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Mario Rizzo on Income Differences

One of my former professors at NYU, Mario Rizzo, has this outstanding letter published in The Financial Times:

Why should we care about sharing out prosperity?

By Mario J Rizzo

Published: June 28 2007 03:00 | Last updated: June 28 2007 03:00

From Prof Mario J. Rizzo.

Sir, Lawrence Summers’ article "Harness market forces to share
prosperity" (June 25), on reducing income inequality, leaves several
critical questions unanswered.

First, why should we care that income inequality is increasing? Was the previous distribution of income more just, simply
because it was more nearly equal? Second, neither Professor Summers nor
anyone else has a comprehensive understanding of the causes of recent
trends in income distribution. In general, it is a bad idea to look for
solutions to a "problem" whose causes we do not understand. Third, the
whole idea of "sharing prosperity" seems to imply that prosperity is
some kind of aggregate to which we all have some claim, much like
members of a family. What justifies looking at society as a family? If
it is, Prof Summers can just send me a monthly cheque without the need
for legislation.

Finally, Prof Summers uses a shameful rhetorical trick. By
suggesting a "solution" that steers a middle ground between excessive
regulation and doing nothing (as if we do not redistribute income now),
he appears to be very reasonable. Perhaps it is even more reasonable,
however, to think through the rhetoric of increased redistribution
before inventing new policies.

Mario J. Rizzo,

Department of Economics,
New York University,
New York, NY 10012, US