Comments: The Moral Case for Fixing Economic Inequality

I am very sad to say that my attempt to get this conversation started here is failing. On the other hand, a fascinating conversation on this exact topic is currently on my Facebook page and currently includes at least 6 different commenters.

Posted by dagny at August 29, 2014 5:08 PM

Heh, you should have PMed me the link, not put it on your wall. ;)

Posted by johngalt at August 29, 2014 5:21 PM

Also of interest is the fact that the commenters range in age from 18 to 77.

Posted by dagny at August 29, 2014 5:45 PM

Well, looking at it from a neo-Monetarist perspective... (You people are so mean to me.)

Here is my comment exactly as it appears on FB:
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I think Scanlon, like many of this genre is unpersuasive on the evils of inequality qua inequality.

Certainly the poor should have more. I believe that respect for rights, enlightenment values, and free exchange to capture comparative advantage will make the poor less poor. I highly recommend William Easterly's "The Tyranny of Experts--" especially as an antidote to the linked Peter Singer TED talk.

But I have very pad news. The solution -- the world tested and repeatedly proven solution -- to helping the poor actually helps the non poor. Inequality myopics must answer the question: "If I doubled your salary and your company's CEO's salary, would you be sad?" That would likely increase the inequality between you and that fat, monocle man in the pinstripes in the corner office. Yet, I would cheer.

Scanlon offers many good reasons to dislike poverty, but his reasons to distain wealth are less compelling. Mal-distribution of political power? Ask President Forbes and President Perot about that. Better opportunities in school? I don't see Steve Jobs, Warren Buffett and Bill Gates trading on their old school ties.

A stratified society is to be distained only as much as the pathways from one caste to another are closed off. And that lack of dynamism generally is the product of top-down organizations' dictating "fair" outcomes.

So I say double everyone's wealth! That will all but double inequality, but I won't complain. I'll be too busy playing my new guitars.

Posted by jk at August 29, 2014 6:43 PM

OK well, JK just did this way better than me, but I’m going to post anyway since I wrote it all down:
There are 2 very important and clear distinctions that come to mind immediately between the government class and the rich. Many in government are rich too but the distinctions are between government and private sector rich.
1) Everything government does is basically done involuntarily. Tax collection is backed up by the power of the law and men with guns. While private sector rich got that way by voluntary exchange. No one held a gun to my head the last time I went to Starbucks or McDonalds or bought an iPHONE.
2) Government is parasitic on the wealth of a society. It creates nothing. I am not an anarchist and I believe government IS necessary but it does not add to the wealth of society. The wealth of a society is represented by its stuff, its art, its leisure time and it is still increasing in this world at a tremendous rate. Money is only a medium of exchange, it is NOT the wealth itself. The wealth itself is this magical device in my hand that allows me to argue with friends and tell my husband to pick up milk on the way home. The private sector rich mostly create wealth. Government invariably diminishes it.
So the question here is whether involuntary redistribution (through taxation) is a good idea. Part of the question is whether it is moral but lets put that aside for a minute and look at what actually happens. The wealth is moved from productive uses to unproductive ones. And I’m NOT saying those at the bottom of the income scale are unproductive, I’m talking about the tremendous loss in government overhead ($600 hammer anyone?)
Also this method of running a society hurts those at the bottom of the scale more. For example the guy at McDonald’s that Paul mentions above cannot decide that since what McDonald’s is paying him is insufficient to meet his needs, he is going to open his own hamburger joint. The government imposed barriers to entry are too high. To open a hamburger joint he needs FDA, EPA, OSHA and whatever else alphabet soup approval that costs so much, he can’t even get started.
So we have this income inequality problem (which BTW, I don’t think the inequality itself is really the problem) but only that those at the bottom are struggling is the problem. If I am happy and not struggling to feed my family, why would I care how much stuff my neighbor has???
Government interventions to try to reduce inequality have downward pressure on real wealth, resulting in things being worse for all which matters less to those at the top than it does to those at the bottom.

Posted by dagny at August 29, 2014 7:03 PM

A primary objection over on the other thread is that CEOs are paid "too much." After explaining that CEO's essentially earn profit from the labors of every worker, while each worker is paid only for his own labor, I did have some sense of a fundamental unfairness where, for example, a new CEO is hired to guide the helm of a major multinational corporation that he did nothing to create in the first place. That guy commands a huge salary because he's qualified to sit in that seat, for whatever reason, but why does the seat exist? Why is it beneficial for corporations to be mega-sized? Economies of scale and access to mega-sized development capital seem the best answers.

I will not advocate government limits on the size of a corporation, but is there a market solution for promoting the fragmentation of corporations? Is that even desirable?

Posted by johngalt at September 2, 2014 12:55 PM

Statist! (Sorry, I had to...)

I do not think it is desirable to promote fragmentation. A board should decide how big a big a corporation is. They can spin off or sell units if it seems desirable to them.

I'm appreciating your desire to be reasonable, but I'll not join you. Peyton Manning gets paid a bucket to QB the Broncos because he is thought the best choice and because other teams would like to have his services. He did nothing to build the Broncos (in fact, he took us out in the first game of the playoffs how many years? Bastard!)

I'll do that analogy all day. There is a pretty select list of folks you'd hire to be a first string NFL quarterback, and there is a select list of people you'd put at the helm of AT&T, Walmart, Exxon-Mobil or LiveAtTheCoffeehouse.com. The cost of the wrong hire is far worse than the cost of the right one.

Posted by jk at September 2, 2014 4:46 PM

Okay, but I'm talking about mega-corporations. Kinda like Peyton Manning takes over as QB of the Broncos and then acquires the rest of the AFC teams in a leveraged hostile takeover. Now he's QB for 16 teams, but taking the same number of snaps and making the same passes and handoffs, but with 16 times the consequences and, sixteen times the compensation.

As principled a capitalist as I'll ever be, I don't think I'll ever admire the M&A specialist who takes perfectly well operating companies and melds them all together in an unworkable mess just to save the duplicative costs of the administrative staff (and compile some BS balance sheet org chart market share nirvana, with which to tempt a buyout by well-heeled rubes looking for a new hobby.) The productive capacity and happy, comfortable careers of countless engineers have thus been cast asunder more times than any of us knows.

In other words, businessmen make the economy go, but some businessmen couldn't give a crap about the actual business.

Posted by johngalt at September 3, 2014 12:06 AM
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