Sunday, January 8, 2012

How Literature Can Reduce Income Inequality

In “How Egalitarianism Increases Inequality,” Bryan Caplan argues that:

All else equal, people in respected professions make less money. The mechanism is simple:

1. People like to be respected.
2. People know that if they enter a respected profession they will personally enjoy more respect.
3. This increases the supply of people in the respected profession, which in turn drives down their wages.

So what happens to inequality when one profession becomes more respected? It depends. If people in the profession currently earn less than average, then giving them more respect increases inequality. But if people in the profession currently earn more than average, then giving then more respect actually decreases inequality.

Now for the fun part. Imagine people become more egalitarian, to the point where they heap scorn on the rich and successful. What is the effect on inequality? By the previous logic, the effect is directly counter-productive. The more you scorn rich people, the more people you scare away from high-income professions. The more you scare away, the lower their supply. And the lower their supply, the higher their income!

Lesson: If you really want a materially more equal society, stop beating up on the 1%. Do a complete 180. Smile upon them. Admire them. Praise them. Sing songs about how much good they do for the world. The direct result will be to raise their status. But the indirect result will be to pique the envy of status-conscious people, increasing the competition among the top 1%, and thereby moderating income inequality.

On the other hand, if you want to increase material inequality, by all means heap scorn on the rich and successful. Try to fill them with guilt and self-loathing. The 1% who remain will find that living well is the best salve for their consciences.
Thus, those leftist authors who heap scorn on business people have been contributing to income inequality. They should all become libertarians, learn to appreciate the work business people do, write stories that celebrate their work, thus encouraging more people to go into business, thus driving down wages through competition. That's not the only reason they should become libertarians (of the thick kind, which I argue best mirrors reality), but it's a pretty good one, considering the role of literature as immanent criticism on our various spontaneous orders, culture, and civil society. Immanent criticism, too, can have unintended consequences!

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