With all the attention demanded by the presidential campaign, the elections and the aftermath, as well as the current history of Covid-19, many other issues have taken a back seat.
While escaping the headlines, some of these other issues will stay with us for a long time, and contributions to the public debate on these issues often have a long-term impact.
One of these issues has long been a favorite of progressives: income inequality. The most influential recent addition to the discussion is a study announced by the famous RAND Corporation in September. RAND’s detailed, in-depth, and meticulous study of income inequality in the United States is titled Income trends from 1975 to 2018.
The author’s main thesis is that there has been a wider distribution of income in the past four decades than in the previous three decades – the post-war period (1945-1975). This is the author’s way of saying that the incomes of the richest Americans have grown faster than the average incomes of the non-rich.
I do not dispute the author’s conclusions. But the correct answer to this conclusion is: So what? The math may be correct, but there is nothing about income disparities that is inherently unfair. First, there is no known “fair” distribution of income. Second, the key question to ask about a particular distribution of income is whether the factors that caused it are just or unfair.
Specify: Assume that the income distribution of Americans in the period 1946–1975 is “fair” or “normal” or “better” or “fairer” than what has happened or will happen in other periods is completely arbitrary. In a market economy, there will be fluctuations – sometimes quite large – in the distribution of income, each reflecting current economic and political conditions. Choosing a certain time frame and labeling it as “the way things are meant to be” is pure fantasy, not science.
The causes of income differences can be harmful or benign, unfair or just. They are unfair when the political powers rig the system so that political insiders benefit at everyone’s expense. Think of 18th century France and contemporary (socialist) Venezuela, for example.
Those who protest how unfair it is that some Americans have become so wealthy (mainly politicians like Bernie Sanders and AOC) do not understand the concept of profits or how profits are earned. They fall under the spell of what the great economist Ludwig von Mises called “the dogma of Montaigne” – the fallacious notion that “no profit can be made but at the expense of another” (Montaigne’s exact words) . In a non-free society, like France under Louis XVI, there is a zero-sum world in which the poor were poor because the rich were rich. But this is a blatant misrepresentation of a market economy based on private property and voluntary choices.
The likes of Zuckerberg and Bezos et al. earn income and accumulate profits in exchange for providing things of economic value to their fellow human beings. They have no power to force anyone to buy their products. People voluntarily give their money to “rich corporations” because they value what they buy more than the money they pay; otherwise, the transaction would not take place. A free society with voluntary economic exchanges is a positive-sum world. In a market economy, both parties to the transactions benefit from the exchange.
In contrast, the incomes of many Americans have plummeted due to lifestyle decisions. A striking example: demographer Nicholas Eberstadt’s “army of 10 million”, made up of working-age American men who have voluntarily left the regular workforce, choosing to get rid of their family or friends. . Their incomes have fallen to negligible levels, thus adding to the widening income gap. The rich did not make them choose this lifestyle. (For more on social and economic pathologies, see the 2012 book by Charles Murray Breaking Up: The State of White America, 1960-2010. Murray documents widespread cultural changes – none forced on the poor by the rich – that are strongly correlated with delayed prosperity.)
We can help those in need both through private efforts and through the elimination of public policies that delay or distort economic production (and unfortunately there are many), but do not persecute the innocent. As Thanksgiving draws near, we should be grateful to society’s economic benefactors rather than condemning them because of the mistaken ideology of egalitarianism, which is nothing but irrational contempt for them. individual economic differences which are the engine of economic progress for all.
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