Is Income Equality Possible? The Mystery of the Kibbutz with Ran Abramitzky

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What would it mean to create a society with income equality? This is a burning political and social question today as we look at our world where fewer and fewer people hold a larger and larger part of the economic pie. But it’s also something that we can look to Jewish history to try to understand, so we are joined in this episode by Ran Abramitzky to discuss his book The Mystery of the Kibbutz: Egalitarian Principles in a Capitalist World which explores how and why kibbutzim developed in Palestine and Israel and the relationship between income equality in kibbutzim with economic models like free riders, adverse selection, and the brain drain. Listen to our conversation about how kibbutzim created a social framework that allowed them to maintain a measure of income equality, if only for a time, and what that tells us about the possibilities for income equality in our own age. As Ran argues, income equality is possible—but it doesn’t come for free.

• Purchase The Mystery of the Kibbutz on Amazon

Ran Abramitzky is Associate Professor of Economics at Stanford University. His research is in economic history and applied microeconomics, with focus on immigration and income inequality. He’s also a research associate at the National Bureau of Economic Research and a senior fellow at the Stanford Institute for Economic Policy Research.

The Mystery of the Kibbutz explores the history of the kibbutz movement and its vision of economic equality, how it thrived despite inherent economic contradictions, and why it eventually declined. He focuses on three challenges in particular: first, the free rider problem, that there is no benefit for working harder when you get the same salary or personal economic benefits; second, adverse selection – that such a social system would tend to attract people who would not be as successful in a capitalist market; or the inverse, a brain drain, that the smartest people or those who could find success outside the kibbutz would tend to leave. Finally, the question of human capital investment: that there would be a tendency to underinvest in human capital, in other words that there would be a lack of incentive for young people to study or work hard because in the end as kibbutz members they can depend on equal income no matter what their contribution is.

The book is fascinating because it explores the fundamental question of how kibbutzim have survived, and in many cases have radically changed. Because even if the kibbutzim were founded on utopian ideals of engineering a socialist society, this isn’t exactly the case any more as many kibbutzim have moved away from the common dining hall, communal sleeping arrangements for families, and even allow some people to work off the kibbutz and keep part of their salary. What’s more, the industrialization of the kibbutzim led to the hiring of many non-member workers, especially foreign workers.

Ran’s book is particularly interesting because it doesn’t just tell us about kibbutzim themselves, but asks us to consider look beyond them to a broader question of what it might look like to create a society of equal income, whether it’s possible, and what are the sacrifices that would be required. In investigating this “mystery of the kibbutz,” he argues that there were a series of harsh tradeoffs which had to be made in order to construct such a society. He argues, in the end, that a society of equal income is possible – but would it be worth it? In today’s world I think this is a really important question.

An edited transcript of our conversation follows:

Jason Lustig: I think kibbutzim are so interesting, for a whole range of reasons. I think, that when people talk about the history of Zionism and the history of Israel, a lot of people pick up on them immediately as this really interesting social phenomenon. And that really draws a lot of attention to the topic, in and of itself. But, I think that it might be useful for us to get started by maybe contextualizing the kibbutzim a little bit, inasmuch as from a certain kind of perspective—and this is something that you talk about in your book extensively—the kibbutzim are kind of an outlier within Israeli society and within the history of Zionism. Numerically, the members of the kibbutzim never really constituted more than a small percentage of the entire Israeli society or of the Jewish population of the yishuv before that. I guess one way for us to get started is to think about why kibbutzim matter right within this context, because kind of in a converse way, when we talk about sort of the broader history of collective farming and collective settlements, kibbutzim are part of a much wider world there as well. So, what do kibbutzim teach us or tell us that’s different or significant, in comparison with other kinds of collective farms, say in Soviet Russia or elsewhere? When we take the big picture view, why do you think the kibbutzim matter? And why is it that you wanted to write a book about them?

Ran Abramitzky: It’s a great question. KIbbutzim, communities in Israel that were based for many years on full income equality, in the distribution of incomes among members, and on collective ownership of property, were, as you said, indeed always a small percentage of the Israeli society. The first kibbutz was established in 1910, but the vast majority were founded in the ’30s and ’40s, just before the state of Israel was established. They started as communal farms, but in the ’50s and ’60s, when Israel went through an industrialization process, kibbutzim participated in this process and since then they had a large industrial base alongside agriculture. Today there are about 120,000 members living in 268 kibbutzim, and they account for about 2.5% of the Jewish population of Israel. And at its most, members of kibbutzim accounted for up to 7% of the population, just around the time the state of Israel was established.

And nevertheless, they mattered a great deal in the context of Israel, Zionism, and more broadly as social experiments that teach us about whether and how we can create more equal societies. They had a large impact on the rest of Israeli society. Prior to 1948 kibbutzim served many national tasks. They extended the Jewish settlements, which eventually determined the borders of the Jewish state. They played a major role in state-building, and they had a disproportionate impact on the ideological, political, and military leadership of Israel. Moreover, this unique combination of the socialist and Zionist ideology produced this mythical image, if you want, of the kibbutznik (kibbutz member) as a pioneer warrior, which stood in sharp contrast to the image of the diaspora Jew who studied the Torah and avoided physical work.

Kibbutzim also teach us very different lessons relative to other communes and collective farms. Unlike members of many other communes in history, kibbutz members were never at the margin of society. They have always interacted with the rest of the population, and they influenced and were influenced by society as a whole, which is in contrast to many other communes whose members have often been more marginal and isolated from the outside world. And also, in contrast to collective farms like the Russian kolkhoz, for example—where exit was not an option—and unlike many communities, countries that were often run as totalitarian regimes, kibbutzim are voluntary, and members of kibbutzim can exit at will. And so it is in this sense that kibbutzim are more interesting social experiments in voluntary socialism and equal sharing, and they teach us about the conditions under which voluntary socialism and income inequality or income equality can succeed and when it will fail, and so on.

JL: I think part of what you are engaging with is that you’re arguing, in a way, that the kibbutz provides a laboratory where we can test by looking at the historical developments of the kibbutzim over the past hundred years or so whether some of the assumptions and ideas of economics, whether they actually work or whether the theories of incentives and disincentives in various settings, whether they work or not.

RA: As communities that were based so many years on full income sharing, and important social experiments in income equality, they challenge, if you want, traditional economic theory. In the book, I talk about an argument that I had with my uncle. I myself did not grow up in a kibbutz, but a big part of my family did. My grandparents were among the founders of onekibbutz in the south of Israel, Kibbutz Negba. And my grandmother was a proud member of that kibbutz for 50 years. My mom grew up there and left, her sister stayed, my brother then later married a kibbutz member, and I remember as children my brother and I loved the kibbutz. We loved to hang out there. Think about it, kibbutzim in the ’70s and ’80s, a kind of picturesque village in the countryside where we would walk around and they go to the swimming pool and dining halls and tennis courts. It was just fabulous, and our parents didn’t have to worry about us because it’s super safe and there is no pollution, no cars. As a teenager I became even more fascinated and liked the kibbutz even more because this idea of a society that shares everything equally and treats everybody the same and where weak members are getting an equal share of the total pie seemed like a virtuous and right way to construct society.

But then, as I grew older I became a little bit more skeptical. And I remember one particular day when I was having lunch with my uncle, he talked to me about these pathbreaking innovations that the irrigation system factory made. And I decided to provoke him and I told him, you know, according to economic theory, the factory of the kibbutz shouldn’t be as good. In fact, the kibbutz as a whole should not really exist. And he’s like, why? What? And I’m like, well, you know, think about it. Why would anybody work hard if all they get is an equal share of the total pie? I was, at the same time, studying at the Hebrew University in economics. So I was explaining to him the free rider problem, that if all you get is an equal share, you have no incentive to work hard. Then I said, you know, Israel is the size of New Jersey. Why wouldn’t talented members and ones that can actually make it outside and earn a premium for their ability and efforts in Tel Aviv, why wouldn’t they exit? So I explained to him the brain drain problem. I said, what about entry into the kibbutz? I expect that it’s a fabulous deal for everybody who didn’t make it outside the kibbutz, who can’t earn a living, and is pretty lazy too. It’s a great deal to enter a kibbutz and be subsidized by others that are more productive, so the adverse selection problem. And then I continued with this annoying speech of mine and said, I also worry a little bit about your children because what are their incentives to study hard in school? In a world where a high school dropout and a computer science engineer earn exactly the same, what are the incentives to study hard and to take school seriously? So the lack of investment in human capital problem that economists typically talk about.

He, of course, got a little bit upset and we started a nice argument where he says, well, you know what a selfish view of kibbutzim you present. You describe people who care only about themselves. But everybody was familiar with the kibbutz knows that kibbutzim are anything but a group of selfish people that just cared about themselves. In fact, they tried to create a new human being. They wanted to create a person that cares about the collective and the community more than they care about themselves. And besides, if you are so smart, then why did kibbutzim survive for so long despite all these incentive problems? So I decided, as I started to do my PhD at Northwestern in economics and over the last couple of decades actually since then, I decided to study that question of how did kibbutzim survive, and often thrive, despite all these incentive problems and collected data on all kibbutzim over the last 70 years, including data on how equal they are, who entered, who exited, how much they worked, how much they study, and so on.

JL: That really highlights the core of the book, which is this “mystery” of the kibbutz, which is what you’re talking about here, this idea that in a certain way from the perspective of economics and some of the ideas and tenets of economic theory, a kibbutz should not exist, so to speak. I think what you’re doing in the book that is so interesting is trying to understand why—why the kibbutzim came into being in the first place, and how it is that such a society survived even with these kinds of fundamental economic challenges that one might assume, from the perspective of economics, would have all these pressures on the kibbutzim. And I think that when we look at the history of the kibbutz over the past 70, 80 years and especially within the last half century, we see this transformation of the kibbutz as these economic forces have their effect over the course of time. You mentioned, of course, some of these ideas that you really engage with, the free rider problem, adverse selection, and so on. You’ve mentioned the theory, that these things should have adverse effects on the project of the kibbutz to create a society of equal income, a kind of a socialist utopia. But when you look at the actual data, whether we’re talking about the history itself or data that you’ve collected on the development of kibbutzim, in what ways do you think that the history of the kibbutz movement actually demonstrates these kinds of issues or otherwise complicates them and makes us perhaps rethink or challenge some of these ideas that you might hear brought up in an economics course?

RA: So, kibbutzim in some sense both demonstrate and complicate these issues of incentives and free rider and adverse selection and brain drain and human capital investment. On the one hand, I find that it’s definitely not the case that economic incentives stop at the gate of the kibbutz. I do find evidence of brain drain. The most educated and skilled members are more likely to leave kibbutz. I find evidence for adverse selection. People who earned less outside the kibbutz were more likely to enter a kibbutz. And I find some mixed evidence for free riding as well. So this idea that the kibbutz members always worried about parasites, if you wantm members who shirk and do not pull in their weight—although in the data, I actually find that the kibbutz members actually work longer hours then nonmembers outside of kibbutzim.

On the other hand, these economic problems are nearly as severe as naive economic logic would suggest. So for example, kibbutz members will not less educated than the general Ashkenazi Jewish population. Even in the equal sharing period, where a high school dropout and a computer science engineer would earn the same, you don’t find the lack of investment if you want in human capital. Kibbutz members were not less educated than the general Ashkenazi Jewish population, implying that the financial returns are not the main or the only reason for requiring education. And in the book, and I’m sure we’ll talk about it more later, a more sophisticated economic analysis that is not just this naive logic helps us explain how kibbutzim were able to deal with these problems.

JL: This goes back to something you mentioned before, this idea that the kibbutz or even just the Zionist movement in general was inhabited by a vision of creating a “new Jew,” or even a new person. And I think that the story of the kibbutzim, one of the things that makes it so interesting and that maybe kind of unlocks part of what it is that you’re trying to do here is that the kibbutz movement is an attempt at social engineering. It’s not necessarily to create a revolution in the society as a whole, but to create pockets of a socialist utopia where the ground rules for life were perhaps different from the rest of the society. In a way, I think one of the things you delve into that is so interesting, and in some ways you kind of scratched the surface here or there, and I think it’s a really important set of issues, is that this project of social engineering and creating a new social reality is part of the answer to this question of the “mystery of the kibbutz,” because that it’s here that we can see that the people who were attracted to the kibbutz were not necessarily those who just want to have an easy, lazy life. They wanted to do something to actually work hard. You mentioned that people in the kibbutz maybe worked harder than those outside of the kibbutz. I’m curious on your take on the kibbutz as an attempt at social engineering, and what this has to tell us about this broader set of issues.

RA: As you say, kibbutzim very much an attempt to create a new social reality. They may not have been able to successfully create a “new human being,” but they did design their society in a way that helped them survive and maintain equal sharing for a long period of time while dealing with incentive issues. In fact, many of the identifying features of kibbutzim reflect, if you want, such social engineering: the communal dining hall, the communal residences for children, the communal ownership of all property, the fact that this was a noncash economy for many years, the lack of ability to save, the relative small size of kibbutzim, and so on.

In the book, I talk about this imaginary conversation that the founders of kibbutzim could have with an economist. I’m thinking, imagine, the founders of kibbutzim, and imagine before they decide to create a kibbutz, they would consult with an economist at the time. And imagine that that economist had a vision to see how economics (would) develop over the next century. And they would ask him, well, we want to create a society that is equal. Why? For various reasons, we want to create a new human being, we think it’s the fair thing to do. We want to have an altruistic society, whatever reason they want. We want to create an equal sharing society. How do you recommend us to structure our society?

And the economist would pretty much tell them to establish kibbutzim the way they ended up doing. He would say, while sounding strange at first, equal sharing may have all these incentive problems, I want to point out that there is a pure economic benefit from creating equal sharing, and that’s insurance. In the kibbutz, when you have equal sharing, it’s a fabulous safety net. Regardless of how you turn out, and your family and kids turn out, you will always be getting paid exactly the same regardless of whether your profession become obsolete or whether you become disabled. It’s a great safety net. But then, he (would say), my first recommendation is: why don’t you have attract members that are not the type that free ride and leave? Why don’t you attract really highly idealistic people? Because, you know, idealistic people don’t shirk. They also don’t leave whenever there is a setback. Those are the best people you want to attract. As often is the case, idealism is something that is very strong at first, and it’s very strong for the first generation for whom living in a kibbutz is a choice. But by the second and third generation, idealism will probably get weaker. Don’t just trust on the nature of idealism. But why don’t you also structure the society to deal with incentive problems?

For example, freeriding: well, you can’t punish with monetary incentives. But how about social sanctions and monitoring? So, people would not sit next to you in the dining hall if you’re perceived to be shirking. Everybody works in the same place they live in and the kids go to the same school. And they interact repeatedly. And so social sanctions can be very useful, especially in societies that are very small. And so, why don’t you design a small society so that everybody knows each other and cares about what each other is thinking? We also will need a lack of privacy because we need to know the comings and goings of people so that we can tell whether they work hard or not. What about adverse selection in entry? Well, don’t just let everybody in. Kibbutzim are very familiar with the tendency of people who didn’t make it to want to take advantage and get in for the wrong reasons. And so they would have tough screening processes in entry, and they would make sure that even after you enter a kibbutz, they will have a probation period of a year or two before they decide whether they take you as a full time member. What about the brain drain problem? Well, you know, that’s a tough one. How do you make sure that people who turn out to be more productive than othersaAnd can earn more outside would not leave? Well we don’t want to do the kolkhoz way where you’ll kill them if they exit. But how about abolish all private property? If you exit, you can only take your brain with you, but you can’t take your share of the kibbutz. You can’t take your house, you can’t take all this local public goods that you can only enjoy in the kibbutz. And these make exit costly and allow the kibbutz to maintain equal sharing. What about also when you want to study something in university, what about we encourage you to study agronomy rather than law, things that are more valuable inside the kibbutz rather than outside? Again, to make exit costly. It’s not to say that kibbutzim were thinking about all these things, and the reason why they created this dining hall and small size are exactly because they wanted to deal with incentive problems. But whether intentionally or not, they designed a society that allowed them to maintain high level of equality while dealing with incentive problems using the social engineering ways.

JL: Are you saying, then, that the economic project and the social project were intrinsically connected?

RA: Again, it’s hard to say. I don’t want to have this functionalist view that the founders of kibbutzim created everything thinking ahead about all these incentive problems. But I want to say that, of course, there were also ideological reasons why they wanted a communal dining hall. They wanted everybody to dine together. There were ideological reasons why they wanted to have children grow up in separate residences, to create a community of children and to teach them about kibbutz values. But all this also had this byproduct, if you want, of being useful to deal with incentive problems. Because if they wouldn’t sit next to you in the dining hall, then you might consider working hard or leaving rather than shirking on the job. Even even the way they structured their industry. So you see, the classic orange-picking goal in kibbutzim, these are jobs where effort is observable. I can see how many bags of oranges you collected, and then I can apply the social sanction if you didn’t collect enough, as opposed to other profession that are more difficult to observe. So I think that both for ideological and functional reasons, the kibbutzim were created in a way that were consistent with their ideology while being helpful in dealing with incentive problems long after idealism is gone.

JL: One of the things that’s so interesting about all of this is that you sort of say that some of these social choices had ramifications that no one necessarily would have thought of in advance. And at the same time, that means that we might look at how small changes in the lifestyle or the social situation in the kibbutz might also have tremendous economic effects as well. For example, a shift from communal sleeping of the children to sleeping with their parents, in their own homes, leads to the need for houses to be of different sizes. I you know each married couple has their own dormitory, they can all be the same size, but if one family has four children and one family has one child, then one family needs one house that’s bigger and one can have one that’s smaller. In a way, what’s so interesting about this is the way in which seemingly minute changes lead to major shifts in the overarching fabric of the kibbutzim.

RA: It’s a good point, Jason. But first, let me say that the move away from communal sleeping arrangements was, I view, a huge change in lifestyle. In the 1980s kibbutzim decided that this communal sleeping arrangement was not a good idea. And they decided to bring kids back home and abolished the communal sleeping arrangement and bring the children to their parents’ homes. And as you mentioned, this meant practically that kibbutzim needed to expand their apartments to accommodate the arrival of the children. Now, kibbutzim for that purpose needed to borrow large sums of money, which in a period of hyperinflation in Israel and unlinked loans, was easy to repay. But they ended up, eventually, accumulating large debts. So this housing expansion ended up being a contributing factor to the financial crisis that hit kibbutzim in late ’80s, and this financial crisis in turn was a main contributing factor to kibbutzim in the 1990s and 2000s shifting away, for the first time in their history, from the defining feature of full equal sharing. Kibbutzim at that point then introduced various degrees of reforms, ranging from small deviations from equal sharing to substantial reforms where members’ budget are mostly based on the earnings. And this shift away from equal sharing called privatization in kibbutzim, increased the economic viability of many kibbutzim, less brain drain maybe, better work ethics, members even started to take education more seriously. But it also changed the social nature of kibbutzim quite a bit, and not everyone agrees for the good, let’s say.

JL: Right. I mean, are you tying the transformation of the kibbutzim to this specific choice, or to broader shifts in the economy or in the Israeli society?

RA: There are number of factors that made kibbutzim less attractive over the years. One key one is the financial crisis that his kibbutzim in the 1980s. But other things are the high tech boom in Israel during the 1990s, technology-oriented growth that makes the outside option, if you want, of kibbutz members more attractive. Israel for many years was a relatively equal society. The returns to skills increased quite a bit with the high tech boom of the 1990s. This made the living in kibbutzim less attractive for high skilled members. There are other things, like the decline in socialism more generally and the declining idealism of the second and third generation for whom living in a kibbutz was a default rather than a choice, became less idealistic than the parents. Other facters were a decline in governmental support. Kibbutzim always enjoyed implicit and explicit governmental support, in the form of tax breaks and subsidies for water and so on. With the rise of the right wing government for the first time in 1977, you start to see less support for kibbutzim. And so this decline in support was a contributing factor as well. But I think that the financial crisis is especially important because it hit different kibbutzim differently. At some level it allows me to test, if you want, some of the economic theories because, well, let’s see how the experience of a kibbutz that was hit by the financial crisis was different from the ones that was not hit. I find that kibbutzim that remained wealthy after the financial crisis were able to maintain a higher degree of equal sharing without losing the most productive individuals and kibbutzim that were hit by the financial crisis started to suffer a brain drain and then eventually ended up shifting away from equal sharing to various degrees.

JL: I think that actually segues really nicely into the next set of issues. When we look at the history of the kibbutzim and we want to look at it through an economic lens, it raises this question of whether the rise of the kibbutzim and then eventually their transformation or decline, or whatever word that you want to use—is this about the historical factors in particular that we could talk about, or about the economic issues more broadly? For example, I think that we could talk quite a bit about the earliest kibbutzim within the context of the socialist idealism of many of the Jews from eastern Europe who came to Palestine and wanted to create their socialist society that, at least before the Russian revolution in 1917, that they believed wasn’t possible to create in tsarist Russia. Then again, if we look to the development of the kibbutzim in the eighties and the nineties, there’s the wider economic factors, a downturn in Israel, hyperinflation, so on and so forth. And just, as you mentioned, the decline of socialism in general, whether we’re talking about in Israel itself or just globally, the challenges to communism in Poland, the Soviet Union and so on, and even just the decline of the Labour party which had been hegemonic pretty much up until 1977. I think that there are a lot of factors that we could look to, some of them which you mentioned, that we can situate the transformation of the kibbutzim. Whereas some of the economic theories or economic approaches, the questions of incentives, make this implicit claim from the perspective of the discipline of economics to be ahistorical or universal. I think that there’s this attention in terms of how we look at this question. I mean, obviously I’m a historian and you’re an economist. I’m curious what your take is on how we balance these two approaches, looking at the historical factors on the one hand and also thinking about these claims that we can take, for instance, the laws of supply and demand and apply them more or less universally throughout human history.

RA: This is a great question, Jason. And honestly, the main reason why I wrote this book, not just to my fellow economic friends, but rather to the general public, the book suggests that it is a combination of history and economics that is crucial for understanding kibbutzim. Let me kind of take it as a segue to talk a little bit about my field, as an economic historian. So in general, economics as a field has shifted over the last few decades away from pure theories, you know, things that try to universally explain everything and being very ahistorical and universal, towards bringing more evidence (and) data to address important questions and test these theories in the real world. Economic theory, nowadays, is a very useful thing in the sense that it’s used to capture economic tradeoffs. For example, if you want the safety net versus incentives trade off, it is used to evaluate formally the logic of an argument and generate predictions, if you want, to be tested in the data.

And then within economics, I’m an economic historian and we economic historians try to bring evidence and longterm perspective to questions that are of interest in both economics and history. So we often construct our own data sets, often through archival work, and we use these quantitative data that we gathered together with qualitative and historical evidence to shed light on both the economic questions and the historical setting. We believe, as a philosophy, I guess, of economic history that on the one hand, we believe that understanding the past is an important intellectual activity for its own sake, even if it doesn’t have immediate practical use or policy implications for today, which in this sense, I think we are very much similar to historians in that way. We think that everywhere people lived, worked, produced, consumed, married, had children, wrote contracts, organized in groups, polluted the air, paid taxes and died, is inherently interesting for us. But at the same time, we also believe that understanding the past contributes to economics by providing ground to test economic theory, improve economic policy, understand economic mechanisms in historical context, and answer big economic questions. So more concretely in the context of my book, if you want economic theory of equality and incentives and brain drain and adverse selection, it highlights the potential problems with equal sharing society and the trade offs that such society may have to face.

The quantitative data I collected on kibbutz members and the decisions they make to leave and to enter and to work and how much do they study and how much equality there is in the kibbutz and so on, this quantitative data is used both to evaluate economic theory and to bring evidence on the forces at the heart of the rise and transformation of kibbutzim. The historical and quantitative perspectives shed light, just like you said, on the particularities of the rise and fall of kibbutzim within the broader context. For example, I discussed how just like you mentioned the historical contingencies in the creation of kibbutzim—the founders of kibbutzim came from eastern Europe and they wanted to bring with them the parts they liked about socialism but without the parts that they didn’t like, and create a new society. They all shared a long period of vocational and ideological training together and the hashomer hatsairmovement abroad and so on. And then the state of Israel at the time, unlike many other places in the world, in fact viewed them as something useful rather than persecute them like many other times in history. So those historical contingencies and their importance in the creation of kibbutzim and then how as the financial crisis and the high tech boom, the kind of socialism, all these factors you’re talking about, how they contributed to the fall of equal sharing in kibbutzim.

But then, what I can also do is I can then use these historical events to guide the economic analysis and answer important economic questions like how the financial crisis hit different kibbutzim differently. And I find in the data that kibbutzim that remained wealthy after the financial crisis experience less exit and were able to maintain a higher degree of equality. Or for example, once kibbutzim shifted away from equal sharing and the returns to education increase, if you want, it’s an opportunity to test the idea of whether kibbutz students take school more seriously once their kibbutz shifts away from equal sharing. And so together with Victor Lavi, we ask the question of whether high school students started to take school more seriously once the kibbutz reformed and the financial returns to education increased and so on. So it is really the combination of history and economics, and by the way some other social sciences as well like sociology and psychology, are all crucial to use them together to understand the kibbutzim and their experiences.

JL: One of the things that comes up a handful of times throughout the book is that you discuss what you call “naive” economic theories. I think part of what’s interesting here is that you set it up almost as a straw man, that this highly theoretical economic approach is something that’s almost kind of a straw man.

RA: Yes, exactly, it’s a strawman. When you say things like, you know, use demand and supply to explain almost everything. I think this is a feeling that I wish people in the public or in other fields did not have, “oh, you know, according to economic theory, brain drain and adverse selection should make everything collapse, or that demand and supply should explain everything.” The book is both about the power, if you want, and the limits of economics, and how we actually don’t take this universal approach. Yes, economic incentives matter, and I find evidence for all of this brain drain and adverse selection, so yes, to some extent this “naive” economic logic is correct. But it is not nearly as severe as you might think by just looking at the theory without understanding the world. Economics today is much more than such naive economic logic, and in fact a more sophisticated economic analysis, one that takes into account history, one that takes into account culture and preferences and social norms and things that traditionally maybe economists did not think about alot, helps us understand kibbutzim and the causes and consequences of income inequality more generally.

JL: I think that this really leads us into a broader set of issues, because the kibbutzim are interesting in their own right but it also tells us a lot about the dream of income equality in general. But before we get there though, you know, I think that that it’s useful perhaps for us to think about what this book represents in terms of its attempt, in a way, to grapple with the possibilities of incoming quality. The kibbutzim present kind of a model, where at least for a time income equality was achieved. When we ask, is this possible, well, we can look to the kibbutzim and say, well, it was—at least for a time.

I think that what you engage with in the book, though, is only part of the story, which is to say that when we talk about economic equality, there are also other kinds of equality which are also part of the broader social fabric, political equality, for instance. In the book, you don’t really talk about that too much. You’re really focusing on this question of income. I think as an economist, that’s probably to be expected that you’re focusing on the economic issues at hand. But when we talk about, for instance, the foreign workers who are at many kibbutzim or the Arab population, what does it mean to talk about economic equality in conversation with these issues or otherwise?

RA: I talk about these issues in the book, perhaps not as much as I should have. Here’s the way I think about it. Yes, kibbutzim were not very inclusive. They were in fact rather exclusive. They were founded by Jews. They were founded specifically by Ashkenazi Jews, and they did not accept Arabs or even Arabic Jews. So at some level, this income equality is achieved within a fairly narrow set of people. And in the book I discuss how this socialist and Zionist ideology often clashed with each other. So for example, think about Arabs for a second. So the other Arab workers, from the socialist perspective, the Arab is a fellow worker that should be a part of the community. But from the Zionist perspective at the time, he often is the “enemy.”

Or, for example, think about the Sephardi Jews, Jews that arrived after the creation of state of Israel from mainly Middle Eastern countries. At the time, the prime minister Ben-Gurion asked kibbutzim to host the new arrival of immigrants in the kibbutz. And kibbutzim really struggled with this. Why? Because on the one hand, they are socialist. For them, hiring outside workers is exploiting workers, right? I mean, the idea of hiring workers from the outside is exactly against the idea of socialism. But as a devoted Zionists, they wanted to be accommodating to the new Jews that arrived. And this created a lot of clash(es). So for example, eventually they ended up doing what Ben-Gurion asked them and they allowed new immigrants to live and work in the kibbutz. But you know what? They reported that they were very welcome on the kibbutz fields, but not so much in their dining halls, if you want. And so exactly this idea of political equality and economic equality are not the same.

But I would say that indeed the way I feel this is that one general lesson of kibbutzim is how homogeneity, if you want, is helpful for income equality. So the founders of kibbutzim are often rather homogeneous as we said. They were young Jewish people who shared similar ideological and vocational training. They had similar prospects. And this homogeneity made the creation of the kibbutz easier. It is less likely that a plumber and the lawyer will group together and say, let’s establish a kibbutz. It’s more likely than two young people with similar prospects and ideas will decide to create a kibbutz. And over time idealism declined and kibbutzim became more diverse, and this is one thing that made income equality more difficult to sustain. And so, more generally, it is easier to sustain equality in a society that is religiously and ethnically less diverse and where people are relatively homogeneous and have similar preferences for redistribution and abilities. So, it is easier to sustain income equality and most generous welfare state for example, in places like Sweden and Norway, which are arguably more homogeneous than it is in the United States, which is more diverse,

JL: I think this brings us to one of the big issues in the book, which is that you argue, I think, that the ideal of income equality is possible and that the kibbutzim demonstrate it. But there are some pretty severe tradeoffs to this kind of situation. You mentioned the homogeneity of the population. This is kind of a tradeoff. The question of social sanctions. This is a highly regimented society, in a certain way. It really brings forward this question of, so you want to make a society of equal income or of relatively equal income? Well, what’s the cost that you’re willing to bear as a society or as a community in order to make that happen? That brings us to a really big and important question that is especially important when we think about our own age, our own era, where we have this really tremendous income inequality, whether we’re talking about within the US or just globally.

RA: Exactly, exactly right. The book tries more broadly to address the question of, can we create a more equal society, and under what conditions it will succeed and fail. And so the way I thought about the book is something like that, it’s like in a world of rising income inequality, well, for example, in the United States, the top 1% holds about 40% of the country’s wealth. It is very natural that many people wonder whether and how we can create a more equal and just society. I studied kibbutzim in this sense, a case study, of society that went all the other way to the other extreme of full income equality. What can we learn from the experience to the questions of whether we can create a more equal society and under what conditions it will succeed?

Think about it. If people were given a choice of whether to live in a society where all incomes and resources were shared equally, or in a more capitalist society, who would choose the more egalitarian option? And would the society thrive? And what rules and norms they would choose to govern their society? These questions are typically very hard to address, because people are not typically given the choice of where to live, they are born into a place. And former communist countries can’t help us answer these questions because their citizens couldn’t exit at will, and they couldn’t vote against socialism, and even liberal or socialist countries like Sweden and Norway that definitely offer more individual choice, but their egalitarian and socialist principles are more difficult to disentangle from other factors.

And so it is in this sense, the kibbutzim offer a laboratory with which to address these questions. Examples of what we can learn about creating equal sharing societies is exactly what you said. Homogeneity we already talked about. It helps, but it comes at a cost. You have to be exclusive. You exclude other people. You don’t do equal sharing among all citizens, but you do it among a set of citizens. And that’s definitely a cost. The small size of kibbutzim was helpful for them to maintain income equality. So it’s not surprising that when you do it on a large scale, you end up with the Soviet Union, always a more authoritarian regime because it’s more difficult to then make use of the social sanctions and make sure that yopu care about what other people are thinking about you and so on.

And so, you need ways to deal with incentive problems. Because equal sharing meant that kibbutzim could not use monetary incentives and they didn’t want to use force or limit freedom in the way that other countries and kolkhozes did, they used mechanisms like lack of privacy and lack of private property which are means that many people don’t like, even if they can allow them more safety nets. So it’s a trade off that many people are not willing to make, which by the way, circling back to your first question, might help explain why kibbutzim are only 2.5% of the population. So if you want, they were up to 7%. So 7% would be your number of how many people would be willing to trade off this lack of privacy and the mechanisms that the kibbutz created for the benefits of a safety net.

Other lessons that we can learn from them is that being rich helps. You know, it helps for many things, but it also helps to support equality. Again, this idea that kibbutzim that remained rich were able to sustain a higher degree of equality. If the kibbutzim offer any lesson for other societies today, think about Norway for a second, which at some level is a kibbutz that offers a generous welfare state. Norway’s also rich. So is it the fact that Norway is so rich that allows them to afford such a generous welfare state? And what if Norway, hopefully not, but what if they have a financial crisis and the oil prices declined? Will they be able to support such generous welfare state?

JL: I mean, I think if we look to the European context, the EU provides potentially another kind of model for this framework. Not of the kibbutz itself, but that people have this kind of freedom of movement from one country to another. It might not be easy for someone to move to Norway for all sorts of reasons, they might not speak the language, their family’s somewhere else or whatever. But one could ask a similar kind of question about welfare state societies in general. I think the kibbutzim are such an interesting example of this, but we can talk in much broader terms as well.

RA: Exactly. So that’s what the book is doing. After I described and discussed the kibbutzim, one general lesson is exactly to countries like Norway and Sweden. They are at some level kibbutzim. They are not based on fully equal sharing, but they are based on a much more equal sharing than most countries, and they are successful examples of voluntary socialism that people can exit at will and so on. I guess if the kibbutz is any guidance though, it suggests that the fact that Norway is so rich is helpful for them in maintaining the high degree of equality. And so to what extent the equality is like a something that you can only achieve when the society is rich enough for very, very poor enough, as opposed to an intermediate level.

If you think about the Norwegian citizen, even though tax rates are very high and they can earn pay less taxes in the United States, still it’s quite nice to live there. It’s a very pleasant place. It’s very beautiful. There is a welfare state. It’s generally a fabulous place to live in. But what if Norway wasn’t as rich? What would that person that can now earn a premium if he moved to the United States, would she then consider moving more seriously?

JL: I want to ask kind of a personal question, in a way, which is just to say that this book I think, correct me if I’m wrong, but my sense from reading it is that its argument follows your own personal transformation. You talk about in the introduction growing up and visiting the kibbutzim and seeing them as kind of an idyllic place, and then growing up and studying economics and developing a sort of way of looking at things that would say, well, these kibbutzim, they just don’t make any sense, leading to this question of is it really possible to create a society with equal income and what are the costs? But then, in the end, it feels like—and I get the sense from our conversation as well—that you have a certain kind of optimism. Not the naivete of a child, looking at what it looks like to live in this very nice environment for for children, perhaps, but a certain kind of optimism that the kibbutzim demonstrate that it might be possible in some way. And so I’m curious if you might want to comment at all on this, or maybe not, how it is that you end up with a certain optimism, especially when part of the story of this book is the harsh economic perspective and your engagement with that.

RA: So, yes, my personal story of how I first got interested in kibbutzim, it was not one of these examples where I was looking at the economic literature and finding a paper and then say, Oh, this paper did not consider that, why don’t I study kibbutzim? It is something that I was deeply interested in and thinking about for a long time. I use it in the book, in part, because the personal story also help me convey that at the end of the day, even if I am very realistic in my analysis and I kind of take into account cold-blooded economic perspectives sometimes, at the end we are interested in people. And the theories and statistics are just tools to systematically study people’s behaviors and decisions.

And so my grandmother’s experience helped me illustrate how the kibbutz provides a safety net. My grandmother lost her family in the Holocaust, and the kibbutz was a surrogate family for her. And then also the last few years of her life, she had Alzheimer’s and she died with the kind of care and compassion that money can’t buy, even though she was a simple seamstress. This idea that I tried to capture in the data that I collected, to see to what extent kibbutzim provide insurance, but my grandmother’s story helps illustrate it better than any statistics that I can find. Or my mother’s experience, I guess on the other side, my mother’s experience helped me convey the role of the lack of privacy. My mother, you see, eventually ended up leaving the kibbutz to Jerusalem when she married my father, and when you ask my mother, even today, you ask my mom, hey mom, where are you going? She said, you know what, I stopped answering that question 45 years ago when I left the kibbutz. I don’t want everybody to know my comings and goings, and this lack of privacy and lack of individualism and conformism drove her nuts. And so that’s kind of like a way to illustrate this., Or my brother’s experience helped me convey how life looks like in a reformed kibbutz today, and so on.

In terms of the optimism, well, 20% of kibbutzim, even today, twenty-first century, 20% of kibbutzim are still based on equal sharing, illustrating that even today under some circumstances fully equal sharing is attainable. Eeven kibbutzim that shifted away from equal sharing continue to provide a safety net to weak members and maintain mutual assistance and mutual aid and caring for others as a building block of the kibbutz. And like we said, countries like Norway and Sweden that are like big kibbutzim illustrate that this model can be successful today. So this suggests equal sharing is possible.

But I want to say that the book presents a realistic approach, not just an optimistic approach. So, equality may be possible, but it doesn’t come for free. So first, you know, kibbutzim did receive implicit and explicit support from the government, which helped them survive. How much would they be able to survive without this external support is a question that is hard to answer. And second, what you gain in equality and safety net, you may lose in incentives or in lack of privacy and more limited individual freedom of choice, conformism limited ownership of private property, or worse forced redistributions through dictatorship, which socialist countries often ended up doing. So, yes, it’s possible, but I encourage readers to think realistically about what are the costs of doing so, and are we willing to pay them?

JL: One other final thing to think about is the imagination of the kibbutz. And this is something that you don’t really deal with in the book at all, I think, but it’s kind of there in the background, which is to say that this image of the kibbutz as a sort of socialist utopia is kind of always there. This is something that we see, you know, even today in the U.S. If you look at the way that American Jews talk about kibbutzim, it’s usually not with any of this realistic perspective. You look at the Jewish education of children and what they learn about Israel in the Hebrew schools or whatever and the kibbutzim very often play a role in this sort of imagery of Israel for all sorts of reasons, because the agricultural settlements represents the return to the land and the “new Jew” and so on and so forth. I think that what is so interesting about the kibbutzim and about this kind of approach that you’re taking to it, is that it very much undermines a lot of these popular perceptions about the kibbutzim in a way that I think is really important when we talk about the public understanding of Israel and the public understanding of its history.

RA: I definitely did not mean to undermine that mythical story. And I do talk about how kibbutzniks, kibbutz members, were held in such high esteem in Israeli society both before and after the establishment of the state and around the world in general, and how they had such a high social and military status and how they produced some of Israel’s most famous generals, like Yigal Alon and Ehud Barak, all the way to famous musicians such as Shalom Chanoch and why always a home to only a small percentage of the population. They had a huge impact on the rest of society. And how the kibbutznik image, like the classic Israeli tsabar, you know, which is Hebrew for the cactus fruit who was rough on the outside but soft on the inside stood in sharp contrast to the image of the diaspora Jews, and how kibbutzniks before 1948 and in the early state of Israel had, like you said, almost a mythical image within Israel enhanced by the major role they played in state building, and this image spread to the rest of the world. And in fact, many people in the United States, American Jews and European Jews will tell you the story of that summer that they went to volunteer on a kibbutz and how amazing experience this was. And so it served also as like, you know, people who get to a certain stage in their life and want to see how it’s like to experience with a little bit of, like, go back to work closer to the land and more agricultural work and communal living and equal sharing, you know, they would spend the summer, they would help kibbutzim collect oranges, produce stuff, while getting this hands-on experience of how it is like to live under socialism. I think that this is actually very important, because this imagination, if you want, it’s something that we will always have around us. People who will strive to design society in a different way, in a way that they perceive to be more just and I think that this is part of the human experience and human creativity. That’s why I like kibbutzim and what they teach us so much and not just in a very cynical way, but also as a way to extend our imagination.