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

25 May 2015

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.