In a comment to the post CORE – The Economy, Raghuram quoted from the book:
In November 2016, we asked students beginning economics at Humboldt University in Berlin, ‘What is the most pressing issue that economists today should address?’ Their replies are shown in the word cloud in Figure 19.12, in which the size of the word or phrase indicates the frequency with which that term was mentioned. Students in other universities around the world gave similar answers.
Inequality is, by far, the main problem that students think economics should address.
Click on the image above in case you wish to read the chapter on “Inequality” but it is not necessary for this post.
Inequality is one of those concepts that can be rigorously defined and frequently easy to estimate, such as the commonly used Gini coefficient. We have a natural preference for equality arising out of our innate sense of fairness. But it is not clear what should or even can be done about fixing any perceived problem of inequality. What if inequality is not a bug but rather a feature of the universe we live in? What if inequality is a good rather than a bad?
People naively believe that we have a moral responsibility toward reducing inequality. The belief is naïve because it is arrived at without much reflection on the cause(s) and consequences of inequality. For example, the students referred to above were starting an introductory economics class; they must have been teenagers, who as we know from our own experience are not the most clued-in people in the world. They thought that inequality should be at the top of the agenda for economists. And the authors of the survey concluded without justification that “Inequality is, by far, the main problem that students think economics should address.”
Economists, economics — whatever. What’s the difference?
Seriously, there’s a difference. Economists are people just like the rest of us, and economics is an academic discipline, one among many. Economics cannot do anything about inequality. Economics is not an agent; it doesn’t have a will. Economists are agents, just like everyone else.
Economists of course can attempt to do something about inequality but they should not. Economists don’t have any privileged position that makes them more capable of, or responsible for, or worthy of shaping society. Most importantly, as Buchanan frequently warned economists, they should desist from getting involved in advocacy, from promoting this or that social policy, from acting as if they were advisers to some sort of disinterested “benevolent despot.” Governments are despotic but are far from being benevolent.
Inequality is a political — even a moral — problem that society perhaps has to deal with. It’s clearly an emotive issue, and most people who care about inequality are too emotionally invested in it to have the capacity to have any disinterested clarity on the matter. Like those students. They are concerned about an issue that in their minds needs to be addressed by someone urgently. Something is amiss and someone (usually the government) should do something about it, is the demand. “How dare you?” (in the immoral words of the great Greta) not do something about it when our survival depends on it? How dare you!
A moment’s reflection makes it evident that inequality is baked into the fabric of the universe. Moreover it’s not something to be lamented but instead celebrated. You cannot have differentiation without differences. Differences matters because a universe of undifferentiated goo would be featureless. We would not exist without differentiated matter.
OK, you may say, we want to exist in a universe that has galaxies and stars, and also has living beings, and has plants and animals but we also want uniformity and equality among humans. I appreciate that sentiment but I am afraid that that’s not likely to happen however much you wish it to be so. Wishing doesn’t make it so.
Fact is that people were equal for most of human history. The inequality that arose was because some people were able to escape the dismal fate that was common to all humanity — poverty. It is not as if all people were prosperous and then somehow some people got afflicted with the curse of poverty. What actually happened was people began to become wealthy and as time went on, more and more people became part of “the great escape”, as Angus Deaton explained in his 2013 book The Great Escape.
I am convinced that in about 15 years, all of humanity would have escaped poverty. And that will be accompanied with even greater inequality. Absolute levels matter to me more than relative levels. I don’t care how much more wealthy the top 1 percent is relative to the bottom 20 percent or whatever, as long as the poorest person is not poor.
An obsession with inequality is silly. Equality is not sustainable because even if you mandate equality through legislation, inequality will arise if people are free to engage in the Smithian “propensity to truck, barter and exchange one thing for another.”
Socialist countries have attempted to impose equality only to create misery. We should learn from their disasters.
Read part 2 of this post.
Further reading: Robert Nozick’s “Critique of End-State and Patterned Principles.”