Economic Inequality And Justice (2005 Jan)

by Barry A. Liebling

Recently the dean of a prestigious business school wrote that a sure sign that United States government policies are ineffective is that inequality has been increasing. She was referring to statistics that compare the amount of money the highest paid people make to what the lowest paid people make. The bigger the gap, the greater the economic inequality. While she cites sources for the income statistics she does not explain why she regards income variance as a problem. She presumes, correctly, that most of her readers will reflexively consider “economic inequality” as troubling.

Let us examine the underlying assumptions of complainers who lament “economic inequality” whenever they see it.

According to the complainers, ideally all people would have exactly the same amount of wealth. That there are differences at all is proof that we live in an imperfect world, where human nature itself works against the ideal of economic equality. If the world were perfect, which it never can be, each person would have an equal share in “humanity’s wealth.”

Notice that the notion that “equal wealth for everyone is good” is incompatible with individual autonomy and freedom. When people’s natural rights are respected and they are free to act according to their own best judgement there will inevitably be inequalities of abilities, ambitions, motivations, and personal preferences which naturally result in a wide range of economic outcomes. Some people will strive to make as much money as they can, many will be satisfied with less than the maximum, and others will not exert themselves more than they need to in the economic arena. Furthermore, people differ according to how well they plan and the extent to which their plans are realized.

In the eyes of the complainer, who is disturbed by the presence of economic inequality, something is broken that needs to be fixed. Since not everyone has the same amount of wealth, actions should be taken to make people more equal.

Complainers almost never call for full equality – everyone should have exactly the same amount of money. First, they recognize that full equality is not a realistic goal. In their Platonic world-view perfection is never really attainable. Second, they are not sincerely interested in making everyone economically equal. Surely, those who the complainers favor deserve to have more than those who the complainers despise.

The real objective of the complainer is to have license to tinker with people’s lives using government-backed coercive force. If we agree that “economic inequality” is a bad thing that needs to be fixed, the actions of “fixing” are justified. Furthermore, if there is always some economic inequality then there is always an excuse to intervene.

What are the interventions that complainers are longing to bring about? Their proposals are variants of taking away wealth by increased taxation, giving prizes of wealth to those who are politically favored, forbidding business dealings that complainers do not fancy, requiring businesses to act in ways that puts the complainers’ preferences ahead of business managers’ best judgements.

What is the true relationship between “economic inequality” and justice? The short answer is that there is no necessary connection at all. How much wealth you have in comparison to your neighbors is not a valid issue. Instead, the important consideration is how you came to possess your wealth.

You either acquire your wealth justly or unjustly. Ethical wealth acquisition occurs when you create valuable goods and services, trade your valuables – honestly and by mutual consent – for other valuables, or receive gifts from others. Conversely, it is immoral to get wealth by violating anyone’s natural rights – that is by physical coercion, by threats of coercion, by theft, or by fraud.

A man or woman who acquires wealth ethically, is entitled to it – regardless of how much or how little other people may have. A scoundrel who enriches himself by violating the rights of others does not deserve any of it – even if the scoundrel has taken from those who are “richer” than he is.

*** See other entries at in “Monthly Columns.” ***


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