Man at the top

The problem with inequality

Writing for The New York Times, Nicholas Kristof

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criticizes the rising inequality in America, comparing our economic situation to the famous “banana republics.” According to Kristof:

In the past, many of us acquiesced in discomfiting levels of inequality because we perceived a tradeoff between equity and economic growth. But there’s evidence that the levels of inequality we’ve now reached may actually suppress growth. A drop of inequality lubricates economic growth, but too much may gum it up.

First, we can wonder why inequality makes us uncomfortable in the first place. One possibility is that there may be something intrinsically valuable about equality. However, it’s hard to viagra online order imagine this being the case – even if there was some truth to this, the value of equality would be easily outweighed by many other mitigating factors. Consider this famous thought experiment by Harry Frankfurt:

Suppose that ten people have a deadly disease, and they need

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two shots of a certain medicine in order to be cured. Anything less would mean certain death. However, there are only ten shots of the medicine available. If we gave the medicine out equally, everyone would get one shot, and all ten would die. Obviously, equality is not the best policy here.

But, some might argue, the economy is different than the medicine example. As Kristof points out, the distribution of wealth actually changes the total amount of wealth. Keeping this in mind, we might believe in something like “the difference principle.” This principle, proposed by John Rawls and perhaps the “orthodox” view within contemporary philosophy, states that we should always choose the policy that is best for the least well off.

So, imagine we have a magical cake that needs to be divided among several friends. The way it is cut affects how big the actual cake is. According to the difference principle, we should try to maximize the size of the smallest piece, so that the person who is the worst off will get as big of a piece as possible. So inequality in itself is not a concern. If the division that is best for the worst off requires huge inequalities between that worst piece and the biggest piece – it is still the best.

The difference principle seems like a good idea at first, but let’s go back to Frankfurt’s example. What if the division that satisfies the difference principle still gives less people the required two shots of medicine than is optimal? Here, it seems the best policy is to save as many people as possible.

So, as Frankfurt suggests, perhaps the best principle is a principle of sufficiency. That is, we should not care about equality as such – or even the worst off individual. Instead, we should care only if individuals fall below a certain level of sufficiency. Of course the details of the threshold need to be spelled out, but is not difficult to imagine what they might look like: sufficient food and medicine, clothing, education, housing, etc. The best policy is the one that keeps as many people above the threshold as possible.

If the sufficiency criterion is correct, it also explains why we might feel uneasy about inequality. Unequal distributions of wealth tend to imply that the least well off are below the threshold. We would care less about inequality if the worst off were all millionaires.

However, the total amount of wealth is oftentimes enough to keep everyone above the threshold, but grossly unequal distribution unjustly keeps some persons with an insufficient amount of wealth.

What is actually worrisome about inequality is the existence of avoidable poverty – not inequality itself.

-Han

Photo by Flickr user Toban Black used under a Creative Commons Attribution license

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The problem with inequality
Writing for The New York Times, Nicholas Kristof criticizes the rising inequality in America, comparing our economic situation to the famous “banana republics.” According to Kristof:
In the past, many of us acquiesced in discomfiting levels of inequality because we perceived a tradeoff between equity and economic growth. But there’s evidence that the levels of inequality we’ve now reached may actually suppress growth. A drop of inequality lubricates economic growth, but too much may gum it up.
First, we can wonder why inequality makes us uncomfortable in the first place. One possibility is that there may be something intrinsically valuable about equality. However, it’s hard to imagine this being the case – even if there was some truth to this, the value of equality would be easily outweighed by many other mitigating factors. Consider this famous thought experiment by Harry Frankfurt:
Suppose that ten people have a deadly disease, and they need two shots of a certain medicine in order to be cured. Anything less would mean certain death. However, there are only ten shots of the medicine available. If we gave the medicine out equally, everyone would get one shot, and all ten would die. Obviously, equality is not the best policy here.
But, some might argue, the economy is different than the medicine example. As Kristof points out, the distribution of wealth actually changes the total amount of wealth. Keeping this in mind, we might believe in something like “the difference principle.” This principle, proposed by John Rawls and perhaps the “orthodox” view within contemporary philosophy, states that we should always choose the policy that is best for the least well off.
So, imagine we have a magical cake that needs to be divided among several friends. The way it is cut affects how big the actual cake is. According to the difference principle, we should try to maximize the size of the smallest piece, so that the person who is the worst off will get as big of a piece as possible. So

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inequality in itself is not a concern. If the division that is best for the worst off requires huge inequalities between that worst piece and the biggest piece – it is still the best.
The difference principle seems like a good idea at first, but let’s go back to Frankfurt’s example. What if the division that satisfies the difference principle still gives less people the required two shots of medicine than is optimal? Here, it seems the best policy is to save as many people as possible.
So, as Frankfurt suggests, perhaps the best principle is a principle of sufficiency. That is, we should not care about equality as such – or even the worst off individual. Instead, we should care only if individuals fall below a certain level of sufficiency. Of course the details of the threshold need to be spelled out, but is not difficult to imagine what they might look like: sufficient food and medicine, clothing, education, housing, etc. The best policy is the one that keeps as many people above the threshold as possible.
If the sufficiency criterion is correct, it also explains why we might feel uneasy about inequality. Unequal distributions of wealth tend to imply that the least well off are below the threshold. We would care less about inequality if the worst off were all millionaires.
However, the total amount of wealth is oftentimes enough to keep everyone above the threshold, but grossly unequal distribution unjustly keeps some persons with an insufficient amount of wealth.
What is actually worrisome about inequality is the existence of avoidable poverty – not inequality itself.
-Han
Photo by Flickr user Toban Black used under a Creative Commons Attribution license
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Comments

3 Responses to “Man at the top”

  1. Alex on November 9th, 2010 7:22 pm

    Surely that’s not all that’s worrisome about gross inequality, even if that’s the worst aspect of it. If you buy into the idea of freedom as non-domination, the idea that I am free just in case no one is able to interfere arbitrarily in my life, then gross inequality is particularly problematic.

    In societies with grossly unequal distributions of wealth, the wealthiest individuals and groups are able to exercise a huge amount of arbitrary influence on the lives of the less well-off (which is not to say they always do). They can enjoy a disproportionate amount of political influence, a disproportionate amount of control over the economic system, and so on. These are the kinds of things that lead to an erosion of freedom for the less well-off. One might, plausibly enough, think that this is unjust.

    Also, let’s not forget worries about long-term stability and social cohesion.

    Just a few thoughts.

  2. Bob on January 21st, 2011 12:02 pm

    You’re right to point to disproportionate influence over others as a problematic effect of gross economic inequality. However, the initial argument seems to show that economic inequality per se isn’t really the problem here. After all, would the problems you describe be real if the worst off were millionaires? I doubt it; supposing that I have a million dollars but you have 500 billion, would you really be able to interfere arbitrarily into my life? No doubt there are some things you could conceivably do, but it’s not clear why we can’t stop you from doing them through our laws and other institutions (e.g., buying political influence).

    It seems to me, though, that one problem with the sufficiency criterion will be determining what counts as sufficient without appealing to equality or relative standards. We might be inclined to think, for instance, that many Americans fall beneath the sufficiency threshold if they can’t afford to buy a car or otherwise access reliable transportation. We would be ridiculous if we thought the same thing of hunter-gatherers; whatever we want to say about their well-being, one of the things we *shouldn’t* say is that they’re deprived because they don’t have cars. In short, what counts as sufficient may itself depend on how much and what people do and can have in a given society; if so, then I don’t think we can appeal to sufficiency to explain the value of economic equality.

  3. Psst��� on March 14th, 2011 9:02 am

    It seems to me, though, that one problem with the sufficiency criterion will be determining what counts as sufficient without appealing to equality or relative standards. We might be inclined to think, for instance, that many Americans fall beneath the sufficiency threshold if they can’t afford to buy a car or otherwise access reliable transportation. We would be ridiculous if we thought the same thing of hunter-gatherers; whatever we want to say about their well-being, one of the things we *shouldn’t* say is that they’re deprived because they don’t have cars. In short, what counts as sufficient may itself depend on how much and what people do and can have in a given society; if so, then I don’t think we can appeal to sufficiency to explain the value of economic equality.
    +1

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