The elusive equilibrium
By: Koen Smets
Tags: Psychology, Economics, Ethics, Behavioral Economics

The elusive equilibrium

The notion of balance is relevant in more than a few ways in our lives. But it is not always easy — or even possible — to establish it.

People have been using balance scales for a long time. The earliest evidence, discovered in Pakistan and Egypt, goes back at least 4000 years. Such devices were (and are) based on the idea that one can determine an unknown weight by balancing the scales with a known weight, producing equilibrium, derived from the Latin for equal and balance (libra).

Equilibrium everywhere

There is something peculiar about the state of equilibrium. We encounter it in the natural sciences: in mechanics, for example, an object that is not in motion is said to be in a state of equilibrium, because the forces that act upon it counteract each other (e.g. the gravitational force on a vehicle parked on a steep hill pulling it down is balanced by the friction of the tyres on the road). In chemistry, equilibrium exists when the reaction in one direction proceeds at the same rate as the reverse reaction, for example in a closed bottle of fizzy water, where the amount of CO2 exiting the liquid equals the amount that is reabsorbed.

We see balance in man-made objects in engineering (bicycles!) and in the aesthetics of architecture and art: buildings, paintings, photographs etc. And how could I not mention the economic equilibrium, the concept which captures how for example supply and demand are balanced in a market.

We see the concept of equilibrium even at the core of our individual and collective humanity: Lady Justice’s set of scales is not there just for decoration, and we tend to think it is better to have a balanced personality or to be in a balanced relationship.

Somehow it feels natural and complete to see things being evenly balanced. Societies often reflect such sense of balance as well. Many goods and services are left to the market to supply and set the prices. But others are provided by the state, often at no cost, so that there is no imbalance between who does, and who does not have access to them: healthcare, education, police and fire protection, libraries and so on.

Furthermore, efforts are made to level the playing field where it is deemed necessary. For example, people with a disability may be helped with adaptations to their home, their school or their place of work, or their car, largely or wholly paid for by the state. Such interventions aim to restore the equilibrium so that, in this case, a disability does not form an obstacle to key elements of life that would otherwise be very hard to access.

But potential instances of disequilibrium remain, of course. One of them is known as period poverty: women and girls who cannot afford sanitary products. The harm they experience as a result is not just the fact that they need to resort to using tea towels, newspaper or pillow cases, but also, for example — in the case of younger women and girls — the fact that this situation might mean that every month they miss school a few days.

Equilibrium where there is disequilibrium

It is quite plausible to regard this as a case of gender inequity: boys and men are evidently not affected in the same way. In order to restore equilibrium, the Scottish parliament has recently voted to make period products free for all. (We can argue about whether this is the most efficient way of doing so, but there is little doubt that the measure does move the scales closer towards equilibrium). A good thing, therefore?

A tweet by Nick Christakis, a physician and social scientist and general perspicacious and thoughtful dude, made me think twice. He declared not to be opposed per se (and finding period poverty disconcerting), but he wondered whether, if the measure is aimed at righting an innate gender inequity, parliament will also address other such instances and, for example, mandate equal life insurance premiums for men and women.

While the fact that there are other cases of gender inequity should not be an excuse for not addressing this one, it is worth reflecting on the degree to which such disequilibria ought to be fixed — indeed, whether they can be fixed. Life insurance premiums, annuity rates, and pension ages are just a few situations where there is potential gender inequity too, based on differentials in life expectancy between men and women.

But it may not be that easy to pinpoint the disequilibrium. Insurers only care about the risk, and not about gender. If a particular category of people poses a higher or lower risk, all else being equal, than another one, they will seek to reflect that in the premium. When, as a society, we do not want to have inequity in the premiums, then we should accept that a unified premium might lead to a different disequilibrium and new inequities.

She’s not happy her premium went up in the name of gender equity (photo: CLeyton Ewerton/Pexels)

Motor insurance in Europe forms a very interesting case study. Traditionally, insurers charged women less, because they tend to be safer drivers, and hence make fewer and smaller claims. Unlike life expectancy, the factors determining the risk here are much more linked to individual choice and behaviour. Since 2012, an EU directive forbids insurers to use gender as an element in the calculation of the premium. So, in Q4 2011, men paid on average 17% more than the overall average premium, while women paid 20% less. In 2018, that difference with the overall average premium had shrunk to a 5% uplift for male drivers, and a 6% discount for female drivers. (The residual difference stems from the fact that men tend to drive more miles per year, in more powerful cars.) So, relatively speaking, the ‘gender equity’ intervention has increased the average premium for the lower-risk women by more than 17%, while it has cut it by just under 10% for the higher-risk men. Is this an improvement? It’s not so sure.

Disequilibrium everywhere, too

Similar challenges arise in many places. Imagine two households with the same overall income, one in which one of the spouses stays at home, while the other earns all the income, and one in which both spouses jointly provide the income. In a progressive tax system, the first household will pay more tax than the second one if individual income is the basis for income taxation (because one spouse earns the same as both spouses in the other one). If total household income were the basis for taxation, the households would pay the same, but both spouses in the second household would pay more tax than a single person earning the same income. Hmm.

If levelling the playing field for people with a disability is a desirable intervention to restore equilibrium, should the same not be considered for people whose potential for earning a living is limited in other ways, for example, because they have an IQ below 100, because they are short, or because they are afraid of driving? It’s not so easy to draw the line.

And lest we might think that restoring or maintaining equilibrium is just a problem for policy makers, consider how we support our children. If one of them choose to study medicine for six or seven years, and another one instead chooses to start work straight after secondary school, should we give the latter the same amount of money that we spent supporting the former during her studies? If one of our offspring gets into trouble and needs our help, should we then replicate it to the others? Should we alter our will and ensure what we leave them reflects their needs, rather than divide it equally?

It is easy to spot disequilibrium. It is much harder to fix it: restoring equilibrium is not always as straightforward as mandating free period products. Let’s bear that in mind when we judge how others go about it.