Sunday, August 12, 2012

The Price of Income Inequality?

Nobel Prize laurette Joseph Stiglitz is out with the new book The Price of Inequality. In it he argues that much of our current economic trouble is due to income inequality. According to Matthew Craft of the Associated Press,
In his new book, "The Price of Inequality," he connects surging student loan debt, the real-estate bubble and many of the country's other problems to greater inequality.

When the rich keep getting richer, he says, the costs pile up. For instance, it's easier to climb up from poverty in Britain and Canada than in the U.S.

Although I think Stiglitz too suspicious with income inequality per se, in his interview with Craft, Stiglitz rightly implies at one point that the real culprit is the crony capitalism that has reached its zenith during and since the financial meltdown of 2008.

It is important not to miss this point. Capitalism and the market division of labor have not caused the magnitude of current income disparities. It is not that the rich got richer while the poor got poorer. It is that the politically connected got richer while those without access to power have to get along without any help from the state. In fact, it is worse than that. The productive have to bank roll the whole thing in the form of taxes and monetary debasement.

In a free society, people would still earn unequal incomes because of differences in skills, talents, environments, personal choices, and divine providence. Anne Bradley, Vice President of Economic Initiatives at the Institute for Faith, Work, and Economics, has just written an excellent monograph explaining "Why Does Income Equality Exist?" In answering the question, she draws upon both economic theory and the Bible to provide a comprehensive analysis of this timely topic.

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