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Capitalism gets a bad rap, often claimed to be the destroyer of everything good. One argument made is that capitalism creates class warfare - the rich against the poor. So-called "social crusaders," such as NOW feminists, purportedly strive to achieve income equality (even claiming income equality doesn't exist when facts prove otherwise, including proof by its own three-time board of directors member). However, as H.L. Mencken once warned, "The urge to save humanity is almost always a false front for the urge to rule."

Some claim socialism's basic premise "from each according to his ability, to each according to his need" has been thoroughly debunked, while others point to socialism that appears to work. Regardless, redistributing wealth from rich to poor via progressive income taxes continues to be one of the components of statist agendas to "combat" income inequality. Some economists claim that income inequality should be a matter of great concern. Others, like Ludwig von Mises, claim that "inequality of wealth and incomes is an essential feature of the market economy." Well, which is it? Is income inequality inherently bad, or are there circumstances where income inequality can be considered good? What measures should we use to determine if income inequality is bad? What is the source of income inequality? Is the egalitarian ideal really such a good idea?


Many people, especially academics and other intellectuals, find the phrase "good inequality" jarring because they can hardly think of any aspect of inequality as being "good". Yet a little thought makes clear that some types of economic inequality have great social value. For example, it would be hard to motivate the vast majority of individuals to exert much effort, including creative effort, if everyone had the same earnings, status, prestige, and other types of rewards. For example, many fewer individuals would engage in the hard work involved in finishing high school and going on to college if they did not expect their additional education to bring higher incomes, better health, more prestige, and better opportunities to marry.

On my first trip to China in 1981 I visited several factories in the Beijing area. All the employees in each factory received more or less the same pay, and they could hardly ever be fired for bad work or absenteeism. This was an extreme eqalitarian approach to compensation, and the result was that no one worked hard, even though Chinese workers have traditionally been known for their diligence and energy. The picture was more or less the same in all of the factories I visited, and there was also little difference in pay between factories. Urban China was then highly eqalitarian, but it was also extremely poor because of very low productivity. China's economic miracle has been in good measure based on allowing much greater inequality in pay and incomes to motivate greater productivity in both urban and rural areas.

Bad and Good Inequality-Becker


Original posting by Braincrave Second Life staff on Feb 11, 2011 at http://www.braincrave.com/viewblog.php?id=464

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