Thursday, October 27, 2011

What's GOOD About "Inequality"

From last night's PBS Newshour:

A couple o' excerpts from the transcript, just in case you don't wanna watch the video:
PAUL SOLMAN: What's good about inequality?

RICHARD EPSTEIN: What's good about inequality is if, in fact, it turns out that inequality creates an incentive for people to produce and to create wealth, it's a wonderful force for innovation. So let's just go and take somebody like Bill Gates again or any entrepreneur.

Guy earns $50 billion, right? How much consumer welfare has he created by selling products? We can estimate the amount of gains to purchases, because everybody who buys one of his products or one of Steve Jobs' products, in effect, values it more than he receives.

The social gain from inequality to consumers of those goods probably dwarfs the entrepreneurial gain by a factor of 10-1 or 20-1.

PAUL SOLMAN: So you mean the incentive for great wealth had Steve Jobs and Bill Gates create products which created so much value that it far outstripped the compensation to them?


And one of the fundamental mistakes about the egalitarians is they're so interested in trying to minimize differences that they don't understand the completely adverse effects that it has on the size of the pie.


PAUL SOLMAN: In the period in which the American economy grew most vigorously, the United States had higher marginal rates, much higher, higher capital gains rate, and more prosperity and greater economic equality.


First of all, the highest marginal tax rates were also accompanied with tax shelters for everybody in those rates. The second thing is that the monies that were being spent in those days were being spent in much more intelligent ways. That is, if you go and you look at either state or federal budgets and see the amount of money that is spent on what we would call standard infrastructure improvements, and spent well, like the interstate highway program in 1956, that was very high.

The money that is spent today on infrastructure improvements of a good variety is a tiny fraction of what it was then. And the amount of money that is spent essentially on transfer payments has mushroomed enormously.

The fundamental truth is, the tax system is more redistributive than it was before, which will lead to a reduction in efforts, and the regulatory burden on the economy is vastly greater, and we would expect lower levels of growth.
Mr. Epstein... a Libertarian law professor at New York University of Law...  slays a few more liberal sacred cows and guts pet arguments for redistribution in this brief piece, which is well worth watching.  Or reading, your choice.  The whole thang is pretty refreshing.


  1. Wonderful explanations for why capitalism is the best system, thus far invented, for achieving that elusive utopian goal of the most good for the greatest number. Thanks for sharing that, Buck.

  2. Capitalist Investor28 October, 2011 22:44

    I just got around to viewing this, as I am interested in economics, but not quite at the doctorate level.

    This is a very high level interview, and I did not understand a lot of it, because he is pulling in information from many areas, and assumes anyone listening to him has a broad background in deep economic thought.

    I understand the big picture he was outlining, but he really needs a spokesman, as his brain is too complex on this to talk to the voting public.

    Having served in the military, I know how socialism works at a very high level. It was nice to have free health care, high wages for buffing the floors, and 4 week vacations. Maybe getting shot at once or twice in a foreign adventure (imperialism through socialism).

    As a capitalist investor today, I see his points clearly. You need high disposable income in order to invest well in the market ($100k or more). Companies need investors.

    Therefore, if you get rid of disposable income, everyone is poor and miserable, and the socialists start arming themselves like Bolshevist's and a revolution occurs that wipes out half the population (sounds good maybe, no more Lindsey Lohan).

    Bottom line, Congress is not on his ship to ride, they are doing all the things Epstein says is bad. I'm glad I'll be dead before 2025.

  3. Capitalist: I pretty much understood all Epstein said and the only economics education I have comes from reading the WSJ for 30 years. I think the average American voter would instinctively understand what Epstein is saying.

  4. I agree with you, Buck. Epstein is common sense and understandable. I've listened to all 15 of his podcasts (with John Yoo) on And I'm just a glorified plumber with a specialty in radioactive water.

    WV: prowar. Well, that depends.


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