What's GOOD About "Inequality"

From last night's PBS Newshour:

Watch Does U.S. Economic Inequality Have a Good Side? on PBS. See more from 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?

RICHARD EPSTEIN: Yes.

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.

RICHARD EPSTEIN: No.

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.