New Books and More Arguments Against Inequality: Will It Ever End?

There is another new book out on the alleged problem of inequality.  This one is by Anthony Atkinson, a British scholar who wrote Inequality: What Can Be Done?  The book was just released so I haven’t had the chance to read it yet, but Richard Epstein, a legal and economic scholar with New York University and the Hoover Institution, has read it and has written a very good piece on the book and the issue in general.  You can read it at Defining Ideas: A Hoover Institution Journal , Dated May 19, 2015 and entitled “The Income Inequality Warriors.”  I know I and others on this blog have addressed the topic of inequality before, but it is looking more like it may be a major issue in the up-coming general election.  Elizabeth Warren, the possible Democratic Party candidate, has well-known views on it.  Hillary Clinton, who needs no introduction, has also spoken about inequality—in one of her rare utterances (yes, a bit hypocritically, given her own rather secret wealth).  The Republican candidates have yet to say much on it, but if their Democratic counterparts continue to make it an issue, they will simply be forced to reply.  In the meantime, scholars on the Left cannot seem to get enough talk about inequality—its perverse effects being emphasized.  Of course this is also related to the calls for the (magic) $15 per hour minimum wage, the continuing demand for severe taxes on wealth and increased rates on income for the top [fill in the blank] percent.

The topic has an emotional resonance.  It just doesn’t seem fair that someone who seemingly is not better than me, smarter than me, etc.  has managed to attain to unimagined income or wealth levels or just to levels much higher than mine.  Our inner (and lurking) envy comes out at these times.  And to speak seriously, Christians, even Christians, must be ever on guard for that green monster.  We too can find ourselves reacting to those differences, brought about by “luck” (we sometimes think), with the wrong attitude and also crying for fairness.  In reality of course no one is where he or she is by luck.  God has a very good reason for where he has them financially.  Yet, we may still say, yes, He does, but couldn’t government find a way to make the gap less yawning than it seems to be.  These emotions can be even more stirred during an economic downturn, like the one we are currently experiencing.

Epstein doesn’t come at the issue from a Christian perspective, but what he says is certainly consistent.  The heart of the argument is illustrated by an example:

“Assume that we have just two groups in society, one of whose members all have wealth at the level of 10 and the second, far smaller, have wealth at the level of 1,000. A change in legal position that increases the wealth of the bottom group from 10 to 15 and the top group from 1,000 to 1,200 will increase absolute inequality even as it improves the position of the people at the bottom. Ironically, it will also give larger percentage increases to those at the bottom. Indeed, many social changes do produce gains across the board. But it is typically beyond the capacity of any social planner to steer productive activity in ways that ensure that whatever growth does take place will result in a reduction of any income gap by any system of state taxation and regulation.” (Epstein)

The argument is pretty compelling.  It seems a bit odd, to say the least, that reasonable people would deny this.  But then worldviews are not always consistent and more important, they are often driven by presuppositions or premises that themselves are untenable—matters of pure faith.  Now to begin with faith doesn’t necessarily lead one to ludicrous positions, but if the assumptions with which one begins lead to outcomes which themselves are negative, isn’t that at least evidence that a closer analysis is needed?  So would a person who insists inequality is the great problem today and is always somehow evil insist that even if those at the “bottom” are made much better off, the market process is bad?

But the inequality warriors aren’t finished.  Many also assert that the cause of inequality is those at the top of the income ladder.  In some way they believe the wealthy who have a great deal of income have created the low incomes.  That position is a zero-sum game, assuming that when one party gains another must lose.  This argument too strikes me as very strange.  If I make money with a business and I have to employ people to conduct my enterprise, how am I taking (stealing?) from others by giving wages and salaries?  Under any circumstances I could not be accused of taking from the poorer unless I actually enslave them and pay them nothing.  Do people not employed by me in my example suffer because of me?  Only if my enterprise imposes costs on others through say, pollution, etc, can we say social costs are a problem and should be corrected.  But those policies are already in place in most nations.  Social costs due to externalities are correctable through a rearrangement of property rights to adjust for those costs.

One other part of the anti-market argument Epstein mentions comes from writers such as Nicholas Kristof of the New York Times.  Epstein writes, quoting Kristoff:

He [Kristof] berates his fellow Americans for not thinking that inequality is the result of conscious social choices. He is surely right about the general point, but wrong in sizing up the situation when he denounces the nation, which has “chosen to prioritize tax shelters over minimum wages, subsidies for private jets over robust services for children to break the cycle of poverty.”(Epstein)

As Epstein details in response, tax shelters can be a problem, but why couple them with a clearly problematic minimum wage?  We surely don’t want to subsidize private jets, but why must this be coupled with poverty programs that have already been shown to have failed?  The policy suggested by Atkinson and Kristof is as Epstein says, “a recipe for economic disaster.”  Inequality is not in itself the problem.  If markets produce inequality and in doing so produce an upward movement in the well-being of everyone, then it only makes sense to favor markets over some redistributional scheme.

 

 

11 thoughts on “New Books and More Arguments Against Inequality: Will It Ever End?”

  1. 1) Could you define everyone in your last statement and explain why free markets have not always provided enough jobs for full employment at a livable wage?
    2) Markets were pretty much free before the Great depression of the 20s. Where was everyone then?
    3 )And, what you would you do as a leader of a Christian nation to provide for those who couldn’t find employment at a wage that provides basic needs?
    4) Would you have government pick up the difference of a less than sustainable wage by supplying say: health care, school lunched, food stamps?
    5) Should the church pick up this slack or should some just go without?
    6) If markets were free would they supply a livable wage that could pay for things like healthcare for everyone wanting a job?
    7) Doesn’t every free economy in the world have some mix of socialism ?

    1. Let me try to answer your questions in order:
      1. Free markets cannot provide full employment and a “livable wage” for all because NO institution can do that, but they come closer than any other.
      2. Pretty free, but there were still a number of tariffs and taxes were pretty high. Also, no one had a particularly high income–even the ultra-wealthy were not as well-off as many upper class people are today. And those at the bottom are MUCH better off than before the Depression.
      3. Depends in part on what you mean by “wage that provides basic needs” or what you called above “livable wage.” This is hard to define and government officials and bureaucrats can’t define it any better than anyone else. I would provide a safety net for the truly needy.
      4. Again, what is meant by “less than sustainable wage”? Also I don’t think any of those programs work well. I would prefer–if I were giving money away–to give it outright to be used as one chooses–with certain defined limits–in the form of maybe a debit card.
      5. Yes, the church ought to bear the extra burden and could do so more efficiently and responsively, assuming it didn’t have any ridiculous regulations stifling its creative work.
      6. No institution can do that–you are asking for perfection, which is impossible.
      7. No every free economy doesn’t have an element of socialism if by socialism you use a standard definition, but most if not all adopt an element of welfarism.
      Hope that answers questions.

    1. Interesting, but for the most part very different than my thinking. Unfortunately, humans don’t always act rational. Free markets would be great if they did and if it wasn’t for greed. Greed seems to get in the way of common sense causing people to do the wrong things for the wrong reasons. For example, coal mine owners in the early twentieth century paid workers so little they had to open company stores where workers became deeply in debt then they had to supply workers with company housing so that “I owe my soul to the company store” Then if a coal miner died, say from black lung the owner kicked the dead miner’s family out into the street. That is what the free market can bring. Fair wages were introduced only after strife, death and finally unions.

      Still curious to see your answers to my questions above. If you have the time.

      1. Interesting, but contains some errors. First, greed is different from self-interest, and not everyone is greedy all the time. Not all businessmen are greedy or all the time if they are some of the time. Not all government employees are greedy all the time. But incentives do matter. Even if a businessman was greedy in his/her motivation he could not express it in action unless he had no competition or he colluded with others to restrict competition. Bu that is NOT a free market by definition. In fact, though it is not ideal from a Christian standpoint, free markets incentivize people to do the RIGHT thing even if is IS for the wrong reason.

        Your historical example is interesting. I am a West Virginia native, born and raised just north of the southern coalfields. What I saw was first jobs for people who wouldn’t otherwise have had any at all–that is what you see today as the coal industry has been severely reduced and most people have moved away. Second, I saw that sometimes the coal operators did attempt to fleece the miners, but they also provided goods that no one else would provide (due to the inefficiencies of coming to coal mining communities at that time). And third, actually workers did not go deeply in debt for the most part. That has gained a mythological status due in part to the romanticized music of the period and beyond). Finally, labor unions did provide some benefit to employees at that time (NOT now) but the cost was that the unions in coalfields were pretty violent (many socialists were a part of that early unionizing effort). The mutual enmity and distrust has lasted even until today. Finally the coal industry is much different today–much higher pay, etc.–but there are many fewer employment opportunities too.

  2. WV coal miner’s example above shows what greed and free markets do to employees who have no recourse, no government regulations on safety, no means of negotiations for human rights. (Now I guess we will get into a discussion on what is a human right.) We are better off today as you said because government has helped tame these human abuses. And yes coal is in decline mostly because we are using cleaner fuels not due to unions.

    Do I hear you say entry level jobs, as in the case of the miners, should not pay enough to house and feed a family? If the next level is miner foreman, how many miners will eventually make foreman? Or, after getting miner experience working a 12 hour shift, as many did, should they become a school teacher. Seems the vast majority stay at level one.

    Yes, there is some aspect of socialism in every country that has a free market place, if not name one.

    1. OK, let’s take what you said one point at a time. You begin by saying your WV miner example shows what greed can do “to employees who have no recourse, no government regulations on safety, no means of negotiations for human rights.”
      1. You changed the argument form wages to safety, and committed a historical fallacy. Safety is of course an issue, and to the extent it poses real danger and the employer will not address it, government has to step in in some way–though the best policy solution may be open for discussion. Historically, safety was an issue, but it was also in almost all industries to some extent. Most nations were just coming to the point at which a political demand began to arise for safety. You blame the market itself for a problem no one had yet (until the mid-20th century) given much consideration to. Even employers, when they did clearly perceive safety as an issue, in many cases in the 19th century considered such things as matters of providence. You are expecting from markets what could only come about with an advance in civilization as people grew better off and began to be willing to do what it might take to address those issues (and as technology itself became available–which it was not in many instances before). You seem to forget that even miners themselves considered much of what happened with safety as just a hazard of the job, until the twentieth century. NOW, did unions do something good there? To an extent, yes. They did help to raise awareness or safety issues and helped push legislation to address it. They had value in that respect, though the legislation did not always turn out to benefit the miners.

      “Negotiations for human rights.” What exactly does that mean. If you mean what the Declaration of Human Rights of the UN (1948) meant, you are including a “living wage.” I contend wages were no more of an issue for miners than any other industry. In fact if you had visited the mining towns that were hubs (Welch, Beckley, Huntington, WV–my hometown) you would have seen the evidence of GROWING prosperity among the miners as they had more disposable income. Of course it didn’t happen all at once. Is any society perfect? But could socialism have done that better? You know the answer.

      Government has helped to a degree, but as time has passed government has become more itself the problem than market failure.

      Coal mining is in decline mainly because 1) we are more efficient in energy use, requiring less coal; 2) oil has replaced much of what coal did and 3) the EPA and state EPAs have stymied coal development without corresponding benefits. Cleaner fuels have actually contributed very little to the decline. Finally, the decline until recently was more a matter of the number of employees than actual coal production. Mechanization was just more efficient. And unions did drive up wage costs.

      I did’t say anything about levels of employment in the coal industry. I said that wages were rising everywhere even before unions came onto the scene. Wages are based on supply and demand. If you tinker with that you end up killing jobs altogether. Do you want that? Today mining salaries are pretty good, but numbers of jobs available are much lower. Your question “Do I hear you say entry level jobs, as in the case of the miners, should not pay enough to house and feed a family?” is not the right question. Unless you buy into Marx’s economic philosophy, you don’t believe surely that a company doesn’t pay enough. Companies realize the value of workers today in general. Now that doesn’t mean the worker always gets the wage he/she wants. But they surely have the intelligence to know how to match their desires to their wages. It isn’t a matter of starving. And even if it were, there are numerous governmental programs for those who cannot get any decent job or any job at all (not that I think they work well, but they are there). In coal mining the pay as I said is more than enough for a family. You cannot forget that the worker also bears responsibility to use what he gets wisely and that he cannot just want anything and expect his employer to increase his wages just because he wants it.

      Finally, not all nations have an aspect of socialism. Hong Kong, Singapore don’t. Welfarism is not the same as socialism, so the US doesn’t. You can of course make an argument that some parts of welfarism overlap with socialism and that is true, but that doesn’t one the other. Some of those elements are just universal parts of a statist mentality.

  3. I think we may actually agree on more things than one might think. Government does have a place in administering justice. It took government to put an end to slavery, jim crow laws, orphanages, women’s inequality and a host of other social injustices. It may take government to put an end to greed. Until then: continue to give a drink of water in Christ’s name. (Mark 9:41)

    Thanks for the spirited debate.

    1. Government created Jim Crow laws, so it’s a little weird to credit them with eliminating them, orphanages are still around (group homes) and until recently the foster system had many problems, women have more equality, but still they aren’t equal.

      Slavery is a great example though.

      1. Government only ended slavery in the sense that a rogue Federal administration using force of arms utilized emancipation not as an end but as a means to another end, centralizing and increasing its own power.

        Government can use its power to right wrongs, but it also can use it to commit wrongs. The problem is that when it uses its power to right a wrong (ending slavery for example) it usually ends of doing so by committing or causing other wrongs.

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