The subject of “inequality” is very much in the news at the moment. For a great many professors, researchers, editorial writers and talking heads on mainstream and social media, this is the topic of the day. By contrast, it is of almost no interest to everyone else.
For the chattering class, a new book by Thomas Piketty is grist for the mill. Even if they don’t understand Piketty’s complicated economics, they will have no trouble discovering his bottom line: inequality of income and wealth is unquestionably bad.
Ordinary people do not think about inequality. They don’t talk about it. They certainly don’t obsess over it. But if they did stop to think about it, they might conclude that inequality is not necessarily a bad thing after all.
In her book The Genetic Lottery, Katherine Page Harden argues that many differences among people are present at birth and are bequeathed to us by our genes. In most cases, a graph of a trait (such as height) would resemble a bell curve – with a few very tall people at one tail of the distribution, a very few short people at the other tail, and the rest of the population somewhere in between.
Now suppose you could play God and change all that. Would you do it?
Take IQ, a trait that has been studied more than any other and is definitely related to personal income. The consensus seems to be that IQ is about 75 percent determined by genes among adults, with the remainder fixed by environment – although this is a subject of continuing debate. Suppose you could wave a magic wand and eliminate the effects of both nature and nurture – leaving everyone with the mean IQ of 100.
The likely result would be no Euclid, no Gauss, no Newton, and no Einstein. Arguably, the most important aspects of the modern world were made possible (in part) because some IQs were several standard deviations above the mean. Without all those geniuses, down through history, life today would likely be no better than it was 2,000 years ago.
In a very real sense, inequality of IQ is responsible for the creation of the modern world.
What if you could wave a wand and reduce everyone to the mean in terms of athletic, singing or acting ability? Would anyone ever watch a football game? Or attend an opera? Or go to a movie? Like IQ, many talents are also correlated with income. A world without differences in talent would be a boring world indeed.
The economic system creates financial rewards for highly intelligent and creative people to use their talents and abilities to make life better for everyone else. Without those rewards, Bill Gates, Steve Jobs, Elon Musk and others might have devoted all their attention to imaginary number theory instead of meeting our needs.
But is the system fair? Let’s ask ordinary people.
I went to high school with more than 400 classmates – all very middle class. After going to several reunions through the years, I did a back-of-the-envelope calculation: Roughly 5 to 10 percent of my classmates appeared to earn half the class income. Yet I have never heard a single classmate say this is unfair. If anything, my classmates seemed proud of the accomplishments of others.
In college, I was in a fraternity with others of similar socioeconomic backgrounds. Later in life, I did another back-of-the envelope calculation: Roughly 5 to 10 percent of my fraternity brothers appeared to be earning half the group’s income. Yet, again, I have never heard a single fraternity brother complain that this outcome was unfair.
I don’t have an explanation for these distributional results. If I went back through time, I would not have been able to predict in advance which of my colleagues would be the most successful and which ones would earn ordinary incomes. For the nation as a whole, the top 20 percent of the population earn 50 percent of personal income. No one has an explanation for that result either. There may be a lot of randomness in the fortunes that befall people.
Is my experience unusual? I invite readers to conduct their own survey among their childhood friends and associates.
What about the idea of government taking from the rich and redistributing to everyone else? The economist Arthur Okun proposed a “leaky bucket” theory, according to which taking from Peter and giving to Paul creates negative incentive effects for both Peter and Paul. As a result, income transfers lower total national income.
Okun’s metaphor asks us to consider this question: If more equality is a good thing and if it comes at a price, how much are we willing to pay to get it?
Here again, why not ask ordinary people.
According to Gallup, there are 42 million people in the world who would like to permanently migrate to the United States. Many of them live in countries where (setting aside a few wealthy elites) everyone is equally poor. If these people came to the United States, they would start out at the bottom of the income ladder.
Millions of additional people are revealing their preference for opportunity over equality through their actions – as they cross our southern border illegally. If people are forced to choose between opportunity and equality, for a very large number opportunity wins in a heartbeat.
Finally, there is evidence from introspection.
If you had to select a partner for tennis doubles or a member of a sandlot basketball team, would you select someone with the same skills you have? Or would you select someone better? If you had a choice of a dinner companion, would you choose someone with the same income as yours, or someone who earns a lot more? The wealthier the dinner partner, the greater the likelihood of a new job, or an investment in your company, or a donation to your charity.
A desire for equality is not reflected in the choices most people make most of the time.