In terms of maximizing use of resources, there is much in favor of reducing economic disparity. The marginal utility of a dollar is much greater for a poor person than for a rich person. So to maximize the over all marginal utility of the available resources one should have the wealth rate as flat as possible.
The problem of course is that you also need to motivate people to actually produce or else there won’t be any resources produced to distribute, so there is sort of a Laffer curve type effect where some middle ground is best but no one will agree where that is.
From my point of view the inequality should be the least that is required to motivate people to work. So that a CEO’s salary should be the lowest salary that will still make being a CEO a desirable position to a well qualified candidate. I suspect that this number is much lower than its current rate.
Not at all. What I am saying is that the old bromide “Equality of opportunity matters; equality of outcome does not,” is pretty easily shown to be, at best, severely incomplete by my ability to conjure—in a matter of minutes—a hypothetical equal-opportunity scenario that is nevertheless quite unsatisfactory.
Obviously, our intuition tells us a fair distribution must be at least partially predicated on desert. Do the scions of wealthy families deserve the greater opportunities into which they are born? Do unambitious and lazy parents deserve subsidies merely because they had some kids? Just how abject an outcome are we prepared to accept for those who, thanks to circumstances outside of their control, are going to be dumb and ugly and off-putting for their entire lives? How can we tell when someone’s success is attributable to unequal opportunity rather than differing desert?
“By necessaries I understand not only the commodities which are indispensably necessary for the support of life, but whatever the customs of the country renders it indecent for creditable people, even the lowest order, to be without. A linen shirt, for example, is, strictly speaking, not a necessary of life. The Greeks and Romans lived, I suppose, very comfortably, though they had no linen. But in the present times, through the greater part of Europe, a creditable day-labourer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty which, it is presumed, nobody can well fall into, without extreme bad conduct. Custom, in the same manner, has rendered leather shoes a necessary of life in England.”
“The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess … It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.”
These data appear to suggest that those in the middle class were as likely to move down as up, and that overall volatility has increased for those in the middle class.
If one desires overall economic stability for the country, this seems to be a bad thing.
No, income inequality is not bad for society. Anyone can perform unskilled labor, so it pays low wages. Not everyone perform skilled labor so those fields pay better. This is natural, and the way things should be. The way to improve one’s lot in life is to acquire more marketable skills, and there is ample opportunity to do so. There is no guarantee of success.
On this point I would suggest that the data on productivity versus wages would suggest concern. That is, if productivity is increasing while wage and income stagnate for the middle class, one can only imagine that it will be less and less motivating to be productive.
Brainglutton, thank you for not saying anything of relevance or utility to the debate. Adam Smith’s preference for progressive taxation does not say anything about income equality’s good or bad effects. Nor does him pointing to the difficulties of the poor living up to a middle-class lifestyle in any way address the point.
I hear a lot of people say inequality is bad. When critically rpessed, they resort to hemming and hawing and talking about nonsequiturs.
Well, that invites the following. Is there any level of inequality that is unacceptable?
As an example, imagine some scheme in which you got a standard deduction at the poverty level, then a 100% marginal tax rate until $100k. So everyone either took home poverty-level wages or took home the amount earned beyond $100k. Your statements are equally true for this (one could move up to the top by learning more skills), but I don’t think you would consider this a just society, right?
What you have conjured, in a matter of minutes, is a situation which has no relevance to what we’re discussing unless you’re arguing that people do not at all deserve what they earn.
And of course in many (most?) situations today we cannot tell if someone’s success is due to unequal opportunity or differing desert (thanks for teaching me this usage for it btw), which is why government should work towards creating equal opportunity. All else being (nearly) equal, success would be deserved.
As for how abject an outcome we are prepared to accept for those who are too ugly or dumb, I say take that question out of the hands of the ‘we’, and into the realm of the ‘I’. If you can’t accept an abject outcome for someone, do something about it. Don’t force me to do it using legislated force. (Using the pronouns in a general sense here). Why should people dislike rich people’s profits being private and risks public as being a terrible incentive, but advocate the same thing for poor people?
My own opinion is not that inequality is per se bad (I think inequality is the inevitable consequence of freedom and meritocracy), but rather that too much inequality, when transmitted through generations, can have bad effects on society - in that it can create a self-perpetuating cycle in which those who ‘have not’ face difficult barriers to social mobility, thus threatening the very freedom and meritocracy that (presumably) gave rise to the inequality in the first place.
Merely pointing out that there is nothing inherently immoral about believing that addressing the needs of the poor through social distribution is a worthwhile societal goal. Many of the most famous moral philosophers of all time have espoused that view.
It’s bad for an economy, because the clumping of money is a vicious cycle, and tends over time to pull funding away from the rest of the economy, cause deadweight loss, and eventually pull the whole material economy down.
Note that it’s not the lack of perfect equality that’s bad. That’s inevitable. It’s the tendency of disparities to increase by feeding themselves indirectly.
I hope to explain this further, but Hellestal might explain it better if he shows up.
Heh. You’re getting nowhere with me if you quote a religious source to prove something isn’t inherently immoral. And even the quote you mention talks of voluntary charity, which I’m all for. Government sponsored charity on the other hand, sets up a perverse system of incentives in a framework that already has plenty of moral hazard. It is not just morally bankrupt, it is likely to do more harm than good over time. I feel as bad for poor people as the next person. I just feel worse if government announces that it’s trying to help them.
I do not think serious adversarial competition (as opposed to competition for pleasure and sport) is an inevitable organizing principle for economic and political structure. I also do not like it. It’s unpleasant, a socially undesirable thing.
I take it for granted, as a “given”, that we’ve long since established that it’s stupid and short-sighted to move from that to some kind of redistributivist band-aid that gets stuck on an economically competitive system, aka redistributing the wealth of the wealthy back to the poor in some misguided spirit of “fairness” or “equality”. It doesn’t work. It pays the competition’s losers to remain in loser-space, removes the incentive for the winners to continue to strive to win, creates a powerful political class of distributors of that wealth, and makes the entire system unweildy and inefficient. But that does not in any way detract from the original observation that adversarial competition is not pleasant and is not necessarily the only way to organize things.
Because otherwise there is no incentive to achieve. If my standard of living is going to be the same as an unskilled laborer, why did I bother to acquire marketable skills?