Why in­come in­equal­ity strat­egy doesn’t add up

The Covington News - - OPINION - WAL­TER WIL­LIAMS COLUM­NIST Wal­ter E. Wil­liams is a pro­fes­sor of eco­nom­ics at Ge­orge Ma­son Univer­sity. To find out more about him and read fea­tures by other Creators Syn­di­cate writ­ers and car­toon­ists, visit www. creators.com.

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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