Economic Growth and Unequal Wealth Distribution, A Dynamic Approach, by Victoria Curzon Price. In New Perspectives on Political Economy, Volume 2, Number 2, 2006, see pp. 116 – 135, a 20 pages pdf.
Abstract: This article surveys various equity-based arguments from Marx to Rawls, in favour of income redistribution by means of public policy. Political explanations, the role of luck versus merit and the problem of the legitimacy of wide income differentials, are also discussed. The article argues that income and wealth inequality, due in great part to luck, is an inseparable part of economic growth, and even necessary for political freedom.
A survey of data published by the United Nations shows that most people today enjoy higher per capita incomes than in 1975, during which time the world’s population almost doubled. The article claims on the basis of this data that the world has entered a new phase in economic development, during which productivity growth surpasses population growth on a broad scale. People are becoming richer, but income disparities persist because they are an intrinsic part of the growth process.
Excerpt: … 1.11 The politics of income re-distribution
Having briefly summarized various strands of thinking with regard to the distribution of material possessions, it seems to me difficult to come down firmly in favour of compulsory re-distribution by the state from a philosophical point of view. It is lacking in moral content, it violates individual property rights in the broadest sense, it is inefficient and degrading, and possesses no safe limitation of state action. In short, there is no acceptable theory of re-distribution compatible with freedom, dignity and justice.
On the other hand, there is a very convincing explanation of re-distribution based on the politics of majoritarian representative democracy. It is always in the short-term interest of the 51% majority to tax the remaining 49% minority.
There is therefore a permanent built-in constituency in favour of re-distribution in any democracy …
… New Perspectives on Political Economy
it has produced the wealth of the modern era. But for the process to work, the chance of success must be balanced by the risk of failure at all times. This dual incentive system is needed not only to motivate people to follow the sign-posts to success and avoid the indicated danger zones. It is essential as a guide to an uncertain and unknowable future.
Price signals encoded in economic success and failure distill all the dispersed knowledge available in real time at any one moment. New information is constantly absorbed.
No one can know but a small fraction of all existing information, and it is essentially unknowable in the whole, or to any of the economic agents who are actually taking decisions.
However, economic agents acting on the basis of the partial information encoded
in price signals, and using their own specific knowledge, are in fact acting in a coordinated manner, despite their inherent ignorance. F. A. von Hayek received the Nobel Prize in Economics for having discovered the coordinating function of the price mechanism. It allows us to be forward-looking in an uncertain world. Without it, our economy would become static and predictable, as it used to be in traditional societies. And what is static and predictable is very soon taken over by one tyrant or another.
Income inequalities and the uncertainties which attend all human endeavour are
therefore an indispensable part of our freedom. As Hayek says, it is our inevitable ignorance of so many essential matters which forces us to rely on chance to see us through.
We need the liberty to explore all possible avenues, in order to find solutions to problems.
We cannot use liberty just for those situations where we know it will work. Partial
liberty is worthless. The economy would grind to a halt and fall easy victim to whatever great tyrant came along. This is the nature of the link between uncertainty, competitive markets, wealth creation and liberty.
Consequently, income inequalities are part of our liberty and wealth, and have to be endured – or enjoyed. Empirical evidence suggests that the latter is more appropriate. To this question we now turn.
My comment: no way, I do not agree with the lady. All these affirmations have already been contradicted by other economists. See tomorrow and later.