Is inequality bad? It is assumed that it is for some reason. And to the degree that it is caused by the already powerful gaming the system it is absolutely a problem and one we examine closely here. (That the big banks have access to the Fed window and that the Fed backstops the bankers is a good example of unjust inequality of wealth.) But what of an inventor who made the world a better place? Should a person or company who cures cancer for instance feel bad in any way about the vast sums which would likely follow such a cure? What if in an “unequal” society the people with the least had things like enough food to eat, flat screen TVs, cars, and even cell phones? Things which are truly luxuries by historical and global standards? If someone attains vast wealth via deserving means why should we care how rich they become? (Assuming again that they do not seek to buy the system.)
One should have equality under the law. Equality of wealth is a very different matter, the pursuit of which leads often to poverty. (In various forms.) Society needs pace setters. They tend to bring the rest of society – at varying and unequal speeds – along with them. When the pace setters are hobbled the rest of society is also slowed. There’s equality but overall the success of a society is diminished.
First, inequality per se in a game of envy and class warfare. Any objective measure of poverty or deprivation deserves its own assessment and debate and, if appropriate, its own public policy response. No one ever went without food, shelter, clothing, education, or healthcare just because the Gini coefficient was higher than 0.57. As my colleagues Iain Murray and Ryan Young discuss in a new study “People, Not Ratios,” statistical measurements of inequality are no substitute for focusing on the quality of life of real people. Ryan Bourne and Christopher Snowdon of the UK’s Institute for Economic Affairs come to the same conclusion in their own study, also released this week.
Second, it’s better to lift the floor than lower the ceiling (and again, that’s doesn’t mean raising the minimum wage). The best way to help people earn a better living – let’s consider a revolutionary idea – is to get rid of the obstacles that block people from earning a better living. This means, among other things, repealing an array of labor rules and licensing restrictions, both at the federal and state level. And, as Bloomberg View’s Megan McArdle reminds us, we can’t fall into the trap of thinking “entrepreneurs” have to be unicorn-founding tech gurus. Anyone who finds a new way to make money (or an old way to make more money) can be an entrepreneur, even if they never give a TED talk or buy a mega-yacht.