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Sunday, February 02, 2014

Why Inequality Matters

Chris Dillow:

Why inequality matters: ...we lefties care about inequality not because we have some idea of what the Gini coefficient or share of the top 1% should be, but because we fear that three things that would make inequalities tolerable are - to some extent - missing.
Firstly, inequalities don't all arise from fair processes. One condition here - set out in Rawls' difference principle - is that inequality should be associated with "fair equality of opportunity". But this condition is obviously lacking...
Also, many inequalities arise not from free market processes but from what Acemoglu and Robinson call extractive institutions - the ability of the rich to use political power to extract wealth for themselves...
Secondly, we fear that inequality has adverse effects. I'm not thinking so much here of its impacts on economic growth, social cohesion (pdf) and other aspects of well-being... Instead, the danger is that inequality is, as Sean McElwee says, an "affront to democracy." ...
Thirdly, we've no great beef with inequality if it is combined with some form of risk-pooling. Even if our first two conditions were met, we'd favour some redistribution to mitigate the effects of bad luck - be it the bad luck of a bad draw in the genetic lottery or of being hurt by a recession. Of course, lefties define luck more widely that righties, but most of the latter should support some redistribution; Hayek, for example, favoured a basic income. ...

    Posted by on Sunday, February 2, 2014 at 09:41 AM in Economics, Income Distribution | Permalink  Comments (67)

          


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