I have posted occasionally about my concern over income and asset ownership inequality. It is a subject that triggers strong reactions. My recent comments on USFR about how modern democracies (even ours) are a mixture of capitalist and socialist policies brought a hail of accusatory responses. My point - which got lost once I used the the word "socialism" - is programs like Social Security, Medicare, and even our beloved farm program are actually income redistribution programs designed to address inequality. I also mentioned Greg Mankiw's idea of a revenue-neutral carbon tax returned as earned income credit to the poorest who would be most impacted by higher energy costs.
The issue of inequality and whether we should do anything about it will be one of increasing conceren I believe, as the trends show few signs of reversing. That's why this post on Freakonomics was illuminating for me.
Further, a growing body of research reveals that the social and medical costs of inequality are high. Here is the tiniest of samplings:
• Among both American states and Canadian provinces, homicide rates closely track income inequality, even after the absolute level of income itself is carefully controlled for. That homicide is not driven by poverty alone is demonstrated by Canada, where, because of aggressive redistributive policies, the poorest provinces have the lowest inequalities and also the lowest number of violent deaths.
• It is becoming increasingly obvious among obesity researchers that the primary underlying factors in this epidemic are social class and income inequality.
It is no accident that the U.S., with the highest income inequality among the world’s developed nations, also has the highest incidence of obesity and its attendant comorbidities: diabetes, hypertension, and vascular disease.
Obesity may also be the reason that the U.S., ostensibly the world’s wealthiest nation, ranks 29th in life expectancy, right behind Jordan and Bosnia. Those who think that these problems are primarily the result of voluntary lifestyle choices should reflect on the difficulty of providing a family of four with fresh fruits and vegetables on a minimum wage salary. [More]
As research uncovers more linkages to the social costs of runaway inequality it offers new reasoning to apply to what was formerly an emotional reaction to the growing gulf. Narrowing the gap - or at least providing more effective tools to bridge the income disparity (such as education) - can then be seen as economically sound policy.
Idealogical purity, regardless of which point of view, seldom makes for effective economic policy. Between brain research and new economic models I think an awareness is growing that will add greater depth to our choices compared to simple p/q graphs.