Debating inequality

Finally, and in large part because of the Occupy movement, the issue of economic inequality in the United States is being discussed and debated.

That’s a good thing. But then, as the debate unfolds, we realize how outrageous some of the positions actually are.

A reasonable argument is made by Bob Reich and Debra Satz. First, they argue that inequality is “not always wrong.” They then proceed to outline three main problems with growing inequality: opportunity, civic status, and fairness.

For us, defending equality, and objecting to the outrageous inequalities between the 1 percent and the 99 percent is based on the democratic imperative to create a community where every citizen has a fair chance at a decent life, an equal opportunity to develop their talents, and an equal voice in political decisions. This aspiration for a society of equals finds its taproot not in envy or class resentment but in our country’s founding ideals and in the democratic dreams of peoples everywhere.

Then, on the other side of the debate, there’s the argument—presented by libertarian law professor Richard Epstein and promoted by neoclassical economist Greg Mankiw—that inequality is a good thing.* And not just some inequality but the existing, outrageous, grotesque inequalities that characterize the U.S. economy.

 

If readers watch the interview or read the transcript, they’ll find the following exchange:

PAUL SOLMAN: So, if inequality is good because it provides incentives to people, is equality bad because it provides disincentives?

RICHARD EPSTEIN: No, it’s not the equality or the inequality. It’s the possibility of earning a high rate of return which does it.

And what happens is, if you let people go through voluntary transactions that produce mutual gain, you will increase overall welfare, you will improve the position of those on the bottom. But increased overall welfare will produce greater skews in income, because in a world with genuine opportunities, you will create billionaires.

In a world without it, the people at the bottom will remain where they were, there will be nobody at the top to subsidize them, so everybody will turn out to be worse off.

Yep, that’s right. It’s the kissing cousin to the “job creators” argument: the rich subsidize the poor. And, without the super rich, the poor will be worse off.

It’s hard to believe such a position is taken seriously. But it is—on PBS, at New York University, and at Harvard.

Many liberals are now calling for evidence-based economic policy. But more evidence won’t convince people like Epstein and Mankiw. They don’t deny the existence of persistent and growing inequalities within the U.S. economy. In their view, economic inequality is a good thing.

* The next time someone tries to make the argument that PBS has a liberal bias, send them to the interview with Epstein.