Chapter 4: Fairness and Equality

There is, in fact, a manly and lawful passion for equality which excites men to wish all to be powerful and honored. This passion tends to elevate the humble to the rank of the great; but there exists also in the human heart a depraved taste for equality, which impels the weak to attempt to lower the powerful to their own level, and reduces men to prefer equality in slavery to inequality with freedom. — Alexis de Tocqueville (1805–59)

In the political world, one way to get what isn’t yours is to stage a public demonstration claiming unfairness and inequity. Outside the political world, when people want what others have, they either trade for it with labor or goods or take it by force. The latter is a risky and generally costly choice. However, in the political world, you can acquire what isn’t yours by petitioning the state to take it for you without facing the hazards of taking it yourself.

Few weeks pass without a riot or demonstration breaking out with protesters demanding from the state just about everything: food, shelter, health care, higher pay, lower prices, equality, ad infinitum. It’s difficult to blame the protesters since the state, after all, holds itself out as the great provider of whatever the populace wants in exchange for votes and support. Protesters should not be expected to analyze or even care about the true source of these provisions. Like the rest of us, they are simply acting in their own self-interest. Certainly, they are acquiring resources taken from others against their will, but the idea that such takings by the state is theft, immoral, or unjust is too esoteric for most to even give them pause. Political propaganda has instilled into many of us that, in the interest of “fairness,” the less wealthy are entitled to some of what belongs to the wealthier. Absent political motivation there is no valid basis for such a notion.

An effective ploy for mustering supporters to a political camp is to provoke their anger with notions of unfairness and inequality. “Join my camp,” a politician might say, “and together we can get our fair share of the wealth the rich are unfairly keeping from us.” Year after year, the political offerings grow, enticing an ever-larger portion of the populace into the parasitic fold. When the political diatribe of pitting the poor against the rich has successfully corralled the votes of the poorest, politicians then ratchet up the campaign, pitting middle-income earners against the rich in a bid to lure even more voters. Finally, when that campaign has run its course, political attention expands to lure nearly every other voter into the political camp by pitting them against the richest 1 percent. In recent years, the banners and posters of protesters proclaiming themselves to be the victimized “99 percenters” exemplify the success of such campaigning.

Such deceitful behavior by politicians in their quest for power should be too obvious and repugnant to gain the support of anyone with any sense of decency and the ability to reason. However, that is not the case: even the most mindful person can be conditioned by the constant flow of propaganda to condone such political rhetoric and chicanery.

Outside the political world, fairness is not a matter of comparative personal achievement but rather a complimentary description of character. Fairness describes a person who plays by the rules and is courteous and honest. Fairness and unfairness reflect how well or poorly people treat others, not how they compare with or differ from them. Being rich or poor is neither fair nor unfair: it is simply a measurement of a person’s monetary wealth compared to that of others. However, politicians use the word “fairness” to shroud the act of theft in an aura of righteousness.

Although fairness is not a term of comparative value, for the sake of discussion, let’s briefly consider it to be so and see that even in its misuse, most people would likely prefer their own life to any of the possible lives they might have lived.

First, living matter emerged in its simplest form some three to four billion years ago and then evolved into a biomass of ever more complex organisms, of which there are now some eight million known animal species, with humans ostensibly occupying the most complex position — at least when measured by cognition. The diversity of life-forms is a natural process, with natural selection fashioning each organism to better fit its own particular niche. Those who contend that inequality is unfair ignore all the lives those organisms are living that few humans would choose to live in exchange.

Second, asserting unfairness in the disparity between those of lesser and greater wealth totally ignores the preponderance of lives people once lived at a level that would make the poorest people of today far richer than the richest person of those times. We are extremely fortunate to be living now, rather than when our distant ancestors had life spans of merely thirty to forty years, scraping together just enough each day to make it to the next. Even the so-called “good old days” of our recent ancestors were quite miserable compared to the living standards of the poorest today.

Finally, and most important, politically reported inequality is only a measurement of monetary wealth, but for most people wealth encompasses far more than that. It includes love, family, friends, accomplishments, and gaining inner meaning to one’s life, which trump all that the richest billionaires can buy.

People in virtually all corners of the political box take for granted that a large disparity in earnings and wealth is a problem. Even those who counter such claims only argue that the purported disparity is exaggerated because the data are either incorrect or misapplied. Some argue that using income levels to measure inequality is misleading and that consumption levels would be more appropriate. In other words, no matter how it is measured, there is an assumed political notion that a large gap in earnings, wealth, or consumption is in fact a problem.

It is a fact that some people earn more and are financially much wealthier than others, but it is not a fact that this disparity is a problem. To peddle the idea that it is a problem, politicos employ the assumptive close technique to connote, by assumption, a problem, thus bypassing the need to provide supportive evidence. People simply assume the problem exists, leaving only a method of measurement and the means to resolve it open for discussion. This shrewd sales technique is evident in the titles of articles and essays that connote the problem as a given. Here are a few examples:1

“Inequality in America Is Getting Worse.”
“So, What Do Experts Say Is the Best Way to Shrink the Wealth Gap?”
“Is Everyone Concerned About the Wealth Gap?”
“Has the Administration Made Progress in Narrowing the Wealth Gap?”
“So, Why Has Income Inequality Worsened?”
“When Did this Wealth Gap Problem Start?”
“How Bad Is the Wealth Inequality We’re Seeing in the United States?”

According to Alan B. Krueger, former chairman of the White House Council of Economic Advisors, income inequality can have a variety of negative economic effects,2 such as:

More income shifts to the wealthy, who tend to spend less of each marginal dollar, causing consumption — and therefore, economic growth — to slow.
Income mobility falls, meaning parents’ income is more likely to predict their children’s income.
Middle- and lower-income families borrow more money to maintain their consumption, which is a contributing factor to financial crises (based on the work of Raghuram Rajan and Robert Reich).
The wealthy gain more political power, which results in policies that further slow economic growth.

Let’s examine each of Krueger’s claims:

Income doesn’t “shift” to the wealthy as if removed from one group and transferred to another. An earner does not make others poorer, because he or she can only be enriched by enriching someone else. As such, there isn’t a shift in wealth between people but rather an increase in the wealth of each participant in a market transaction. This is the fundamental nature of markets, in which trading improves the well-being of each trader from their pre-transaction wealth level. Krueger’s use of the word “shift” rejects an elemental economic principle that the economy is not a fixed pie. He then depicts greedy, rich scoundrels taking an undeserved portion of an illusionary fixed pie, thus paving a path to justify taking a larger share of their wealth through higher taxes. Disregarding the political trickery, the claim that the wealthy spend less of each marginal dollar and cause economic growth to slow is without foundation: whatever portion of earnings people do not spend, someone else will spend by accessing that money via a bank loan, whereby the borrower becomes the spending proxy of the depositor. Money doesn’t simply lie dormant in a vault; the banker offsets the interest paid to depositors by earning interest from borrowers, who in turn use that money to buy houses, cars, equipment, and so on.
The evidence directly contradicts Krueger’s claim that income mobility has fallen. In the United States, the odds of moving up or down the relative-income ladder have not changed appreciably in the last twenty years, according to an extensive 2014 study that tracked forty million children and their parents between 1996 and 2012.3 The findings contradict claims by politicians in both major parties. As the authors of the study note, their results show broadly similar and steady mobility when compared with a previous study of children born from 1952 to 1975.4 Taken together, these studies suggest that the rates of intergenerational mobility have held fairly steady over the last half-century, according to Raj Chetty. Relative mobility is the change in ranking of a person’s household earnings compared with the earnings of others, while absolute mobility is the change in a person’s actual household earnings compared with their earnings in an earlier period. Over the thirty-three–year period from 1979 to 2011, average inflation-adjusted, after-tax income — which equals market income plus government transfers minus federal taxes — grew significantly for all income quintiles. Households in the bottom quintile averaged a growth in earnings of 1.2 percent per year, thereby producing a cumulative growth of 48 percent over the thirty-three–year period. Households in the middle three quintiles (21st to 80th percentiles) had a cumulative growth of 40 percent over the same period. Consequently, most adults today have much more disposable income than their parents did at the same age.5
Krueger’s third point, that inequality means the poor and middle classes must borrow more to maintain their consumption, is a non sequitur. Although the poor and middle classes earn less than those in the higher quintiles, they are not necessarily earning less in real terms than they earned in earlier periods. Thus, maintaining consumption does not depend on comparative earnings but rather on actual earnings, which have increased substantially over time, as noted above. In other words, even if relative mobility were zero or even negative, absolute mobility determines an individual’s actual change in potential consumption.
In criticizing the wealthy for allegedly using political power to adopt policies that slow down the economy, Krueger erroneously assumes that policies designed to accelerate the economy are good. But in fact, any policy that attempts to engineer the rate of economic growth is a disruptive and harmful intrusion.

According to Nobel Laureate Robert Shiller, “The most important problem that we are facing now today, I think, is rising inequality in the United States and elsewhere in the world.”6 He supports establishing a contingency plan now to raise taxes on the rich if inequality increases. Thomas Piketty closes his popular book Capital in the Twenty-First Century by recommending that governments step in now by adopting a global tax on wealth to prevent soaring inequality from contributing to economic or political instability down the road.7 Imagine a candid politician taking Shiller’s and Piketty’s proposals to heart: “If you find your earnings disturbing because others are earning more than you, then vote for me. I promise to get you your fair share of the wealth by embezzling it from those who earn more; this way, you avoid the hazards of embezzling it yourself or having to contend with earning more on your own.”

Let’s use a dramatic thought experiment to demonstrate the negative impact on the poor if the government were to forcibly reduce the earning gap. Consider whether the living standard of the poor would improve, ipso facto, if all the highest earners met their immediate demise. Eliminating the highest earners would surely “improve” (shrink) the earning gap. Now, the prior middle-income earners would become the country’s highest earners and thus, to further “improve” the gap, they would then need to meet their demise as well. You get the picture. By continuously eliminating the wealthiest, there would eventually be perfect equality with no income gap because the poorest person would also be the richest person of the land — and have to be self-sufficient and poorer than he or she ever was before.

Alternatively, consider the following simpler and more realistic thought experiment to illustrate the obvious nonsense of a harmful wealth gap. Let’s begin with a society of, say, one million people of equal earnings and wealth. While working in his shop, an ambitious young man named Tom gets the “bright” idea of a light source that is neither a candle nor a kerosene lamp. He works on his idea for a few years before ultimately designing a device that economically converts electricity into light. It’s cheaper, brighter, and safer than any known light source other than the sun. It’s a rather simple device that just about anybody else could have made, but Tom produces it first and calls it a light bulb. He likely wasn’t interested in saving houses from burning down or brightening long winter evenings; he may have been a so-called greedy, self-serving guy, knowing only that people prefer lightness to darkness and home preservation to destruction.

Making the first light bulb may have cost several thousand dollars, but making a million may cost little more than ten cents each. One by one, people line up to buy Tom’s new-fangled light bulb at twenty cents each, and he sells ten million of them. Irrespective of the financial preciseness of the transactions, each buyer improves his lifestyle immensely by an amount multiple times the meager cost of a few bulbs to light up his house. Not even through the most tortuous reasoning could one conclude that those who made Tom a millionaire also made him a scoundrel, or that their individual higher standard of living created a problem by not reaching the height of Tom’s. In total, of course, the collective gain in the standard of living by the million people makes the amount Tom earned a relative pittance.

Today, innovators on the front wave of new technologies are bringing unimaginable benefits to nearly everyone in the world who volitionally launch these esteemed benefactors into stardom and wealth. These spectacular individuals are the praised “one percenters” that political pundits tell us we should despise. Such discrediting of society’s greatest benefactors demonstrates how political motivation can turn otherwise honorable people into deceptive town criers.

Anyone truly concerned about the gap between their own earnings and those of a higher earner can always decline to buy the goods and services the latter offers, thus helping to “even things out.” However, those with lower earnings aren’t foolish; they know their purchases will make others richer, yet eagerly continue to buy their goods and services, which makes better sense than trying to produce these same items themselves. Self-sufficiency is always available to take a stand against making others richer, but few ever choose that route.

People’s wealth reflects society’s appreciation of the value of their work — assuming, of course, that they justly earned it. However, wealth gained by force, deceit, or obtaining privileges from the government, such as subsidies or restrictions imposed on competition, is not an accurate reflection of society’s appreciation and valuation.

The implication that high inequality of earnings is a moral crime is tantamount to praising a bank robber who is trying to reduce inequality between himself and the bank owner and, as such, doing his best to reduce crime. One would have to be most gullible to fall prey to the devious political tactic of criminalizing wealth, victimizing poorness, and moralizing theft.

There are many reasons why some earn more than others. For instance, some people are taller than others and, statistically, the taller you are, the more you earn — by a purported annual average of $789 per inch.8 Attractive employees earn, on average, roughly 5 percent more than unattractive employees, according to a study by Daniel Hamermesh.9 It would be just as foolish to claim that this disparity in height and beauty is a crime. It is simply a fact that some people are taller, richer, better looking, and smarter than others, but it does not follow that everyone would be better off if no one were taller, richer, better looking, or smarter than anyone else.

Those who live more sensible lives outside the political box are undaunted by the political rhetoric of unfairness and inequality. Instead, they simply strive to improve their own quality of life without fretting over someone across town, across the country, or even overseas being taller, richer, better looking, or smarter, or, in effect, experiencing a better quality of life than their own.

In A Theory of Justice, noted political philosopher John Rawls (1921–2002) claims that justice must deny a person the financial benefits resulting from his or her natural talent, since such talents were “accidents of natural endowment” and not earned. Such an intrusive notion begs the question: Why would it then follow that someone’s “unearned” financial benefit has been earned by or belongs to anyone else? Underlying such intrusiveness is an almost divine-like arrogance asserting that all lives must be lived in accordance with another’s personal agenda. Only in a political democracy would anyone dare assert such a pretentious concept without being laughed out of the room as an eccentric demigod.

To demonstrate the arrogance and intrusiveness of Rawls’s claim, let’s ask Rawls to personally carry out on one of his wealthier neighbors his claim of fairness and justice. Imagine the scene: Rawls is knocking on his neighbor’s door. When answered, he demands as a matter of fairness and justice that the neighbor share his house with others because the neighbor was able to acquire it only as a result of his greater talent. Rather than calling the police, the neighbor would likely call one of Rawls’s family members to tend to Rawls’s safety, fearing that the poor fellow had totally lost his sense of reason. The absurdity of advocating these types of political “fairness” claims in the name of justice can easily be seen for what they are — whether logically, emotionally, economically, or morally — by reducing them to similar scenes involving just two actors. For some, reducing a scene to a one-on-one interaction to distill and analyze the essence of a political claim is quite natural; but for others — particularly those trapped in the typical political box — such an exercise is generally too abstruse.

Aside from the arrogant and intrusive nature of Rawls’s claim that people do not deserve the financial benefit of their natural talents, the glaring fallacy of that claim resides in the fact that the more talented people are at satisfying the preferences of others, the wealthier they become — but to no greater extent than the sum value of the benefits (wealth, pleasure, health, etc.) realized by those whose preferences they have satisfied. The choices people make determine the value of another’s talent. To handicap naturally talented people in their pursuit of well-being is to simultaneously handicap those who would choose to benefit from that talent in their own pursuit of well-being. Satirically, in a Rawlsian world, talented people would be restrained from overburdening society with the benefits of their talent.

Beneath the fallacy that earning gaps are harmful and wealthy people cause others to have less is the demoralizing creation of anger in people who now live their lives blaming others for their lot in life. This sorrowful outcome is just another example of how government brings out the worst in people — in this case, both in those who create the anger and those who now harbor it.

1Emphasis added. Christopher S. Rugaber, “Wealth Gap: A Guide to What It Is and Why It Matters,” Associated Press, January 27, 2014, http://www.businessinsider.com/wealth-gap-a-guide-to-what-it-is-and-why-it-matters-2014-1; Lisa Fu, “The Wealth Gap in the U.S. Is Worse Than in Russia or Iran,” August 1, 2017, http://fortune.com/2017/08/01wealth-gap-america/; Heather Long, “U.S. Inequality Keeps Getting Uglier,” December 22, 2016, http://money.cnn.com/2016/12/22/news/economy/us-inequality-worse/index.html.
2Alan B. Krueger, “The Rise and Consequences of Inequality in the United States,” speech January 12, 2012, https://cdn.americanprogress.org/wp-content/uploads/events/2012/01/pdf/krueger.pdf.
3Raj Chetty, Nathaniel Hendren, Patrick Kline, and Emmanuel Saez, “Where Is the Land of Opportunity? The Geography of Intergenerational Mobility in the United States,” Quarterly Journal of Economics 129, no. 4 (2014).
4Chul-In Lee and Gary Solon, 2006, “Trends in Intergenerational Income Mobility,” NBER Working Paper No. 12007, National Bureau of Economic Research, February.
5“The Distribution of Household Income and Federal Taxes,” Congressional Budget Office (November 2014), p. 24.
6John Christoffersen, “Nobel-winning Economist Warns: Rising Inequality a Problem.” Associated Press, October 15, 2013, http://www.telegram.com/article/20131015/NEWS/310149727/1237.
7Thomas Piketty, Capital in the Twenty-First Century, reprint ed. (Cambridge, MA: Belknap Press 2017).
8Timothy A. Judge and Daniel M. Cable, “The Effect of Physical Height on Workplace Success and Income: Preliminary Test of a Theoretical Mode,” Journal of Applied Psychology 89, no. 3 (2004): 428–41.
9Daniel Hamermesh and Jeff E. Biddle, “Beauty and the Labor Market,” American Economic Review (1994): 1174–94.

Liberty, Dicta & Force: Why Liberty Brings Out the Best in People and How Government Brings Out the Worst