What, exactly, is wrong with economic inequality?
Thomas Piketty's improbable bestseller, "Capital in the Twenty-First Century," has put that question in sharp relief. As just about everyone now knows, Piketty contends that over the next century, inequality is likely to grow. In response, he outlines a series of policies designed to reduce wealth at the very top of society, including a progressive income tax and a global wealth tax.
But Piketty says surprisingly little about why economic inequality, as such, is a problem. He places a lot of reliance on his epigraph, which comes from France's Declaration of the Rights of Man and the Citizen: "Social distinctions may be founded only upon the general good." To say the least, that is a highly controversial proposition. With respect to economic disparities, nothing of the kind can be found in the U.S. Constitution, the Universal Declaration of Human Rights, or even the International Covenant on Economic, Social and Cultural Rights.
Piketty's prescriptions require a philosophical argument, not an analysis of economic trends. Suppose that in a democratic nation, almost everyone is getting richer, slowly but steadily, and that poverty is disappearing, but that the wealth of the top 1 percent is growing very rapidly. Is that a serious problem?
To support an affirmative answer, Piketty refers to the work of the great American philosopher John Rawls, who embraced what he called "the difference principle." Rawls argued that economic inequalities are compatible with justice only if they operate to the advantage of the least well-off. In Rawls' view, a society that allows great inequalities would be unjust if those inequalities do not work to the benefit of those at the bottom.
In philosophical circles, however, the difference principle is highly controversial, and many reject it. Here is an alternative principle, which would allow far more inequality: Ensure that average income in a society is as high as possible while also making adequate provisions for those at the bottom.
Studies find that numerous people in Canada, Poland and the United States favor something like this alternative approach and that they reject Rawls' difference principle. In the same studies, most people do not show much enthusiasm for imposing a ceiling on the rich or for imposing limits on economic inequality as such.
To see why, imagine you are given a choice between two societies. In Society A, there is little poverty and the social average is very high, but some people are extraordinarily wealthy — far more so than everyone else. In Society B, there is little poverty and the social average is not very high, and no one is much richer than anyone else. Isn't Society A better, simply because the average is higher?
