Income Inequality 3

Dr. Anne Bradley, in Why Does Income Inequality Exist? An Economic and Biblical Explanation, says we should care about income mobility, not income inequality.  I think we should care about, and work to reduce, income inequality (along with income mobility) to the extent such inequality is attributable to unjust causes.

What might those unjust causes be?

The answer is probably very broad.  For now, let’s stick just to examples Dr. Bradley cites: “not letting business fail when they deserve to fail (bailouts); protecting some businesses from competition (subsidies and tariffs); or letting some businesses succeed over others through protective legislations (licensing and other regulatory requirements).”

What do these — i.e., bailouts, subsidies and tariffs, and licensing and other regulatory requirements — have in common?  They are results of government actions authorized by legislation that came out of the political process.  What is this political process?  Elections and lobbying, to grossly oversimplify.  Is this political process always unjust?  Hard to say in such a blanket fashion.  Is this political process sometimes unjust when viewed from the Biblical standard of justice?  I believe so (but admit answering this thoroughly would take a book or two or three…).

So I draw this conclusion, using Dr. Bradley’s terminology: to the extent income inequality results, not from the mere, providential, distribution of diverse gifts, but from “rent-seeking behavior” enabled by legislation birthed through the political process that operates at times unjustly, we should recognize such inequality as “a sign of injustice” and work to reduce it.

Income Inequality 2

Dr. Anne Bradley, in Why Does Income Inequality Exist? An Economic and Biblical Explanation, says “if we care about a society that reduces poverty and assists the poor, we should be concerned not about income inequality but the relative prosperity of those at the bottom and their income mobility” (emphasis mine).

I agree we should care about income mobility.  I also think we should care about income inequality.

If the only reason for income inequality in our society is due to the diversity of gifts and the diversity of the monetary value our society attaches to such gifts, then it might be easier to argue we ought to focus solely on income mobility.  Dr. Bradley states it this way: “In a free society, absent cronyism, disparity of wages is not a sign of injustice” (and, it is implied, thus such disparity need not be addressed as if it is an unjust outcome).  Let me restate that this way: “disparity of wages is not a sign of injustice” so long as we live “in a free society” where “cronyism” is “absent.”

Do we in fact live in a “free society” free from “cronyism”?  First, what do those words mean?  Here is Dr. Bradley:

It is important to make the distinction between free-market exchange and rent-seeking (cronyism). The farmer, who grows soybeans, innovates and keeps costs down will be rewarded through profit by the market. The farmer who grows soybeans and lobbies the federal government for subsidies which protect him from other more productive soybean farmers is not serving his customers. Rather, he is lobbying the government for money which he did not earn, and the “profit” he secures in this fashion is appropriated from taxpayers.

In other words, a free society is a society in which “free-market exchange” takes place, and is free from “rent-seeking” behavior such as lobbying for federal government subsidies.

So, again, do we live in a free society, free from cronyism?  Again, Dr. Bradley:

This research suggests that there is some amount of income inequality which results from the uniqueness with which we are created; however, it is economically unwise to exacerbate any natural level of income inequality by: not letting business fail when they deserve to fail (bailouts); protecting some businesses from competition (subsidies and tariffs); or letting some businesses succeed over others through protective legislations (licensing and other regulatory requirements) (emphasis mine).

Do we live in a society that has bailouts?  Yes.  Do we live in a society that has subsidies and tariffs?  Yes.  Do we live in a society that has licensing and other regulatory requirements?  Yes.  Do we live in a “free society” free from “cronyism” (as those terms are defined by Dr. Bradley) then?  No.

This means, while “there is some amount of income equality which results from the uniqueness with which we are created” and thus does not pose any issue of injustice, there also is some amount of income inequality which results from factors other than our diverse gifts.  And, if so, to the extent such other factors are results of unjust processes or systems (whether social, economic, political or other), we should care about income inequality as a sign of injustice.

That was the easy part, though.  And I doubt that’s a controversial conclusion to anyone. But there is more….

Income Inequality 1

Dr. Anne Bradley, in Why Does Income Inequality Exist? An Economic and Biblical Explanation, explores economic reasons and Biblical views on income inequality that exists in our society.  She then draws the following five conclusions that build on top of one another.

They are:

• “Diversity is a Biblical premise of Creation. We are born with different gifts.
• By focusing on our gifts we can unleash our comparative advantage and bring value to the marketplace by serving others.
• In a free society, absent cronyism, disparity of wages is not a sign of injustice.
• If we care about a society that reduces poverty and assists the poor, we should be concerned not about income inequality but the relative prosperity of those at the bottom and their income mobility.
• An opportunity society is the best way to unleash the creativity and dignity with which we are created and serve others with our gifts.”

I agree that our society attaches different monetary values to different gifts and Biblical justice does not call for income equality.  I also appreciate the focus on income mobility as a way to enhance “the relative property of those at the bottom” of the income ladder.

At the same time, I find the prescription — “if we care about a society that reduces poverty and assists the poor, we should be concerned not about income inequality but the relative prosperity of those at the bottom and their income mobility” (emphasis mine) — less than fully satisfying. Specifically, I think the solution, in our society, is both to work for income mobility and against income inequality.

Why?

Let me explore….