Disagreements Over Wealth Inequality

The NY Review article by Krugman is a review of Thomas Piketty’s Capital in the Twenty-First Century. Piketty’s book is generating a heck of a lot of debate, apparently because it touched a nerve both among economists and among policy advocates, hence the couple of dozen reviews plus lots of blogging. Krugman, of course, presents support from the Left, all part of society grappling with the issue of inequality.

So it would be interesting to tackle the topic of inequality which is what his book is scientifically about. The research challenges are interesting—what factors explain the causes of inequality, personal wealth, what model of economic development should we use in research—as are the policy implications—does inequality even matter? Do the rich have too much money? Why can’t the poor accumulate wealth? If the rich have too much, how? (fairly or not) and why? (evil workings or government favoritism), and should we redistribute wealth from the rich to the poor? What would be the consequences of redistribution? Would it help? Of course it’s not a slam dunk that the rich have too much money nor is it clear the rich are getting richer and the poor, poorer. What we all want is policy that would best promote societal progress with justice so that everyone does better over time.

People on the Left like Krugman praise the book while free market economists tackle its methodological failings. Are there other research findings that arrive at different conclusions? But in addition to the economic research findings, the practical policy issue divides among those (maybe like you?) who believe government should be in the redistribution business (otherwise Libertarian policies would let the poor die in the streets), and those who see government as destructive of the advancement of the poor (me) and as hindering innovation and progress as well as favoring some groups over others most often to the detriment of the poor. Which is it? Which would better help the poor in the long run?

We might think that careful economic investigation could put these big policy questions to rest but the economists often favor one causal model of human economic and societal development over another so that each research paradigm develops to support a particular policy agenda, i.e., the progressive, conservatives, libertarians research and policy perspectives. So the great divide in not only policy but also research comes down to whether your understanding of how society constructs itself necessarily depends on government or whether it is somehow self-constructing and self-regulating such that government necessarily impedes progress and societal problem solving.

In a nutshell, the Left believes without government we would have anarchy, and if anarchy then massive bloom letting in a survival of the fittest. The Libertarian camp believe government impedes constructive activity, and it offers a tool to the powerful to take unfair gains for themselves at the expense of everyone else particularly the lowest and least powerful among us.

While I’m far from an economist but interested in the developmental psychology of economic thinking, hearing people discuss the issue of inequality is always interesting. These discussions seem important, a microcosm of an important societal dialogue, as our many sub-groups of society attempt to debate (and sometimes understand) and overcome our disagreements surrounding the nature of societal problems and even whether they are real problems that require intervention or not.