Friday, November 16, 2007

False Dichotomy in the Income Inequality Debate

Josh Hendrickson:
...the most frequent solution to income inequality, and the one advocated by [Paul] Krugman in nearly every interview about his book, is higher taxes on those at the top of the income scale. While this may give the appearance of lessening inequality, in actuality it does very little. Essentially, it is equivalent to twisting the ankle of the fastest runner in the world in an attempt to make other runners faster. In no way does this make other runners faster.

...income inequality is a static measure of well-being. Looking at an individual's or group's share of income at a given point in time tells us very little. In fact, even looking at the trends in income inequality is futile. The fact that individual's rarely remain in the same income group throughout their lives suggests that looking that a group defined as "poor" or "middle class" or "rich" is irrelevant...income inequality is a poor measure of prosperity. In reality, economic growth and innovation will do more to help the poor and the middle class than any conceivable government policy.

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