Carl Horowitz

Occupy Wall Street and dozens of offshoot groups have proven far more adept at moral theater than policymaking. Yet their operative assumption – economic inequality is reaching crisis proportions – has become the coin of a wider realm. Governments, beginning with our own, thus must “do something.” President Obama, for one, is listening – and acting.

Call it “class envy” or “a cry for justice,” but outrage toward the highly affluent, personified by the perfidious “1 percent,” is real, large and growing. This impulse, in nuanced tones, also can be found in respectable venues. While mass squatting in public spaces grabbed headlines last year, the more significant news for the long run may have been the release of various reports pointing to a widening gulf between rich and poor, both here and abroad. Advocates of redistribution have seized upon the findings as a justification for higher taxes upon a presumably insular plutocracy unwilling to part with its morally suspect gains. Without such action, they argue, the poor will continue to grow in number and desperation, while the middle class will continue to edge toward the precipice of poverty. Almost everyone, in the end, will revolt. In this neo-Marxist view, the rewards of global capitalism are not only uneven, but positively destabilizing.

“Inequality” can be defined in many ways. One of the most reliable and common measurement tools is the “Gini coefficient.” Named after early-20th century Italian statistician-sociologist Corrado Gini, author of the landmark paper, “Variability and Mutability,” the Gini coefficient, in an economic context, measures income distribution. A coefficient of “zero” represents a situation in which everybody has an identical income; “1” represents an opposite situation in which all income goes to one person. In the world of nations, the closer a country approaches “1,” the more likely its upper economic tier operates as an oligarchy.

Yes, it’s hypothetical. But like “perfect competition” and “Pareto optimality,” the Gini coefficient is a mental construct intended to summarize broad social tendencies, not achieve some ideal result. The problem, from a pro-market standpoint, lies not with the coefficient itself but with its interpretation. Egalitarians use it to call for extracting income from persons not needing it to persons who do. America apparently is in need of redistribution therapy.

Carl Horowitz

Carl F. Horowitz is director of the Organized Labor Accountability Project of the National Legal and Policy Center, a Gold Partner organization dedicated to promoting ethics in American public life.
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