By Walter E. Williams
Wednesday, January 15, 2014
Democrats plan to demagogue income inequality and the
wealth gap for political gain in this year's elections. Most of what's said
about income inequality is stupid or, at best, ill-informed. Much to their
disgrace, economists focusing on measures of income inequality bring little
light to the issue. Let's look at it.
Income is a result of something. As such, results alone
cannot establish whether there is fairness or justice. Take a simple example to
make the point. Suppose Tom, Dick and Harry play a weekly game of poker. The
result is: Tom wins 75 percent of the time. Dick and Harry, respectively, win
15 percent and 10 percent of the time. Knowing only the game's result permits
us to say absolutely nothing as to whether there has been poker fairness or
justice. Tom's disproportionate winnings are consistent with his being either
an astute player or a clever cheater.
To determine whether there has been poker justice, the
game's process must be examined. Process questions we might ask are: Were
Hoyle's rules obeyed; were the cards unmarked; were the cards dealt from the
top of the deck; and did the players play voluntarily? If these questions yield
affirmative answers, there was poker fairness and justice, regardless of the
game's result, even with Tom's winning 75 percent of the time.
Similarly, income is a result of something. In a free
society, for the most part, income is a result of one's capacity to serve his
fellow man and the value his fellow man places on that service. Say I mow your
lawn and you pay me $50. That $50 might be seen as a certificate of
performance. Why? It serves as evidence that I served my fellow man and enables
me to make a claim on what he produces when I visit the grocer. Google founders
Sergey Brin and Larry Page are multibillionaires. Just as in the case of my
serving my fellow man by mowing his lawn, they served their fellow man. The
difference is they served many more of their fellow men and did so far more
effectively than I and hence have received many more "certificates of
performance," which enables them to make greater claims on what their
fellow man produces, such as big houses, cars and jets.
Brin and Page and people like them created wealth by
producing services that improve the lives of millions upon millions of people
all around the globe. Should people who have improved our lives be held up to
ridicule and scorn because they have higher income than most of us? Should
Congress confiscate part of their wealth in the name of fairness and income
redistribution?
Except in many instances when government rigs the game
with crony capitalism, income is mostly a result of one's productivity and the
value that people place on that productivity. Far more important than income
inequality is productivity inequality. That suggests that if there's anything
to be done about income inequality, we should focus on how to give people
greater capacity to serve their fellow man, namely raise their productivity.
To accomplish that goal, let's look at a few things that
we shouldn't do. Becoming a taxicab owner-operator lies within the grasp of
many, but in New York City, one must be able to get a license (medallion),
which costs $700,000. There are hundreds of examples of government restrictions
that reduce opportunity. What about the grossly fraudulent education received
by so many minority youngsters? And then we handicap them further with laws
that mandate that businesses pay them wages that exceed their productivity,
which denies them on-the-job training.
Think back to my poker example. If one is concerned about
the game's result, which is more just, taking some of Tom's winnings and
redistributing them to Dick and Harry or teaching Dick and Harry how to play
better? If left to politicians, they'd prefer redistribution. That way, they
could get their hands on some of Tom's winnings. That's far more rewarding to
them than raising Dick's and Harry's productivity.
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