Opinion: Daily Journal

Exposing Questionable Claims About Inequality

It’s hard to reach the right conclusion when you start with false premises.

That’s why one of the most critical elements of public policy debate involves ensuring that those taking part in the debate base their recommendations on sound premises. If not, those recommendations could prove ineffective or even counterproductive in addressing real public policy concerns.

Was the primary problem with American health care prior to 2010 the lack of access to health insurance? If not, the (not-so) Affordable Care Act has generated quite a bit of turmoil for no good reason. It’s also diverted attention from reforms that might have alleviated more pressing health care concerns.

Are carbon dioxide emissions linked to an industrialized world pushing the earth’s temperature to a tipping point, beyond which lies catastrophe and mayhem? If not, and the absence of any significant warming for more than 18 years suggests that the question is at least debatable, the ongoing international climate talks in Paris are unlikely to yield useful policies.

To the extent that governments pursue ideas that would lead to the “wrenching transformation” former Vice President Al Gore once promoted, governments could be limiting the economic growth that would spur additional investments in innovations and new technologies that would address any real climate-related threats in the distant future.

One of the most interesting debates in recent years involves income inequality and its impact on the health of the American economy. Those who spend time decrying inequality make, or at least suggest, a number of assumptions that serve as premises. Among them: Inequality is always bad. Inequality must derive from those with wealth and power taking advantage of those lacking those attributes. Addressing inequality requires redistribution of income and wealth.

It’s fortunate for those who would like to test those premises that economist Thomas Sowell devotes his latest book to the topic. Titled Wealth, Poverty, and Politics: An International Perspective, Sowell’s book offers chapter after chapter of anecdotes, data, and lessons in geography and history. Those who complete the reading will have good reasons to question each of the premises listed above.

Nearly half of the book reminds readers that geographic, cultural, and social factors have created inequality within and between nations throughout human history, regardless of any actions from a ruler or ruling class.

“Not only have equal economic outcomes been rare to nonexistent, the particular patterns of inequality in one era have differed greatly from the particular patterns of inequality in another era,” Sowell writes.

Political solutions to the perceived problem of inequality can lead to unintended consequences. Take, for example, the well-intentioned practice of providing welfare benefits. “The welfare state can reduce, or perhaps even eliminate, poverty in any material sense, but it also reduces the need for many people to earn income — especially when earning income reduces eligibility for government-provided benefits — and therefore widens income gaps and disparities.”

One of Sowell’s most important contributions involves productivity, a factor left “in the dim background” by those seeking redistribution of incomes and wealth.

“In a world where rewards were based solely on merit, there would be no obvious reason to pay the brain surgeon and more than the carpenter was paid,” Sowell writes. “But, in a world where productivity matters, this is no longer a question of the relative merits of individuals. What is far more important than merit-based ‘social justice’ to particular income recipients is the well-being of all the people who stand to benefit from what they produce. Introducing production into the discussion makes a big difference.”

Focusing on inequality distracts policymakers from pursuing paths that will yield the most benefits for purported victims of inequality, as Sowell warns near the end of his book. Take the distinct goals of boosting prosperity for all versus reducing economic “gaps” and “disparities.”

“Many people may be in favor of both these things, and think of them as complementary goals, when in fact beyond some point there are inescapable trade-offs that can make the two goals incompatible in practice, however desirable they may seem together in theory,” Sowell warns. “If everyone’s income doubles, for example, that will almost certainly reduce poverty but it will also increase economic ‘gaps,’ ‘disparities,’ and ‘inequities.’”

“When prosperity is widespread, even if not equalized, that may be of more significance to those released from the worst deprivations of grinding poverty than would reductions in the statistical gaps between the poor and the rich,” he adds. “A low-income mother whose sick baby’s chances of dying in infancy have been cut in half, as a result of rising prosperity, is unlikely to think of this as inconsequential, much less a grievance, even if she learns that a rich mother’s baby’s smaller chances of dying in infancy have also been cut in half or by more than half.”

Readers seeking Sowell’s solution to income and wealth inequality will find no answers. But they’re also more likely to question whether the focus on eliminating inequality, “the victory of some abstract vision, in defiance of reality or in disregard of the truth and the fate of fellow human beings,” is worth the trouble.

Mitch Kokai is senior political analyst for the John Locke Foundation.