Thursday, October 30, 2014

Inequality Does Not Reduce Prosperity

By Scott Winship

Since the Great Recession, inequality has loomed large in policy debates in the United States and around the world. Losses from the recession and the slow pace of recovery since have fueled concerns that inequality is not simply unfair but harmful. It is now commonplace to see claims that high and rising inequality levels have held back or worsened living standards among the poor and the middle class, a theme of Thomas Piketty’s best-selling Capital in the Twenty-First Century.

Such concerns may nevertheless be misplaced. The prospect of vast economic returns might, for instance, incentivize more innovation and investment, producing stronger economic growth and higher incomes even among those who do not amass fortunes. By rewarding work and human capital investment, inequality between the upper middle class and the poor could also promote stronger earnings growth for everyone over time.

Read the rest here.

1 comment:

  1. These types of "hard science" studies to gain insight into economic policy are worse than useless. They enable the scientific community to continue to believe they are serving some useful purpose gathering and analyzing bits of data when they are simply wasting time and money. They ignore the more powerful tool of deductive logic which offers true insight into human action and end up with useless conclusions like this:"...cast doubt on claims that rising inequality is responsible for slowed income growth in America—and they suggest that attempts to reduce income inequality, in the U.S. and elsewhere, may not produce higher living standards..." "Cast doubt"? "Suggest"? This weak-kneed conclusion will change nothing! While the deductive logic of the Austrian school of economics offers real answers it also reveals there is little need for "policy" in the first place. And this is of course a death sentence for government and all the little "scientific" bureaucrats its funding has spawned. At the very least we should ignore and more actively not support these data-driven mistakes.