February 17, 2007
IN A REGIME OF LIBERTY YOU'RE REQUIRED TO CONTROL YOURSELF:
Inequality and its discontents (Robert J Shiller, 2/17/07, Daily Times)
Leaders around the world seem to be convinced that inequality and lack of broad participation in economic growth, if allowed to persist, will lead to social discord and even violence. But is inequality the real problem? [...][S]ome statistical analyses of the correlation between inequality and social conflict conclude that there may even be an inverse relationship: societies that are more unequal tend to show less conflict, because the rich are better able to control the poor.
There is some evidence that social unrest follows from inequality. The economists Alberto Alesina and Roberto Perotti have shown that, after controlling for several other factors, high-inequality countries do tend to have more social instability, as measured by, say, the number of politically motivated assassinations or the number of people killed in conjunction with domestic mass violence.
Nevertheless, one wonders why the evidence that inequality causes social unrest is not stronger.
One part of the problem may be that it is not always inequality per se that causes social discord, but also how inequality is perceived to have come. Unrest may reflect more a sense of betrayal - that others are not living up to their implied promises or are not behaving honourably.
Indeed, a sense of trust in others' intentions is central to a functioning economy. Lawyers write a lot of contracts, and courts spend a lot of time enforcing them, but these institutions cannot cover everything. Most economic relationships depend on good will, a basic inclination to do the right thing even if no one is checking.
Trustworthiness is hardly universal. But the business world is built on our intuitive knowledge of when we can trust people fairly well and when we can't trust them much at all.
How can there be any trust between people in a system where the regime is responsible for the distribution of wealth? If you set out to make individuals dependent on the state you can hardly be surprised when they end up atomized from each other and uninterested in society generally. Posted by Orrin Judd at February 17, 2007 7:43 AM
Right. Also we should ask what sort of abandoned reprobate is so consumed by envy that he would be content with less just so that he may not see his neightbor with more.
There are very good reasons why we ahould not covet our neighbor's goods. The very possibility of inequality drives him to invent, invest and produce, all of which recound to our great benefit.
Posted by: Lou Gots at February 17, 2007 9:12 AMAnother suggestion: inequality matters less when most people in society believe themselves to be in a decent situation.
In America, you may not have money of Bill Gates or George Soros, but it's very likely that you have enough to feed and house your family. So you can be a little more acceptable (or at least philosophical) about inequality.
Posted by: Steve White at February 17, 2007 12:30 PM