Questions for Redistributionists
In my latest column for AIER I pose some questions to those persons who decry income inequality in market economies. Two slices:
Objections to income inequality are commonplace. We hear these today from across the ideological spectrum, including, for example, from the far-left data-gatherer Thomas Piketty, the far-right provocateur Tucker Carlson, and Pope Leo XIV.
Nothing is easier – and, apparently, few things are as emotionally gratifying – as railing against “the rich.” The principal qualification for issuing, and exulting in, denouncements of income inequality is first-grade arithmetic: One billion dollars is a larger sum of money than is ten thousand dollars, and so subtracting some dollars from the former sum and adding these funds to the latter sum will make incomes more equal. And because income is what people spend to achieve their standard of living, such ‘redistribution’ would also result in people being made more equal. What could be more obvious?
Countless careful researchers have convincingly shown that popular accounts of the magnitude of differences in monetary incomes are vastly overstated. But let’s here grant, for the sake of argument, that differences in monetary incomes within the United States are indeed vast. And then let’s pose some probing questions to proponents of using the state to tax and ‘redistribute’ high incomes.
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Nobel-laureate economist William Nordhaus found that entrepreneurial innovators in the US from 1948 through 2001 captured, on average, only 2.2 percent of the total social value of their technological innovations. As Nordhaus put it, nearly 98 percent “of the benefits of technological change are passed on to consumers rather than captured by producers.” Does the fact that market competition obliges entrepreneurs to share the vast bulk of their wealth creation with consumers give you pause in your demands for ‘redistributing’ the wealth that these entrepreneurs manage to retain for themselves?
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