In my four-part series on inequality (here, here, here, and here), I argue that that it is more important to instead focus on reducing poverty – especially since we know the policies needed to achieve that latter goal.
In this discussion, I contemplate why some folks don’t understand that message.
One reason is that some of them don’t care.
As explained by the Eighth Theorem of Government, 
they are motivated first and foremost by a desire for bigger government.
And it doesn’t matter whether they are driven by ideology or “public choice.” The bottom line is that helping people climb the economic ladder is – at best – a secondary concern.
But what about the well-meaning folks on the left? Is there a way of convincing them to channel their compassion in a better direction?
As mentioned in the interview, these are the people who generally believe that the economy is a fixed pie. As such when someone like Jeff Bezos is rich, they think it means other people are poor.
So it should be simple to show them that this isn’t true. There is a wealth of data showing how good (or even just decent) policies create more prosperity.
Looking specifically at the United States, we’re much richer today than we were in the past. And that’s true whether you go back 200 years or if you simply compared today’s economy with where America was after World War II.
And the same pattern exists in other market-based nations.
But here’s what frustrates me. When I share this data with my left-leaning friends, they seem to have some sort of mental block that prevents them from reaching the obvious conclusion.
A few of them will pivot, acknowledge that broad-based growth happens, but then argue that growth is unaffected by policy.
In other words, nations can become more prosperous whether government is big or government is small.
Needless to say, there’s also a wealth of data showing that this isn’t true.
At which point the honest and intelligent folks on the left will explicitly or implicitly
embrace Arthur Okun’s argument that it’s okay to have less growth if there’s more equality.
That’s when I point out that even small differences in growth make a big difference to income levels over just a few decades. Which means poor people ultimately will be richer if there’s more economic liberty.
So if they really care about the well-being of the less fortunate, they should be the biggest advocates of free markets and limited government.
[…] less prosperous economies mean lower living standards, as honest folks on the left (such as Okun) openly […]
what a sad commentary on our educational system…
AJ,
I’m tempted to say, based on your tone, that Dan struck a nerve.
But perhaps that’s unfair, so let’s stipulate that the column accurately describes some people on the left but not all of them (I’m sure that both sides have plenty of people who don’t think deeply about these topics).
What I’m curious about is whether you accept of reject Okun’s premise that Dan has written about on a few occasions (https://danieljmitchell.wordpress.com/2021/05/04/arthur-okun-class-warfare-redistribution-and-income-growth/, https://danieljmitchell.wordpress.com/2021/07/01/the-tradeoff-between-tax-progressivity-and-economic-output/, and https://danieljmitchell.wordpress.com/2015/06/21/regarding-research-on-inequality-aei-imf/).
Christophe
Well, I decided to give your blog a peek and all I can say is that I’m appalled someone as yourself would actually masquerade the internet as an economist and genuine intellectual. I have not read the rest of your blog-series on inequality, but allow me to systematically deconstruct this messy work.
1.) “they are motivated first and foremost by a desire for bigger government.”
This is a straw-man argument. People, in the middle or on the left, that desire income inequality to reduce are not desiring larger government. This is an outright fabrication of your opposition’s stance. My guess is that this misconception in your reasoning exists because you are fairly ignorant of the actual views held by others outside of your camp. People who want to reduce inequality want to reduce inequality; if smaller government or larger government or both are the answer, then that’s what they would also want.
Imagine if I said “Dan Mitchell doesn’t want small government, he really just wants corny capitalism” you would probably protest and rightfully so. Stop utilizing straw-man arguments Dan.
2.) “The bottom line is that helping people climb the economic ladder is – at best – a secondary concern.”
Wrong. Again you are not representing the views of your opposition correctly. Part of many policy ideas – all center and leftward – include policies that help improve economic mobility of lower income people as to reduce overall inequality.
Again, imagine if I said “For Dan Mitchell, reducing poverty is but a secondary concern; what matters is that we increase economic production and profits for the wealthy” Anyone can play this game Dan. A casual reader on this site might fall for it, but a real intellectual or critical thinker won’t let you get away with it.
3.) “As mentioned in the interview, these are the people who generally believe that the economy is a fixed pie. As such when someone like Jeff Bezos is rich, they think it means other people are poor.”
Again. Another straw-man argument. This is honestly tiresome. Imagine, for a second, that we ought to have an economy where all classes experience proportional growth in wealth; imagine having an economy that everyone benefits from, when we take inflation and other metrics into account. That’s what people want when they want our inequality problem addressed. There is plenty of room for growth for people like Bezos under such a goal. And, here’s the shocker, the period of the greatest economic boom in American history was also the period where growth was the most proportional and when inequality was at it’s lowest. You may deny that, but it’s a fact.
4.) “Looking specifically at the United States, we’re much richer today than we were in the past.”
No one is arguing against that. Comparing generations, however, we see that Boomers had it better than Millennials and Gen Z. College was incredibly affordable, even on a part-time salary. Good jobs could be found with mere high-school diplomas. Cars were much more affordable. Housing was cheap and widely available. Fast forward to today: college is over 2000% more expensive, college is also a necessity now – virtually ensuring that a large segment of our economy has to live with debt, cars are over 80% more expensive, housing prices have inflated to insane levels – effectively killing the American Dream for most people today, and on-top of all of that people work longer hours today and get paid less (when adjusted for inflation) despite the productivity of workers skyrocketing.
To say “wE aRe RiChEr ToDaY” is stupid. It misses the point and shows me that you have zero economic understanding.
5.) “So if they really care about the well-being of the less fortunate, they should be the biggest advocates of free markets and limited government.”
I skipped a large segment of your post because it was largely uninteresting and lacked in substance. This sentence, however, encompasses what your argued. And the facts simply do not support your claim, as the claim is too all encompassing. In many ways the free-market has to be unleashed. In many other ways it needs to be reigned in. To make it a false dichotomy between big and small government is to simplify economic topics in an intellectually disingenuous manner that makes it clear that you’re not acting in good faith.
If i were you, I’d stop pretending to be an expert and disclaim that you’re a purely political commentator.
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