Government Power and a Free Society
By Robert Higgs
The Independent Institute Copyright © 2004 The Independent Institute
All rights reserved.
Is More Economic Equality Better?
For most American intellectuals, the answer is obvious. The question itself would strike them as either frivolous or callously reactionary. For the typical intellectual, including the typical economist, it is clear that more economic equality is better. If pressed, the intellectual might offer some kind of argument to support his position, but normally he simply treats it as axiomatic.
I disagree. In doing so, I am not claiming that more economic equality is necessarily worse. I simply insist that the societal distribution of income or wealth itself, whatever it might happen to be, is morally neutral: neither an increase nor a decrease in the degree of inequality has any unambiguous moral meaning. Everything hinges on why the distribution changes. Once we know and morally assess the actions that cause the distribution to change, we need go no further. The resulting change in the distribution itself is a statistical artifact, devoid of any moral implications.
The Prevailing Intellectual Position
When I say that the typical intellectual believes more economic equality is better, I am not thinking about wild-eyed radicals or street-corner revolutionaries. I have in mind some of the most respected and influential social scientists in the land. Consider, for example, the statement of Arthur M. Okun, an economist who taught at Yale before serving on the President's Council of Economic Advisers during the 1960s: "Equality in the distribution of incomes ... would be my ethical preference. Abstracting from the costs and the consequences, I would prefer more equality of income to less and would like complete equality best of all."
Henry J. Aaron, an economist and senior fellow at the Brookings Institution who has taught at the University of Maryland and served as assistant secretary for planning and evaluation in the Department of Health, Education and Welfare, has said: "My own perception is that some additional redistribution [from the richer to the poorer via government] will cost almost nothing in freedom, though it will cost something in efficiency, and that it is worth getting."
Christopher Jencks, a Harvard professor of sociology, has gone much further than Okun and Aaron. Jencks concludes his widely discussed (and partially federally funded) book Inequality with a remarkable passage urging more government intervention in the distributive process, more envy among the poor, more guilt among the rich, and ultimately a revolutionary restructuring of American society:
The crucial problem today is that relatively few people view income inequality as a serious problem. ... We need to establish the idea that the federal government is responsible for not only the total amount of the national income, but for its distribution ... [;] those with low incomes must cease to accept their condition as inevitable and just. ... [T]hey must demand changes in the rules of the game. ... [Some] of those with high incomes, must begin to feel ashamed of economic inequality. ... [W]e will have to establish political control over the economic institutions that shape our society. This is what other countries usually call socialism.
As a final example, consider the statement of Charles E. Lindblom, a professor of economics and political science at Yale, in his highly acclaimed treatise on the world's political and economic systems Politics and Markets:
It is in communist provision of minimum standards of living and some degree of equality in the distribution of income and wealth that the communist claim to approximate the humanitarian vision ... seems undeniable. On these fronts communist systems have to be credited with great accomplishments, on the whole probably greater than those of the polyarchies. ... Inequality in the United States is severe in its [harmful] effects.
Such examples quickly become tedious; their message is clear enough. The prevailing position, not only on the left but also within the mainstream of American social science, is that the existing inequality of income and wealth is unjust. Indeed, most writers routinely employ the words unequal and inequitable as synonyms, showing no concern for the moral freight borne by this linguistic practice. Hence, not surprisingly, enthusiastic approbation is showered on government policies that promise, either directly or indirectly, to redistribute income from the richer to the poorer.
The Facts about Inequality
Open the Statistical Abstract and you will find the "facts" on which most judgments about inequality rest. According to these official data, the lowest fifth of households gets less than 4 percent of the total income (this share having fallen slightly over the past ten years), and the highest fifth gets about 50 percent (this share having risen substantially over the past ten years). The top one percent of households receives about 22 percent of the total income (this share having risen substantially over the past ten years). Economics textbooks reproduce these figures. Economists study and debate them at great length. Intellectuals fashion from them the ammunition for politicians to fire in demagogic salvos.
Yet these figures are virtually worthless. Acceptance of them makes economists either the most gullible or the most dishonest guild on earth. To assess the credibility of the data, one must begin by inquiring into their sources. In fact, they come from the information supplied by people on the census forms collected every ten years or in response to the much smaller Current Population Survey conducted by the Census Bureau as an ongoing project. In both cases, we find out only what people choose to tell us. Of course, people have many reasons to dissemble. A desire to conceal illegally acquired income, a cavalier attitude in responding to the survey, a devotion to privacy in their financial affairs — such are the sources of misreporting. It happens among the rich, the poor, and those in between, but how much is anyone's guess.
Even when people want to be honest and try to be accurate, they forget, miscalculate, or misconstrue the questions. "Household income" is by no means a crystal-clear concept. Just what is a household? And what qualifies as income? Once the data are in hand, should the statistician make his calculations on an annual basis or average them over a longer time span? What adjustments, if any, should be made for differences in age and family size among the income recipients? How much of the money income reported is taken away in individual income and payroll taxes? The answers to these questions are uncertain. To make matters even foggier, the official data neglect whole realms of real income, such as the income in kind received directly from other persons or indirectly in the form of government transfers. As Edgar K. Browning has said, "we really do not know how much redistribution is going on in the present system. ... How can we talk sensibly about redistributing more if we do not know how much is already being redistributed?"
Still, the statistical issues are secondary. Even if the figures on the societal distribution of income were conceptually unambiguous and numerically precise, the question would remain: Is more equality better? And the answer would still be: not necessarily. To appreciate the basis for this answer, consider some ways in which a more equal societal distribution of income might come about.
Greater Equality: Seven Scenarios
The scenarios I offer here are hypothetical, but they are not impossible. Their lessons, like those of parables, are independent of their degree of descriptive historical veracity.
1. The death rate increases abruptly for persons older than thirty-five. Because older persons have, among other things, accumulated more property and job experience, their average wealth and incomes exceed those of younger persons. To the extent that (average) younger persons inherit the wealth of (average) decedents, the increased mortality among older persons would tend to reduce economic inequality.
2. Young women suddenly find themselves unable to bear children. Because babies do not produce income or accumulate wealth, their presence in society creates economic inequality. Diminished fecundity therefore would tend to reduce economic inequality.
3. A new law requires housewives to enter into paid employment. Because housewives are not rewarded for their efforts in the home by explicit monetary payments, their presence in society increases economic inequality — at least as it is now measured. If all housewives were compelled to earn wages in the paid-labor market, measured economic inequality would decline markedly.
4. A new law requires every worker to switch occupations at least once a year. (Something resembling this requirement has been the policy in communist China at various times during the past fifty years.) Because job experience improves the productivity of workers and leads to higher earnings, the distribution of earnings in an economy where no one could ever escape from the entry level would tend to be more equal, other things being the same.
5. Poor robbers increase their plunder of rich victims. Of course, this reign of Robin Hoods would diminish economic inequality, though the reduction would probably never be detected by the Census Bureau.
6. People develop an aversion to education and training. As in the scenario of annual switching of occupations, the universal refusal to accumulate human capital would tend to place all workers on a more equal footing, and economic inequality would tend to decline.
7. The workweek is legally fixed at twenty hours, and overtime work is outlawed. This trade-union dream come true would tend to equalize the distribution of earnings by making the amounts of labor supplied by various workers more uniform.
To sum up, all of the foregoing scenarios have two characteristics in common. Each entails increased economic equality, and each in its own way is a disaster. Increased mortality, decreased fecundity, forced labor, forced occupational mobility, increased robbery, mass abandonment of education and training, forced unemployment — surely few decent people would argue in their favor. Any increase of measured societal economic equality that arose from such catastrophic events would certainly be considered a spurious indication of increased social well being if one knew its origins.
Yet economists and other intellectuals routinely compare the income or wealth distribution between times or places and judge the differences good or bad, depending on whether the measured degree in inequality is less or more, without giving any consideration to why the differences exist. This practice bespeaks utter moral blindness. If inequality increases because — in counter-scenarios of those sketched here — older people live longer, women succeed in having the babies they want, more wives choose to work at home, workers switch occupations less frequently, robbery declines, more people acquire advanced education and training, or more workers choose to work full time, can anyone reasonably conclude that society is worse off?
If we know that individual actions are just, that knowledge is all we need in order to make a moral assessment. A supposedly deleterious change in the statistical measure of the societal distribution of income or wealth, should it occur, is simply irrelevant. Changes in such aggregative measures have no moral implications whatever. The error of supposing that more societal equality is necessarily better springs in large part from an even more fundamental error: the implicit assumption that societies are moral agents. Obviously, they are not, nor can they ever be. Society is nothing more than an abstraction, a concept, an intellectual invention. Just as only individuals are economic actors, capable of purposive goal-seeking behavior, so only individuals are moral agents, whose actions we may properly describe as ethical or unethical. Moral individual actions, like immoral individual actions, may produce either more or less societal inequality, depending on their precise character. Some rich individuals steal from some poor persons, and vice versa. Some rich persons voluntarily transfer their wealth to some poor individuals, and vice versa. Any changes in the aggregative statistical profile brought about by such complex and variable individual behavior are wholly uninformative for purposes of a moral assessment. In their simple-minded moral judgments about differences in societal distributions, many intellectuals have committed astonishingly blatant errors. They could have saved themselves from these blunders had they kept their eyes focused on the only true economic and moral agent, the individual human being.
The Welfare State Promising Protection in an Age of Anxiety
More and more we ... debate what government should do — what it should do in a providential manner for people more than people can do for themselves, how it shall confer upon them welfare, security, happiness — forgetting that though an omnipotent government were able to confer these blessings, it would be obliged at the same time to confer upon people also the status of servility.
— Garet Garrett, 1935, Salvos Against the New Deal: Selections from the Saturday Evening Post, 1933–1940
Anxiety, according to The Random House Dictionary, denotes "distress or uneasiness of mind caused by apprehension of danger or misfortune." By this definition, the twentieth century qualifies as an age of anxiety for Americans.
There is irony in this condition because in many respects we twentieth-century (now become twentieth-first-century) Americans enjoy much more security than our forebears ever did. Our life expectancy is longer, our work easier and more remunerative, our style of life more comfortable, stimulating, and unconstrained. Yet, notwithstanding all objective indications that our lives are better than those of our ancestors, we have become incessant worriers.
Our predecessors dealt with their worries by relying on religious faith. For tangible assistance, they turned to kinfolk, neighbors, friends, and coreligionists, as well as to comrades in lodges, mutual benefit societies, ethnic associations, labor unions, and a vast assortment of other voluntary groups. Those who fell between the cracks of the families, churches, and voluntary societies received assistance from cities and counties, but governmentally supplied assistance was kept meager and its recipients stigmatized. (Continues...)
Excerpted from Against Leviathan by Robert Higgs. Copyright © 2004 The Independent Institute. Excerpted by permission of The Independent Institute.
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