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Inequality as an issue January 27, 2007

Posted by Sharath Rao in contemplation, economics.

Talking about income inequality in the United States, Tyler Cowen in the Times argues that natural demographic factors account for it. [ Read it, a well written article ]. In the end though he adds :

The broader philosophical question is why we should worry about inequality — of any kind — much at all. Life is not a race against fellow human beings, and we should discourage people from treating it as such. Many of the rich have made the mistake of viewing their lives as a game of relative status. So why should economists promote this same zero-sum worldview? Yes, there are corporate scandals, but it remains the case that most American wealth today is produced rather than taken from other people.

What matters most is how well people are doing in absolute terms. We should continue to improve opportunities for lower-income people, but inequality as a major and chronic American problem has been overstated.

To which Berkeley Economist Brad Delong quotes Steven Kyle saying :

To this, I can only say that it takes a white middle aged economics professor with tenure to come up with a statement like that…. [I]n the real world [inequality] makes people distrustful of the system and causes them to lose faith in the fairness of society. General belief in the social contract is a long term asset to us all and one we should be very worried about losing. Only a very narrow view of the world could conclude otherwise…

I imagine what Tyler would say to that. I am undecided – I wouldn’t go as far as Steve did, but I wouldn’t side with Tyler either. I am worried about the larger problem of inequality especially the way it plays out in India, but the solutions the current center-left pursues aren’t something endorse either.



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