The Rawlsian Veil answer is the United States. Obviously
Rawls’ idea of the veril of ignorance is to ask, well, if you didn’t know where you were going to end up in a societal heirarchy what, before you were born into it, would you think was the right societal heirarchy to be born into? An interesting question, obviously, and the answer is always taken to be that you’d prefer a more equal such heirarchy.
Which is the wrong answer. To maximise personal beneft or utility you’d want to be born into the United States of today. Well, leaving aside the few much smaller societies that do even better.
From Arindrajit Dube who, we think, gets the implication of this wrong:
It's a remarkable fact that the bottom 10% in France and UK have about the same income (slightly higher) as their American counterparts - in spite of the fact that America has much higher GDP per capita. That's a testament to our policy choices, including the failure to raise the federal minimum wage in America for over a generation.
We’d also add in this lovely finding which we’ve noted before:
We can put this more formally too. The OECD quite famously found that redistribution doesn’t harm further economic growth – that’s what they found if we listen to certain siren voices. What the paper actually found was that redistribution is harmless within certain limits. Using tax and benefits to share out wealth works up to the point where the Gini index has moved by 13 percentage points. Indeed, it seems to increase economic growth to that point, a point we’ve made before here. Above that it still increases equality at the cost of diminishing future growth. Moving the Gini by 13 percentage points is about what the British welfare state does now – and rather less than happens in Sweden or perhaps France.
That was from some years ago - the British state now tries to do much more than that while the US still does about that.
The Veil of Rawls. What would you like the society you’re about to be born into to be like given that you don’t know where you’ll be in that society’s structure? Clearly, the correct answer is the United States. If you’re in the bottom 10% then your outcome will be roughly as is with Europe. But you’ve also that 9/10 chance of doing much better than that and also than Europe.
Another way to put this is that the US is the objectively better society. No one loses out as against that European model but the US contains many more utils - the poor do about the same and the vast majority do much better.
And as the OECD points out in the long run it’s growth which determines living standards, not redistribution. So, do the amount of redistribution which optimises growth - that less than we do now - to produce the best long term outcome. More capitalism and markets red in tooth and claw, less tax and less redistribution. Hey, works for us.
There’s also a joy to this being the correct answer to the Rawls Veil of Ignorance surmise. You’re better off being born into a richer society and who could argue with that?
Tim Worstall