Economic Inequality and Prosperity

TCS Daily had an article the other day by Josh Hendrickson, concerning those economists who insist that there is something fundamentally wrong with a society where there are some who are richer than others.

Never mind that there has never been a society with economic inequality. And never mind that these economists are using their argument to sell books, so they can grab a bigger piece of the pie themselves.

Innovative markets help the lower income groups more than the rich. The rich didn’t benefit directly from washing machines, they already had someone else to wash their clothes.

Those who are concerned with income inequality often present their argument
as though there are two choices. One can either side with the market
fundamentalists whose “blind faith” claims that the market will work itself
out or they can side with “realists” who believe government intervention is
necessary to correct for this market failure. However, this is a false
dilemma. As Arnold Kling so eloquently explained, there are many of us who
concede that markets fail, but we are much more concerned with government
failure. And there is certainly reason to believe that the government will
fail to equalize economic outcomes. For example, the most frequent solution
to income inequality, and the one advocated by Krugman in nearly every
interview about his book, is higher taxes on those at the top of the income
scale. While this may give the appearance of lessening inequality, in
actuality it does very little. Essentially, it is equivalent to twisting
the ankle of the fastest runner in the world in an attempt to make other
runners faster. In no way does this make other runners faster.

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