In a couple of months, Scioto Analysis will be releasing its second study on inequality in Ohio. This study will be an update of the 2022 study it produced in collaboration with graduate students at the University of California, Berkeley’s Goldman School of Public Policy.
In 2018, I wrote a blog post for Gross National Happiness USA’s blog post Serious About Happiness. In this blog post, I argued that there are five frameworks that can be used to assess whether a society is serving its residents well: economic growth, poverty, inequality, human development, and subjective well-being.
Of these five frameworks, inequality can sometimes raise the most objections. Only extreme partisans object to the benefits of economic growth or poverty reduction. Almost everyone supports human development (income, health, and education) and subjective well-being as social aims. But inequality can sometimes cause pause for people.
Philosophical approaches to inequality
In his 2018 book Why Does Inequality Matter?, American Ethicist T.M. Scanlon lays out six justifications for why inequality carries moral weight. Without getting into the details of the book, here are his justifications:
Inequality arises because certain people were not given proper consideration.
Inequality creates unjustified inequalities in status.
Inequality gives some people control over other people.
Inequality makes economic institutions unfair.
Inequality makes political institutions unfair.
Inequality arises from unfair institutions.
Scanlon’s justifications for the moral weight of inequality make sense on their surface. They seem a step away, though, from the criticism John Rawls levies at inequality in his political philosophy classic A Theory of Justice.
In A Theory of Justice, Rawls invites readers to place themselves behind a “veil of ignorance.” Behind this hypothetical veil, people know nothing of their place in society, their race, their gender, their abilities, their family, their wealth, their height, their charisma, their anything. He then asks people to imagine what a just society would look like to someone living behind that veil.
Rawls argues that someone behind the veil would want (1) access to freedoms that allow them to experience the many lives that they may want to live beyond the veil, and (2) access to equal resources, with any inequality of resources only justified by increasing the total resources for the least well-off in society.
Arthur Okun: a policy analytic approach to inequality
Economist Arthur Okun brings up a similar thought experiment in his “leaky bucket” analogy, which undergirds the policy analytic concept of equity-efficiency tradeoffs. Okun argues that social welfare programs can be characterized as “leaky buckets,” where redistributive policies, through market distortions and administrative spending, cause “leakage” in the economy while resources are being redistributed.
He, like Rawls, argues we can use our intuition to determine how much leakage we are willing to accept to reduce inequality. To Okun, the problem with inequality is self-evident, and the problems with policies to reduce it are tradeoffs inherent in public policy.
Marx: the political problem with inequality
Marxist approaches to inequality argue that inequalities lead to social collapse. Marx argued that capitalist society was inherently unequal, that capital inherently created inequality between two classes: capital owners and workers. Marx’s perspective was that this inequality would ultimately lead to revolution.
More contemporary Marxists use this historical determinism as a justification for strong social safety net systems. As far back as the 1880s, Otto von Bismarck of Germany was credited with pioneering the first social welfare state as a tool for social stability. He was fending off challenges from socialist political rivals but also characterized universal health and accident insurances and old age and disability pensions as tools for creating social and political stability.
The economic problem with inequality
More contemporary economists have argued that inequality hampers economic growth. There are a number of reasons this may be the case. Inequality could lead to more centralization of consumption or production, allowing producers to exercise market power to keep wages artificially low or consumer good prices artificially high.
Inequality could also stifle innovation. A 2018 study provocatively titled “Lost Einsteins” found evidence that children born into the top one percent of the income distribution are ten times more likely to be inventors than children born into the bottom 50 percent of the income distribution. Unequal access to resources in childhood could be choking innovation, which, along with people and capital, is one of the three drivers of economic growth under the classical economic growth model.
The intuitive problem with inequality
Of all these approaches to understanding inequality, the types that ring the most true to me are those Rawls and Okun put forth. There is something inherently troubling about inequality.
When I consider the richest people in the world, most of them are the opposite of the “lost Einsteins” found in the U.S. innovation ecosystem: they started with a leg up. Elon Musk is an heir to an emerald fortune. Google Co-Founder Larry Page’s father Carl Victor Page Sr. was a pioneer in computer science and artificial intelligence. His co-founder Sergey Brin was a third-generation computer scientist.
The amount of their wealth is staggering. Each of these people is a centibillionaire, with net worth of $839 billion, $257 billion, and $237 billion respectively. Elon Musk’s wealth is the same as the income of 25 million families of four at the U.S. federal poverty line.
I think the strongest objection to inequality is one that Rawls alludes to in his “difference principle.” This is his claim that differences in resources should be justified by improvements in resources for the least well-off in society. Maybe inequality is not so great, but maybe it unlocks other things by giving people incentives to create social goods like Tesla, Google, Amazon, and Facebook.
But this is why I like inequality–as a part of a portfolio of outcomes for a good society. Inequality should not stand on its own as the only yardstick for a good society. But this is why policymakers should be considering economic growth, poverty, human development, and subjective well-being alongside it. Maybe there will be policies that reduce poverty and increase inequality, which is what Rawls alludes to in his “justice as fairness.” Or maybe we are okay with a little bit of inequality if it leads to a lot of economic growth, or increases in education, or increases in health outcomes, or increases in happiness.
But we’re fooling ourselves if we don’t think, all else being equal, that a more equal society is better than a more unequal one. While reducing inequality cannot be the only goal of society, it certainly should be among its goals.
