexity here, of course, and it is important to emphasise that this issue of injustice does not necessarily constitute a decisive reason for refraining from giving central banks the power to transfer money directly to households. Not least, it might well be the case that the benefits of helicopter drops in terms of their power to kickstart a flatlining economy outweigh the worry we have about the injustice of rewarding people without paying due regard to desert. Moreover, if it turns out that the policy is targeted towards the less well off, and if the inequality of modern societies is itself unjust, then it's entirely possible that the redistributional aspect of a helicopter drop would make the policy serve justice overall even if it is lacking with regard to issues of desert.

Jeremy Stangroom, the author of this piece, is Agenda Publishing's online editor, and founder of the Social Science Statistics web site.