If you’re considering making some change in your life — waking up at a different time, adopting a pet, starting a business — there are generally only two possibilities for the outcome: it will make your life better, or it will make your life worse. (Very rarely, it might make a net zero difference, but I won’t worry about that.)
But if the change affects someone else too, there’s more to consider, and more possible outcomes: Does it make both parties better off? Is it a win/lose situation? Lose/lose? Moreover, it usually doesn’t affect both of you equally: who gains or loses more? If one person wins and another loses, does the win outweigh the loss? If it’s win/win or lose/lose, do the two parties end up more equal, or more unequal than they started?
I’ve often heard economic arguments that go something like “This practice is good because it increases our country’s GDP,” i.e. it increases a measure of our total well-being, and social arguments that go “This same practice is bad because it increases inequality,” i.e. it increases differences in well-being between groups. But when you’re looking at two or more groups, it doesn’t make sense to say that something is just plain “good” or “bad”, because it may be good or bad separately and in different amounts for each group.
It turns out for two groups, there are eight different ways they could both be affected, which I arrange into this pie-chart-looking diagram I call “The Wheel of Outcomes”:
Of course, in real life there are usually more than two people or groups who have a stake in some decision, but I still find it enormously helpful to have a mental picture for organizing my thoughts on what kinds of tradeoffs and compromises I find acceptable, and what values seem to be at odds (like maximizing the total vs. minimizing inequality) that can actually work together. I’ll walk you through the eight pie slices, with real-life examples of each.
First we’ll work our way down the right-hand side of the wheel:
That golden pie slice in the upper right consists of those changes that benefit both groups, but especially the group that was less well off to start with. This type of outcome is win/win and decreases inequality at the same time. Examples include:
- Public libraries
- Curb cuts in sidewalks (helpful for people with strollers and carts, but especially people with wheelchairs)
- Public infrastructure in general
The orange pie slice consists of win/win scenarios in which the one who was better off already gains the most, increasing inequality. Most innovations that are good for everyone fall into this category, since those with more resources are more able to take advantage of new opportunities. Examples include:
- The widespread adoption of Google’s digital infrastructure (good for everyone, but especially for Google)
- Merit-based hiring, which means people with the most experience continue to get more, while people with none have a hard time getting any.
The red slice represents those outcomes in which those on top get large gains through small losses of those on bottom. The classic example is when a large company becomes a monopoly and starts raising prices or treating its workers badly, all in the name of increased productivity and profit.
- Amazon provides a huge service for many households, but it brings those cost-savings at the expense of terrible worker conditions.
- Social media add a tremendous value to the world, but it comes with some uncomfortable side-effects for its regular users and large profits for its owners.
Even worse is when the rich prosper at the expense of the poor, and it’s not even a net positive.
- Think of dictators who keep their countries poor by siphoning all the nation’s wealth into their own bank accounts.
- In some ways, the pandemic has ended up in this slice, since while the economy as a whole has suffered, the richest few have used it to get even richer.
Now we’ll skip back up to the upper-left and work our way down the left-hand side:
5. Safety net
The diametric opposite of exploitation is a social safety net: anything that diverts resources to those who most benefit from them. This has the simultaneous effect of decreasing inequality and improving total well-being, but unlike Utopian interventions it’s not a positive for everyone.
- Unemployment insurance benefits those down on their luck at the expense of those already doing fine, but it’s a net positive for society because those benefits are much more valuable to those who receive them than to those who have to give them up.
- Other social programs like “House the homeless” benefit those in direst straits while actually saving money overall.
The opposite of forming a monopoly is breaking one up: antitrust laws are meant to do exactly that. This can be a real cost to society — a monopoly can be coordinated in a valuable way that several smaller companies simply can’t — but it prevents runaway inequalities.
Now on to the two lose/lose slices:
When the stock market crashes, everyone loses, but the people who had the most lose the most. This is the polar opposite of Investment, where everyone gets better off but especially those who were well off to start with. However, while Investment is a relatively common positive outcome, much more common than Recession is…
The opposite of Utopia: everyone is worse off, but especially those who were most vulnerable. Think of hurricanes obliterating whole cities, heat waves that overwhelm the elderly, pandemics that disproportionally affect the victims of structural racism.
Why a wheel?
So far these different types of outcomes have just been a list of eight types, and maybe you noticed that they come in four pairs of opposites. Why do I make them a wheel? Because each slice is most similar to its two neighbors on either side, differing from them only slightly:(This is my first animated graphic for this blog, and it is Not Awesome but I’m proud of it! Click here to see the original on Desmos.)
And it lets us see clearly which groups of outcomes have various good properties:
As you can see, the golden “Utopia” slice has every good feature, and the “Disaster” slice has none. Every other type of outcome will be good in some ways and bad in others, but that doesn’t mean those interventions are useless! Next time, we’ll look at how you can mix two types of outcomes to get a third, like mixing colors on a color wheel.
Till then, I’d love to hear from you if this helps illuminate what you do or don’t like about some policy ideas, or if there’s something you found confusing or wrong with my examples. (Some of them could definitely be placed into other slices depending on how you divide up society into two groups.) Let me know in the comments!