Sunday, May 04, 2014

Why inequality isn't a problem but a sign of progress

With, I think, the qualifier of a relatively free market governed by rule of law and property rights (Telegraph via Instapundit):

almost all inequality in developed economies does not arise by the wealth of almost anyone else declining. (That does happen in less socially and politically developed societies, in which wealth arises from political control of resources or access to corruption.) In modern developed economies inequality arises when someone – a Gates or Zuckerberg or Cowell or Ronaldo or Rowling or just an ordinary businessman or professional – finds some way (some skill or invention or investment) that adds considerable value, and that value is not then shared equally.

In our modern globalised economy, the gains from a new idea or skill can now be leveraged over enormously more people. Instead of your new and better mousetrap being sold just to the fair folk of Wolverhampton, the whole world beats a path to your door. In such a world, improved added value creates large inequalities. But that is precisely because the added value of a Windows or Facebook or awesome evening's football skill benefits so enormously many people – even if each only benefits a little compared with the huge aggregate benefits benefits taken by the value-creator.

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