In a post on income inequality last month, Will Wilkinson wrote:
Like a broken record, I repeat myself: A high level of income inequality means nothing in itself.I really hope Wilkinson doesn't actually believe this, because it's simply false. But browsing through his posts on income inequality, I get the feeling he really does believe it. Wilkinson is extremely bright, and clearly capable of nuanced thinking. But when it comes to income inequality he seems to inhabit the world of simple, neat models that produce satisfyingly clean answers, or what I like to call the Principles of Economics World: apply textbook economic model to issue; get answer; repeat as necessary. There are several reasons why Wilkinson's assertion is false, but here's just one: The higher the level of income inequality, the greater the chances that the richest members of society alter the institutional structure to reinforce the pattern of growing income inequality at the expense of the rest of society. In other words, a high level of income inequality means, in itself, that the society is at a greater risk of government capture by the wealthy. This is only not true if the government is completely immune to being influenced by money. To my knowledge, no such government has ever existed, and I'm 100% positive that no such government has ever existed in the U.S. Wilkinson seems to be of the opinion that unless U.S. income inequality is benign unless it was produced by some inefficient or unfair mechanism. He also seems to think that absent evidence of an inefficient or unfair causal mechanism, no policies should dare attempt to reduce U.S. income inequality. This is also wrong, for the very same reason: if income inequality is high enough to permit government capture by the wealthy at the expense of the rest of society, the high level of income inequality is inefficient, regardless of the mechanism that produced the income inequality. I think it would be extremely naïve to suggest that no areas of government policy have been captured by the wealthiest Americans (see: Bush tax cuts, 2003). And if U.S. income inequality has reached the level where government capture of income tax policy by the wealthy is possible, then it's equally naïve to suggest that income inequality is benign unless definitely proven otherwise.