Why Inequality Should Not Be an Object of Social Policy

Academics, the media, and Democratic politicians, like Elizabeth Warren and Bernie Sanders, have suggested that reducing inequality should be a central objective of public policy. This focus represents a substantial change from a previous consensus, which suggested that it was the reduction of poverty, not inequality per se, that should be given priority. This reorientation is not just a grave practical mistake, but as a moral matter, inequality is also undeserving of government concern. There is no substantial evidence that inequality of wealth harms our society in general. Any program of reducing inequality will have substantial costs, not least to the economic growth that can redound, among other things, to reducing poverty.

The Poverty of Moral Justifications for Targeting Inequality

First, the moral justification for targeting inequality by government coercion is weak. Poverty represents an extreme form of distress. And, intuitively, we feel an obligation to help people in extremity, just as if they are seriously ill. But most people do not have such intuitions about inequality and for good reason. People are unequal on many dimensions besides wealth—in physical attractiveness, in underlying health, and indeed in their innate capacity for happiness. Why should society single out material inequality as the most important form of inequality—one that alone demands state power to correct?

It is even a challenge to infer that people are less well off because they have less material wealth, because general interpersonal comparisons of utility among people are difficult, if not impossible. Some people have a greater felt need for luxury or the sense of security that wealth brings. That is obvious from the career choices that many people make. Some choose to be teachers, for instance, rather than investment bankers, because they prefer spending time with their family to earning a higher income. Both a teacher and investment banker can thus be equally well off in a fundamental sense, despite having very different incomes. To be sure, it is possible to be reasonably certain that people who cannot put food on the table or a roof over their heads are miserable, but that is a condition of poverty, not inequality. The reason that many are driven to accumulate substantial wealth is that they are needy in another way—for the affirmation of status.

A related problem is the difficulty of measuring inequality as opposed to poverty. The more innovations that are broadly enjoyed for free in society, the more materially equal people are, even if their incomes are different. And we have created many such free amenities, knowledge and access to free entertainment being two prime categories of free goods that are now available in greater abundance than ever before.

Some simply argue that superfluous wealth is morally wrong. But that claim seems more an aesthetic objection than an argument with moral force, unless one can show that the excess is morally blameworthy in comparison with someone else’s current wealth. There can be no absolute as opposed to relative measure of what wealth is superfluous. The benchmark for what it is to be wealthy changes substantially from decade to decade and from place to place. Almost any American’s wealth might seem superfluous to anyone in Mali or even to most Americans of fifty years ago.

The Weak Case for the Social Costs of Inequality

Because it is difficult to make the case that society should be concerned with inequality because of individual justice, some commentators now argue that it has destructive social consequences. For instance, a leading argument is that inequality harms democracy because the rich have views that are unrepresentative of society as a whole and that they have disproportionate influence because of their wealth. But it is unclear that even if they did have unrepresentative views, that their views are a result of their wealth. It may be that rich people, having greater acuity or leisure or both, have a better understanding of the benefits of the market and the dangers of government.

Moreover, on its own terms the argument proves too much. The very rich are neither the influential group in society that is most unrepresentative of their fellow citizens, nor are they the unrepresentative group that is most influential. Rich people hold a wider variety of views and skew less strongly to any place on the ideological spectrum than either the media or university academics (who themselves generally have higher incomes than the average citizen). The latter groups are almost entirely Democrats and academics in particular are increasingly leftists, not just centrist liberals. And yet, despite the material inequality of their position compared to the truly wealthy, these groups are far more influential, because they set the agenda for society far more than the wealthy do. The media decide what stories are important. Humanities and social science professors determine how our history is taught and what is the canon of our literature, which helps define our social imagination. I would much rather have academics and reporters on my side than the wealthy in pursuing my vision of the ideal society.

Others argue that rich people prevent social mobility. According to this argument, they use their wealth to send their children to the best schools, using education today to preserve intergenerational wealth, as aristocrats once used land. But as I have suggested before, this claim confuses correlation with causation. The evidence is that in our meritocracy, it is intelligence that is key to getting ahead, not family wealth, although wealth is correlated with intelligence.

Indeed, a famous paper showed that holding SAT (a measure highly correlated with IQ) constant, one’s future income was the same whether the student attended a highly prestigious college or a less selective one. In other words, the choice between Penn State and the University of Pennsylvania seems more a matter of enjoying consumption than increasing human capital. While a subsequent studied qualified these findings, the qualification was that women who went to prestigious schools tended to have higher incomes because they worked full time rather stayed at home. Here the effect seems to be an ideological one: female graduates of prestigious universities often value career success over more time spent raising a family. Once the ideology of feminism (in the limited sense that women should seek satisfaction through work as well as raising children) diffuses through society, that effect can be expected to dissipate.

The Costs to Society of Focusing on Inequality

A program focused on reducing inequality as opposed to poverty creates substantially greater costs for society. First, reducing inequality is far more disruptive and dangerous to economic growth than efforts at reducing poverty. Poverty programs can be focused on poor people and can be funded through the tax system with relatively modest amounts of money and transparent, simple rules. Economic inequality is almost by definition a much more diffuse problem. It requires a great deal more redistribution to address, because the problem is one of too great wealth and income, not the absence of wealth and income. Reducing wealth and income for the sake of reducing it will also have bad incentive effects. As a result, there will be less money for the government to spend on innovative programs to help the poor, an area where innovation is needed because anti-poverty programs have a weak record of success.

Even worse, it is difficult to see how a focus on inequality can be confined to economic redistribution. Instead it will morph to undermine basic freedoms. Given the notion that inequality creates social immobility, a concern with inequality naturally attempts to prevent the differential opportunities that many claim allow some to be richer than others. The right to private schooling, for instance, thus goes on the chopping block. Lest one believe that this fear is unwarranted, abolishing private schools has just become a goal of the Labour Party, the principal opposition party in Great Britain.

More generally, policies designed to make people more materially equal create a society in which people are more envious of wealth. As Tocqueville noted, small inequalities become more apparent and important the closer people become—and this is true at every economic strata. An excellent example is France, where opposition to material inequality is an element of its national creed. The result has been a less entrepreneurial society, because getting rich is less valued. It is also a more conflict ridden one, where groups use violence to get their way, because of the perception that society is a zero-sum game, a perception that a government focus on inequality promotes.

In contrast, the American creed of liberty and natural rights has been a bulwark against making material equality the measure of a social policy. The single greatest danger today to the American experiment is that this new metric of equality seems poised to replace our traditional focus on preserving liberty.