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14 May 2019

What’s wrong with inequality?

We live at a time of astonishing inequality. Inequalities in income and wealth, as well as those that characterise health and education, have become flashpoints for public debate. From the ‘Occupy’ movement that swept many countries in the wake of the late 2000s financial crisis, to the recent ‘yellow jackets’ in France, millions of people are now protesting against a system that they believe leaves them out.

We live at a time of astonishing inequality. Inequalities in income and wealth, as well as those that characterise health and education, have become flashpoints for public debate. From the ‘Occupy’ movement that swept many countries in the wake of the late 2000s financial crisis, to the recent ‘yellow jackets’ in France, millions of people are now protesting against a system that they believe leaves them out.

And there is much evidence to support their belief. For example, not only have median wages been stagnating in the US for the last 50 years, but also life expectancy has actually declined for the third year in a row – a trend driven by the increasing numbers of ‘deaths of despair’ among those without a college degree. In the UK, wages have been stagnant for a decade and homeownership rates among younger people on middle incomes have collapsed.

Economists have examined the causes and consequences of income and wealth inequality in such books as Thomas Pikkety’s Capital in the Twenty-First Century (2014) and Anthony Atkinson’s Inequality: What Can Be Done? (2015). These books document the ways that income and wealth have been distributed upward and that recent capitalism has excluded most of society from the gains experienced at the very top. For example, since the late 1970s, the income share of the top 1% has approximately doubled in both the UK and the US.

These facts raise not only economic questions, but also ethical ones. In particular, we need to ask, ‘What exactly is wrong with inequality?’. Clearly, not all inequalities are objectionable. College professors are, for example, less fit than professional athletes. But this inequality in athletic prowess does not elicit moral concern.

Contrast this example with the recent case of wealthy parents buying their way into highly selective universities in the US. This practice was widely condemned by almost everyone as objectionable. There is at least one difference between these two scenarios – we might think that professors are responsible for their own sports ineptitude while young adults bear no responsibility for the fact that they were born into families that were poorer than others. We should select students on their merits – the hard work and accomplishment that they are responsible for – and not their parents’ wealth. But having responsibility for an unequal outcome does not always justify that inequality. For example, if a doctor contracts Ebola in the course of voluntarily caring for its victims, this does not mean she is less deserving of our aid and treatment than someone who was accidentally struck by this disease.

Philosophers have attempted to probe the role of responsibility in justifying inequalities – trying to understand to what extent it plays a role. At this point, the consensus seems to be that there is no defensible argument that singles out as objectionable those and only those inequalities for which a person is not responsible. In any case, it is not clear, and there is no consensus on, where responsibility starts and ends. Even if you cannot directly buy your way into an elite university in the UK, you have a big leg-up if you are born into a rich and well-educated family. But you don’t have zero responsibility for your educational achievements – you still have to put some effort in.

At the same time, it is hard to see ways that equality, independent of its causes and consequences, could be good in itself. After all, achieving equality will sometimes involve some form of ‘levelling down’. There doesn’t seem to be anything even marginally better about a world where everyone is blind than one where only some people are blind. Causes and consequences matter to our assessment.

Turning to economic inequalities, we might think about the ways that such inequalities arise from or lead to circumstances that are morally objectionable. Many philosophers, from Richard Tawney in his book Equality all the way back in 1931, up to the present day in Tim Scanlon’s Why Does Inequality Matter?, have probed these issues – for example, worrying that large inequalities in income and wealth might give some people power over others or that they lead to stigmatising differences in status.

Further, it might be that some inequalities arise from unfair procedures – perhaps they are the result of monopolies, predatory financial institutions or simple corruption. And some people had a head start at birth – they were born on third base, while others were still making their way to the batting area.

People tend to be much more concerned about inequalities that are seen to be unfair – perhaps because they arise from unfair processes. But even inequalities that arise from fair procedures may have pernicious consequences, including by creating an uneven playing field in the subsequent generation.

As we hope this discussion makes clear, the question of what makes an inequality objectionable is complex. In order for economists and policymakers to contribute effectively to social deliberation about various policies that affect inequality, they need to grasp the reasons why some inequalities are objectionable and others not.