Income Inequality by Force

"Hey, Cyn, guess where I am?"
--Tess McGill (Working Girl)

Spot on observation that although President Obama calls growing income inequality 'morally wrong,' income disparity has grown more on his watch than in other recent administration. These pages have frequently discussed the effects of government policy, and this administration's efforts in particular, on the distribution of income and wealth (examples here, here, here, here).

Income inequality itself is not morally wrong. In fact, it is an essential feature of a thriving market economy, as it empowers consumers to motivate producers to better meet marketplace needs. Those producers who do so are compensated well; those who do not do so are paid less.

Although it gets less attention, an even more important feature of a market economy is income mobility, defined as the extent to which people can move (up or down) in income. In unhampered markets, people who better serve the needs of the market move to higher income brackets; those who do not do so drop to lower levels.

Distributions of income and wealth therefore have natural shapes and variances to them, reflecting voluntary cooperation among people seeking to improve their circumstances.

The problem occurs when force is applied to unnaturally alter the distributions. When people use force on their own to alter income or wealth distributions, it is called robbery, fraud, slavery, etc.

When people employ government agents to forcefully alter income or wealth patterns, the associated policies go by many names: welfare, war, fiscal policy, monetary policy, et al. Some of these policies force the distribution tighter while others serve to widen it.

Currently, the policies enacted by the Obama administration are, on the net, serving to force the distribution wider.

If this president is serious about reducing income inequality then he should not apply even more force to the system in hopes of reducing the spread between rich and poor.

The correct response is to remove force from the system.