Here’s a letter that I sent a few days ago to the New York Times:
Ross Douthat’s plausible explanation for why income inequality won’t decline any time soon (“Inequality as Usual,” Oct. 5) prompts this question: so what?
If some persons are robbed of their property or are unfairly blocked from pursuing economic opportunities, that’s wrong and should be stopped. If some persons are so poor that they lack life’s barest necessities, they should be helped. (How best to help them is a different issue.) But neither of these problems has anything to do with income inequality. We would want to correct these problems even if doing so would make the income distribution more unequal.
To worry about differences in earned incomes simply because some persons earn more than other persons is to wallow in envy. And envy is, and ought to remain, a deadly sin rather than be fashioned into a livewire for energizing public policy.
Sincerely,
Donald J. Boudreaux
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The problem is that envy made the list of deadly sins for a reason. Its common. And as long as it is common there will be politicians, driven by greed and pride, who will exploit it.
Isn’t this just a classic “blinded by the monetary veil”?
You present income inequality as a neutral thing – i.e. won’t worry about income inequality – that makes you envious. But since reading “Myths of Rich and Poor”, I’ve come to a different conclusion: applaud income inequality because it makes us all, and especially the poor, better off.
In the development of new technology, the cutting edge is always the most expensive, because firms have to recoup their R&D costs. So the market for the cutting edge tends to be the wealthy, who pay for the production costs PLUS the R&D costs of the thing they’re buying. But over time, the price of the product gets competed down to the cost of production. (Think of CD & DVD players costs when they first arrived on the scene compared to now.)
This means that it’s the wealthy who pay for R&D. The poor, on the other hand get it for free. Without income inequality how much less R&D would we have? How much worse off would we all be, especially the poor who would not have cheap access to things that make life easier? I think it’d be much worse for the poor w/out income inquality. Hence I think that income inquality is far from neutral. I think it’s good.
Is there some mistake in this reasoning that I’m missing?
It would only be wrong in Utopia, which is where the Progressives run most of their thought experiments. In the real world it is absolutely right.
I couldn’t care less about the distribution of income. Put differently, I care as much about the distribution of income as I care about what color my neighbor paints his kitchen. It’s a matter that’s out of my hands and one that has no effect on me or on anyone else. And about people who work themselves into a lather because they happen to object to whatever color it is that my neighbor’s kitchen is paint, I can only tell them to get a life – to worry about something meaningful.
Ok. But you applaud markets, and you (alone) can’t create those. You also applaud free trade across all borders, and you can’t control that either.
Is it not useful to appreciate the positive benefits that income inequality brings? And at least be thankful for all the R&D that the wealthy fund? I think it’s on par with appreciating the value of markets and free trade.
That said, I don’t think it’s valuable to be envious. But I do think it’s valuable to be appreciative. And I appreciate the free R&D that the wealthy have funded for me, and that I (on exceptionally rare occasion) have funded for others.
Touche. But, the fact remains, I just don’t care about the distribution of income. It’s irrelevant in market economies (except insofar as it is demagogued by politicians).
“I just don’t care about the distribution of income”
I sense DG Lesvic chomping at the bit.
You think it is irrelevant but I’d argue it is not. In my line of work there is a very real squeeze to be productive and to stay in business as there is in any line of work. When massive amounts of resources for health care are going to pay the salaries of claims adjusters, of CEO’s and of their shareholder of health insurance companies less money is available for more health care workers and health care providers.
Someday down the road, heaven forbid, you or a family member may be in need of serious medical attention. When a nurse is not readily available or a doctor is too busy to see you or an overloaded pharmacist fills you prescription wrong… you will have been the victim income inequality. Efforts to run skeleton crews to afford the wealth shift to non-productive claims adjusters, CEO’s and shareholders have a very real effect on the services you will receive.
You are likely the victim of it on a smaller but far more regular occasion as in when you purchase something from a store that basically has a Mastercard or Visa tax increase in the price of everything they sell regardless of weather or not you use such a card yourself.
The prosperous idea that $1.4 trillion dollars of accumulated wealth amongst the Fortune 400 in no way effects the efficiency and functioning of the wider economy is an article of faith common in free market group think but not supported by real world evidence or even common logic.
Some one or each of the other 299,999,600 Americans owe those Fortune 400 that equivalent of work or debt. That’s about $20,000 for a family of 4.
The problem is your unfounded belief that the market divvies up rewards in proportion to worth. There’s no logical or rational reason to believe so especially as the two greatest economic calamities to befall our country have occurred after such massive accumulations of wealth.
It indeed would be silly to envy wealth accumulations were they truly representative of value. In that such belief is founded on blind faith someone telling me my position on the matter is one of envy would be like me claiming another person who is not happy with such and such a politicians position of power has a problem with power and political envy.
Are you envious of politicians Don? Or do you have a reason to despise them?
You think it is irrelevant but I’d argue it is not. In my line of work there is a very real squeeze to be productive and to stay in business as there is in any line of work. When massive amounts of resources for health care are going to pay the salaries of claims adjusters, of CEO’s and of their shareholder of health insurance companies less money is available for more health care workers and health care providers.
Someday down the road, heaven forbid, you or a family member may be in need of serious medical attention. When a nurse is not readily available or a doctor is too busy to see you or an overloaded pharmacist fills you prescription wrong… you will have been the victim income inequality. Efforts to run skeleton crews to afford the wealth shift to non-productive claims adjusters, CEO’s and shareholders have a very real effect on the services you will receive.
You are likely the victim of it on a smaller but far more regular occasion as in when you purchase something from a store that basically has a Mastercard or Visa tax increase in the price of everything they sell regardless of weather or not you use such a card yourself.
The prosperous idea that $1.4 trillion dollars of accumulated wealth amongst the Fortune 400 in no way effects the efficiency and functioning of the wider economy is an article of faith common in free market group think but not supported by real world evidence or even common logic.
Some one or each of the other 299,999,600 Americans owe those Fortune 400 that equivalent of work or debt. That’s about $20,000 for a family of 4.
The problem is your unfounded belief that the market divvies up rewards in proportion to worth. There’s no logical or rational reason to believe so especially as the two greatest economic calamities to befall our country have occurred after such massive accumulations of wealth.
It indeed would be silly to envy wealth accumulations were they truly representative of value. In that such belief is founded on blind faith someone telling me my position on the matter is one of envy would be like me claiming another person who is not happy with such and such a politicians position of power has a problem with power and political envy.
Are you envious of politicians Don? Or do you have a reason to despise them?
deleting duplicate – sorry
Ab initio radix tristis est cupiditas. Invidia absit!
I envy your innocence thus bombard you with my jaded corruption. I like to call it by geometric name. I call it revolution, but to me it is not revolting when you are stuck with it as I remain innocent.
Now I feel better.
Grazia,
A
What is property? “Robbed of their property” is a loophole that any herd of elephants would happily welcome.
Property is my condo, and I have the deed to it. Any one who proposes suddenly that it is “their” property will meet me in court.
Yes… and then you will lose your property to Citibank. They will be still richer and you poorer. And you might still hold strong to a belief that favors them over yourself.
Yes… and then you will lose your property to Citibank. They will be still richer and you poorer. And you might still hold strong to a belief that favors them over yourself.
Other mistakes made by those who focus on income “distribution” (and appeal to Rawls’s veil of ignorance) include considering production and remuneration to (1) be two disconnected processes that (2) occur in a one-shot game. Income is not distributed, it is earned. This infinitely-repeated process of production and remuneration is what drives growth.
So interest on my Treasury notes is earned? My Social Benefits? My SSI disability benefits? My TANF benefits? My Medicaid benefits? It’s all income, so it must be earned, right?
Entitlements are certainly not earned–they are income redistribution (typically justified in the name of reducing income inequality), compelling those who earn income to give some to those who haven’t. Arguments that interest is not earned are likely to boil down to an appeal to a Marxian labor theory of value. That you mention treasury notes is interesting, as the interest earned is taken from taxpayers, much like the money used to fund entitlements. In other words, the goal of the initial borrowing was probably, in part, motivated by a desire to address income inequality.
Did you purposely list income that is taken from taxpayers? If so, I appreciate that you point out the difference between earning income and stealing (albeit “societally sanctioned” theft, often justified as a means to address income inequality). Otherwise, I’m not sure what to think of your questions.
Entitlements are income to the recipient.Arguments that interest on a Treasury note is not earned have nothing to do with Marx.The buying and selling of Treasury notes has nothing particularly to do with income inequality. It has to do with the seller’s desire to finance some project outside of the market, like a war, and the buyer’s preference for entitlement to tax revenue.How do you know how much of anyone’s income, including yours, is essentially a distribution of taxes or other rents? If I “work” for AIG or Bank of America or Lockheed Martin or even GM these days, how different is my income from that of a clerk at the IRS or a recipient of SSI benefits or interest on a Treasury note? When the state at every level controls half or more of GDP, how can most income not be heavily influenced by state entitlements?
Why should anyone believe that higher incomes are distributed less this way than lower incomes? In other words, why should anyone believe that the state flattens the income distribution rather than steepening it? Whether the state tends more to steepen the income distribution or to flatten it, why is it not relevant to any analysis of the role of states and markets in the economy?
I included the comment about the Marxian labor theory of value because I wasn’t sure whether you were intentionally bringing state intervention into the discussion.
I haven’t claimed that the role of states in markets is not relevant. My claim is simply that those who are fixated on income “distribution” often ignore the notion that, in my original words, “income…is earned.”
I’m not sure whether I could modify this to satisfy you, but my point is that those who are obsessed with income “distribution” act as if in stage one all goods and services are produced and in stage two income derived from the production of these goods and services is distributed with absolutely no connection to the value of the goods and services produced in stage one.
Correct me if I’m wrong, but you seem to insist on (1) adding the realistic complication of state intervention in both stage one and stage two and, moreover, (2) highlighting the fact that the connection between the value of production at stage one and the income “distribution” conducted at stage two is distorted by this state intervention. If so, I don’t disagree.
Was access to treasury funds that made some fabulously wealthy earned? How about patents for Microsoft protected by government men with guns and tax dollars?
There’s not a man alive who is worth a billion dollars but apparently a billion willing to think they owe him a buck.
Billions think so, because states threaten them, like states threatened their fathers and grandfathers. States become more powerful with time, and the rich become richer.
States excel at taking a little from many to give much to a few, and this function is sustainable. Unwitting apologists for the state see only the opposite tendency, taking a little from a few to give to many, but this tendency is only an illusion.
The few don’t object to the taking, because they know what the state also delivers to them. If they weren’t gaining on balance, if they weren’t becoming richer, they’d join forces to defeat the statesmen at whatever game the statesmen play.
Billions think so, because states threaten them, like states threatened their fathers and grandfathers. States become more powerful with time, and the rich become richer.
States excel at taking a little from many to give much to a few, and this function is sustainable. Unwitting apologists for the state see only the opposite tendency, taking a little from a few to give to many, but this tendency is only an illusion.
The few don’t object to the taking, because they know what the state also delivers to them. If they weren’t gaining on balance, if they weren’t becoming richer, they’d join forces to defeat the statesmen at whatever game the statesmen play.
Was access to treasury funds that made some fabulously wealthy earned? How about patents for Microsoft protected by government men with guns and tax dollars?
There’s not a man alive who is worth a billion dollars but apparently a billion willing to think they owe him a buck.
Why would you put your hard-earned dollars into something that didn’t gain interest? You are giving your money to be invested in whatever and hope to get a decent return. There’s nothing wrong with that morally.
I could buy guns with my hard-earned dollars and earn the yield of the guns by threatening to shoot you if you don’t provide it.
Our society functions because you wouldn’t really do that. Most of us want to get along with everyone else.
Why would you put your hard-earned dollars into something that didn’t gain interest? You are giving your money to be invested in whatever and hope to get a decent return. There’s nothing wrong with that morally.
Yes and politicians making back room deals… obviously earned income.
Yes and politicians making back room deals… obviously earned income.
Prof. Boudreaux,
I am afraid that you are burying your head in the sand, for ignoring the issue will not make it go away. And if it is “the bottom line,” as you yourself had termed it, how could we afford to concede it?
As we ought to know here, there is no need to do so, for it would be a simple matter to turn the whole issue to our advantage, to point out that taking from the rich to give to the poor could not reduce but only increase income inequality.
Why would we not do so, when it was so easy to do, and concede that crucial issue, when there was no need to do so?
The only way to deal with it is the way Ronald Reagan did, and that is to re-frame the debate in terms of the Communist who want to kill opportunity to make something of yourself in America. If you continue to let the left frame the issue in terms of inequality – they win.
It would be better to frame it in terms of individual rights, but sadly some of you guys have yet to recognize their existence.
It would be better to frame it in terms of individual rights, but sadly some of you guys have yet to recognize their existence.
Some people would prefer guaranteed security to the risk of living with individual rights AND responsibilities.
Some people would prefer guaranteed security to the risk of living with individual rights AND responsibilities.
One difference between “individual rights” and “guaranteed security” is that one exists, and the other does not.
One difference between “individual rights” and “guaranteed security” is that one exists, and the other does not.
Could you provide a reference for this counterintuitive claim?
Could you provide a reference for this counterintuitive claim?
Arrowhead,
Since the Left depends entirely on the assumption that taking from the rich to give to the poor reduces inequality, it would be utterly demolished by the opposite-most conclusion that it didn’t reduce but increased inequality.
I don’t recall Ronal Reagan ever saying that, and if you think we should keep it a secret, I would really have to wonder whose side you were on.
Arrowhead,
Since the Left depends entirely on the assumption that taking from the rich to give to the poor reduces inequality, it would be utterly demolished by the opposite-most conclusion that it didn’t reduce but increased inequality.
I don’t recall Ronal Reagan ever saying that, and if you think we should keep it a secret, I would really have to wonder whose side you were on.
Jeff,
Thanx for requesting the link.
As soon as I can get ahold of my daughter, and get her to show me how, I will post a direct link to The Forbidden Theory of Redistribution.
In the meantime, you could click on my name below, and then scroll down to the Table of Contents, and, in that, about three fourths of the way down, to The Forbidden Theory, and click on that.
Let me know what you think.
Jeff,
Thanx for requesting the link.
As soon as I can get ahold of my daughter, and get her to show me how, I will post a direct link to The Forbidden Theory of Redistribution.
In the meantime, you could click on my name below, and then scroll down to the Table of Contents, and, in that, about three fourths of the way down, to The Forbidden Theory, and click on that.
Let me know what you think.
Jeff,
That is Chapter LXVII, 67.
And click on my name above, not below, as I had said.
Jeff,
That is Chapter LXVII, 67.
And click on my name above, not below, as I had said.
Jeff,
It should be noted that none of the critics from the past, and behind closed doors, have ventured to repeat their criticisms here, and out in the open, and several, after appearances here, have been directly challenged to do so.
So I think it’s fair to say that the theory has withstood quite a bit of expert criticism, and been as validated as any other.
Your ‘theory’? Inequality ought to increase in a free market because a free market rewards quality productivity. In a free market 100m race there ought to be the maximum inequality because people can’t all run at the same speed. However, if the government demanded that everyone slackens their pace to the slowest runner such that everyone crosses the finish line at the same time then equality has been achieved at the expense of productivity.
Your ‘theory’ is nothing but a daft hypothesis.
Your ‘theory’? Inequality ought to increase in a free market because a free market rewards quality productivity. In a free market 100m race there ought to be the maximum inequality because people can’t all run at the same speed. However, if the government demanded that everyone slackens their pace to the slowest runner such that everyone crosses the finish line at the same time then equality has been achieved at the expense of productivity.
Your ‘theory’ is nothing but a daft hypothesis.
Jeff,
It should be noted that none of the critics from the past, and behind closed doors, have ventured to repeat their criticisms here, and out in the open, and several, after appearances here, have been directly challenged to do so.
So I think it’s fair to say that the theory has withstood quite a bit of expert criticism, and been as validated as any other.
Gil,
If you ever said anything sensible, your teeth would all fall out of your mouth.
Huh? Even Don’s letter hurts your ‘masterstroke’.
Huh? Even Don’s letter hurts your ‘masterstroke’.
There are many coherent, rational objections to income inequality. They might be social, moral or even economic. I think you could make a pretty decent libertarian argument even, though it would require looking past current political paradigms in the US.
To present objection to income inequality as nothing more than a envy is intellectual dishonesty.
There are many coherent, rational objections to income inequality. They might be social, moral or even economic. I think you could make a pretty decent libertarian argument even, though it would require looking past current political paradigms in the US.
To present objection to income inequality as nothing more than a envy is intellectual dishonesty.
Catsup,
You’re missing the point about income inequality.
Your efforts to reduce it by force will only make it worse.
Catsup,
You’re missing the point about income inequality.
Your efforts to reduce it by force will only make it worse.
Don,
You have a wonderful way of putting things. You should put together a book of your pithy comments, “The Sayings of Don.”
Good work. Now if the Times would only publish your comments.
Don,
You have a wonderful way of putting things. You should put together a book of your pithy comments, “The Sayings of Don.”
Good work. Now if the Times would only publish your comments.
Growing inequality at the top end of the income spectrum is not
necessarily an undesirable trend. As James Sherk of the Heritage Foundation points out, it depends on the source of inequality:
“Consider the impact of Google, Inc. The company’s founders, Larry Page and Sergey Brin, are now worth more than $16 billion each. Their financial success has made America a demonstrably less equal country, and most Americans are better off for it.”
Martin Brock,
I must have had you wrong. I considered you someone not to be bothered with, but your response to Muirgeo on the Norway issue was a classic, and I have incorporated it into my book.
See Chapter XLIX, that’s 49, for you ingoramuses, The Joy of Paying Taxes.
From now on I will have to take you seriously, so PLEASE don’t make me regret it.
“To worry about differences in earned incomes simply because some persons earn more than other persons is to wallow in envy. And envy is, and ought to remain, a deadly sin rather than be fashioned into a livewire for energizing public policy.”
Paging PM Thatcher…
http://www.youtube.com/watch?v=okHGCz6xxiw&feature=player_embedded#
babinich,
Your morality still misses the point.
Taking from the rich to give to the poor doesn’t reduce but increases inequality, and is immoral from the redistributionist’s own standard.
Bab,
Your morality, and Boudreaux’, and Thatcher’s, doesn’t just miss the point, but plays into the enemy’s hands.
For, if the policy doesn’t work, the morality of it isn’t an issue. So, by making an issue of it, you imply that it does work, that plunder pays, and freedom doesn’t.
And, with friends like that….
“Your morality, and Boudreaux’, and Thatcher’s, doesn’t just miss the point, but plays into the enemy’s hands.”Please explain…
Dang! You beat me to it!
Dang! You beat me to it!
The real world is counter factual to your position. Many country’s have higher standards of living greater socialization of the economy and far less wealth inequality. Norway, Denmark … probably most of Europe.
The real world is counter factual to your position. Many country’s have higher standards of living greater socialization of the economy and far less wealth inequality. Norway, Denmark … probably most of Europe.
Muirgeo, what are you talking about?
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita
The US is easily at the top, with the exception of a few small countries like Luxembourg and, yes, Norway. Give me one European country– just one– with a population greater than the size of NYC (~8mm people) to make your point.
The answer is, there isn’t one. It’s not even close. I suggest you check your facts before making such claims.
Muirgeo, what are you talking about?
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita
The US is easily at the top, with the exception of a few small countries like Luxembourg and, yes, Norway. Give me one European country– just one– with a population greater than the size of NYC (~8mm people) to make your point.
The answer is, there isn’t one. It’s not even close. I suggest you check your facts before making such claims.
Norway is a ridiculous comparison. It has 1.5% of the U.S. population, but it’s one of the world’s largest oil and gas exporters. Denmark has a similar population without the huge petroleum reserves, and its per capita GDP is less than eighty percent of the U.S. value. The per capita GDP of the European Union is seventy percent of the U.S. value.
Cherry picking a few tiny nations that you think merit your state worship, and then asserting that the rest of the world is “probably” similar, doesn’t demonstrate anything.
But that’s exactly what I do when I purchase Treasury securities.
Cherry picking a few tiny nations that you think merit your state worship, and then asserting that the rest of the world is “probably” similar, doesn’t demonstrate anything.
Well, it demonstrates that our dear ducktor has the IQ of a dead battery.
In what little I can bring to the discussion, I have been debating (closer to fighting I suppose) with a friend over this exact point. The essential point is simply that when we talk about income distribution versus redistribution, we are talking about very different things, despite the fact that the words sound similar.
It may not be particularly helpful to further the discussion, but it certainly seems true enough.