Responding to Income Inequality

A recent study by Norton and Ariely on wealth inequality in the United States has generated a bit of buzz in the past few weeks.  The media and public response has been predictable: an overblown amen chorus finding our wealth inequality to be a grave problem.  But the real peril flows less from the inequality itself than the implicit and perennially popular redistribution impulse that follows.

The study invites dangerous thinking by asking participants to indulge their Rawlsian side and imagine an equitable income distribution.  They find that even wealthy and Republican respondents conceive of an ideal distribution being much more equal than it is now.  Surely the study is fine empirical work, but what are the normative implications?  What ought we do about it?

Sadly, popular dissatisfaction with wealth inequality is rife for political exploitation, especially given the undying misconception of a fixed economic pie.  On this view, wealth is a pie that can be divided, but cannot grow.  Our economy is a zero-sum game.  If Jack becomes rich, it must have come at the expense of Jill.  Justice then would be to confiscate Jack’s excess slices of pie and give them back to Jill as an entitlement.  This is what President Obama essentially endorsed when he told “Joe the Plumber” that we need to “spread the wealth around.”  The need for activist government has been the mainstay of the Democratic party for decades.  But when politicians are the middle men for our collective wealth, they naturally exploit it for their gain, at the cost of simplicity and consistency.  Vote-getting tools like earmarks and tax exemptions only make our economy more muddled, unpredictable, and subject to political patronage.  This hurts wealthy and poor alike.

The destructive nature of zero-sum and redistributionist thinking is no surprise given they are at odds with classical economics.  Take the foundational idea that voluntary transactions between rational agents generates new wealth.  If this is true, it undermines the narrative that American wealth is an economic injustice built on stolen land, slave labor, and gunboat diplomacy.  It robs the progressive, technocratic welfare state of its raison d’etre.  So can a solution to wealth inequality really be found in classical economics?

David Brooks recently shed some light on the divide between economic libertarians and statists by explaining his own identification with “epistemological modesty.”  He sees the European enlightenment as split between hyper-rationalizing French like Descartes and Rousseau and intellectually modest Scots like Adam Smith and David Hume.  I find this to agree with Thomas Sowell’s concept of the “unconstrained” and “constrained” visions.  On the one hand are those who believe the world is totally knowable and perfectible, and they trust that educated elites will guide us into a technocratic utopia.  On the other, there are those who believe our ability to understand and shape society are limited.  They trust in traditional institutions–church, family, free markets–as generational accumulations of human wisdom.  All things being equal, it would be better to work with what our predecessors have left us than to rebuild our society according to a radical vision.

If we reject the temptation of technocratic utopias, we will find that the traditional institution of the free market provides the best way to distribute goods and services.  Using government or some other centralized agency to circumvent the market will only yield bread lines and corruption.  The Scottish or “constrained” approach not only maximizes societal utility, it is just in limiting economic activity to voluntary transactions.

So if redistributing wealth through legislation is counterproductive and unjust, what can be done to improve the American situation?  Strengthen the free market by shrinking and simplifying government.  More predictable markets that are less subject to political manipulation will make fairer playing fields.  And we can increase social mobility a couple of ways.  One would be to end unions’ status as exclusive cartels of labor.  Consumer and business loans can lower barriers to market entry, but market criteria must rest on the basis of merit rather than need.  Ultimately, hashing these policy particulars is not as useful as promoting the cultural understanding that progress comes less from centralized political pushes than from individual initiative that works within our traditional institutions.

Rule of Law, Rule of Gut

The BP oil spill has provided a chance to clearly delineate between two worldviews vying for our political discernment: the visions of the liberal Left and the conservative Right.  In responding to Republican House representative Joe Barton’s double-apology gaffe, President Obama’s Chief of Staff Rahm Emanuel said as much.  And while Emanuel is correct in observing that two governing philosophies are at stake this November, it would be an error to take his class warfare bait.  The choice is not between wise, compassionate Democrats and corrupt, cozy-with-big-business Republicans.  To the contrary, this November is a chance to dump destructive Democratic impulses to rule from the gut, and empower a new, conservative Republican leadership that values rule based on law.

The rhetoric of emergency is the greatest pitfall of the Democrats’ liberal governing philosophy.  In times of crisis like the BP oil spill, inflammatory rhetorical appeals come naturally to them. At the onset of the oil spill, Democratic strategist James Carville cried out “We’re dying here!” In a recent attempt to capitalize on Barton’s apology blunder, Vice President Joe Biden chided that “people are drowning.”  As a tool of political persuasion, the appeal to emergency is dangerous.  It preys on raw emotions, leading to the loosening of purse strings and  easing the approval of impractical and downright harmful policies.  Recall that appeals to emergency during the Great Depression ushered in the New Deal.  Among the many blunders under the aegis of enlightened activism, the federal government paid farmers to wastefully slaughter their livestock, denying food to the hungry for the sake of stabilizing food prices.

Having lived through Bolshevik brutalism as well as America’s New Deal fiascos, Ayn Rand warned in her brilliant polemic Atlas Shrugged that appeals to emergency inevitably empower either unsavory autocrats or unreasoning incompetents.  The Left’s Rule of Gut is all the more dangerous given their inscrutable devotion to the cult of the political savior.  Whether as youth admiringly looking upon the iconic visage of revolutionary Che Guevara, or as older generations fondly recalling fireside-chatter FDR, Democrats and their Leftist base turn not to reasonable stewards of power, but at the gut level dream of charismatic, decisive deliverers of salvation.  Perhaps it is only slightly more tragic for a banana republic to produce a Castro or Chavez than it is for the United States to beget a starry-eyed bungler like Carter or Obama.

What then stands as an antidote to the twin appeals of emergency and charismatic deliverance?  Many people dismiss today’s conservative movement out-of-hand because they buy the idea that Republicans are beholden to big business and that conservatives are under the undue influence of social “wedge” issues.  But while the political Left relies on emotional appeal to further a hazy end of “progress” shared by the political bedfellows of victimhood, American conservatives look to widely-established and long-standing traditions as the means to preserve national well-being.  Broadly considered, these traditions share the spirit of and are inclusive of the Rule of Law.

The decisive factor in favor of conservatism may be the question of ends and means.  Not only are the ends of the Left mistaken, the means of achieving their ends leave us vulnerable to the imperfections of alliance-wrangling.  As Thomas Sowell effectively notes in Conflict of Visions, the ends are paramount to the Left, but the means are the key focus of conservatives.  With an aim to preserving the integrity of process rather than seeking to guarantee a specific result outright, the conservative vision offers the greatest chance of behavioral accountability from our leaders.  Conservative constituents demand fidelity to function, but liberal politicians, supposing a backdrop of knock-down, drag-out class war, must satisfy their constituents’ identity-based grievances by any means necessary.  And more often then not, the sausage-making that begets vaunted progress for the Left is deleterious to the national interest.

Its a paradox that those on the Left, who seek change by Rule of Gut, will always remain unsatisfied by their side’s inability to effect the immediate gratification they seek.  But we, whether at the election polls or in the course of day-to-day life, can avoid that frustration by choosing to live under the Rule of Law instead of the Rule of Gut.

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