Does Inequality Matter

Avent on Picketty part 2″

But so what? Mr Piketty’s answer is that this state of affairs is simply not sustainable, and however it ends, it ends badly. It could be that the process will peter out on its own as massive accumulation of capital eventually pushes down the rate of return. But this process can take a very, very long time and result in intolerably high concentrations of wealth. Or it could be the case that the process stops when a relatively small group of individuals owns everything. Either way, the danger is that society rejects the injustice of these concentrations and reacts—perhaps violently.

The main problem is a meta-problem, in other words. Inequality matters because, like it or not, inequality matters. In most states of the world, inequality will tend to rise unless countered, by economic shocks or deliberate policy choices. Active concern over and management of inequality may help reduce the odds that society rejects as unjust the institutions underlying an economy, potentially in chaotic and violent fashion.

That doesn’t seem like a particularly outlandish view of the world. Humans intuit that—whether one is born into a fortune or one earns it in the market—there is only so much credit one can take for great wealth. Birth is the ultimate lottery, and it is wrong for the stakes of that lottery to be excessively high. Given the economic realities that Mr Piketty describes, it is therefore inevitable that distributional concerns will arise and motivate policy. The strange thing—as Mr Piketty points out—is that we consider the return of distribution as a worry to be an unusual or unnatural thing.

Emphasis mine.  I am growing convinced that inequality matters.


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