There is a question as to whether inequality matters or not. We’re not dealing with that here. Let’s go ahead and assume for the purposes of this post that it does, action is justified, and we are in charge of fixing the world.
I have yet to hear anyone suggest a solution to inequality that isn’t some form of using resources from high-income (or wealthy) households to fund direct payments to or additional services for low- or no-income (or poor) households.
The societies we live in do this now, but not as much as many would like. A lot of folks in the United States, for example, would like to see us adopt policies closer to Sweden’s. #OWS
From everything I hear Sweden is a nice place, but it unfortunately seems possible to be unhappy enough to engage in extended mass riots there.
Perhaps it is my confirmation bias talking, but the most convincing explanation for the Stockholm riots in the linked article came not from the politicians interviewed, but from this guy:
Among a large group gathered on an overhead walkway was Mohammed Abdu, 27, whose family came to Sweden from Eritrea when he was aged three, and who now works as a security guard. While he condemned the violence as “hooliganism”, he claimed that many Husby residents still suffered from discrimination from the police and employers. Besides, he added, living in such a prosperous, advanced country offered no real satisfaction for those so conspicuously at the bottom of the heap.
“It’s true that the welfare system here is an example to the rest of the world, so if you fall here you do not fall all the way to the bottom,” he said. “But people don’t like being dependent on social welfare, and there is hidden racism.”
Mr. Abdu’s model suggests that tweaking economic inequality does little to solve other problems that are responsible for a lot of the dissatisfaction among some disaffected groups.
Even if all wealth were to be redistributed equally with the unemployed enjoying the same economic position as the CEO, the CEO will enjoy a far more exalted position within society than the permanently unemployed guy. In fact, the CEO might encounter even greater reverence given the number of people his pre-tax income supports.
In contrast, the unemployed man will feel dissociated from the society that supports him. Sure, one will write the next Harry Potter, but most will just be deeply unhappy. Check Chris Dillow:
[M]arket rewards are linked to the esteem in which we hold ourselves and others; there’s a reason why wages are called “earnings.” The rich get respect from others and a sense of self-worth and arrogance, whilst those reliant upon “hand-outs” feel despised; this is why the unemployed are so unhappy, even controlling for (pdf) their low incomes.
Contra Paul Krugman, a check is not a substitute for a job. Chris brings this point home with:
Mere monetary redistribution doesn’t solve this problem. Indeed, it might even exacerbate it, by making the rich feel that they are being deprived of their entitlements in order to support “scroungers”.
One of the functions of inequality in our society is to tell us who is of value. The consumption choices of the wealthy identify them as targets for the respect, reverence, and envy. I suspect that if we took that away from them, the hierarchy would reassert itself in other ways. It always has.
Reallocating everyone’s income would solve the narrow problem of income inequality. It’s just that that won’t be enough to fix the bajillion social problems that people have laid at the feet of inequality alone: