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The society considers income inequality as a curse upon itself. In a general argument between a ‘Capitalist’ and a ‘Socialist’, or a ‘Liberal’ and a ‘Conservative’, generally the Socialist/Liberal individual accuses free market or Capitalism of creating economic inequality in the society. A general example given is of US society where top 1% of the people own 40% of the wealth in US(or a variation of the statistics). This makes the people who stand for free market and capitalism generally go on a defensive by either attacking the statistics, or by comparing the worst person in a ‘seemingly’ capitalist society like United States being better than most average or well rich individuals in a seemingly socialist or an equal society like North Korea and Cuba.
My point here is not to argue whether the statistics is correct or not or to argue whether poor people in United States are better than poor people in Cuba, but to see whether ‘inequality’ is a negative attribute of a society on its own.
Society with an all knowing Superman
Imagine a society where there is one human being which knows each and everything. Consider him as knowledgable as God. He knows how much exactly its going to rain or snow, how much wheat is going to be produced, how much metal is there in a gold mine, and when its going to become uneconomical to dig more gold. He knows everything, if you ask him what is the best job you could do, he could even tell you that. He has all these information of the time till he dies.[1] In a free market society this man will end up owning everything in the world. There will be no investors in the stock market but only him, he could plan the resources in such a way that it gives him maximum profit. He pulls out capital from a oil company exactly when the oil extraction will not be economical anymore and invests in alternate energy. He shorts the shares of the companies the moment its CEO tries to be dishonest or to cook the books. He bursts the bubbles and lifts up the recessions by investing in such time. Overall he owns everything in the world. Everybody works for him now.
The question which comes now ‘Is this a terrible society to live in?’, or ‘Is there something wrong with this society?’. Initial reactions would be, ‘Of course, this is a horrible society to live in, one employer and he owns everything. You can never become rich in this society. He will be consuming everything.’. But give it a little bit more thought. What this guy has managed to do is eliminate the risk from the society. There is no risk. When you start a business, you see a demand and you see a supply, and you hope to match the supply and demand and hope to undertake the leftover of that operation. In this society, all demands which can be met by supplies are already been met by this guy.
People of city A want a train to the city B, but they don’t really wanna pay enough money which facilitates the operations of a train, so they use buses instead. The day people of city A get enough fed up and decide that they would be willing to pay enough money for a ticket of this train, this Superman sends his men who start to build a railway line between city A and city B. Sure Warren Buffett, Bill Gates, and all the successful Stock market Investors and businessmen would not wanna live in this economy, but common people like you and me are much better off in this city than we are in our current situations.
Imagine there are no shortages of wheat and rice, because this Superman who has the insight of demand/supply fluctuations always buys/sells the wheat and rice in such a way that maximum people are able to buy maximum amount of rice all the time. Imagine there is no stock market crash which proceeded 9/11 because this guy has already smoothed it out. Imagine no real estate bubble because when people overvalued the houses, this guy shorted them.
Is this society better?
You see the reason why the people of this society would be so much better than our current society because there is no risk in this society. Sure someone might say that you can never dream of starting a business and becoming a billionaire, well don’t forget this is a hypothetical society where we are presuming this superman knows everything. We dream over the possibilities. We don’t dream that we will go to school tomorrow, because we are pretty sure we are going to school tommorrow like every day(though we may dream of NOT going to school tommorrow for the possibility of a rain storm or something). Imagine it to be like this, on a roulette table, some people win and some people lose. If you told everyone the outcome of the game, the people who lose will never play the game, and the people who will win, now have nothing left to win from. Roulette is a zero sum game and real life is not, but in our example, if you play knowing that you will lose, you still lose and nothing changes(lets say you decide to run an airplane service from City A to B whereas they don’t really wanna pay that much, so now you lose all your money by investing in it). If you are correct on your entrepreneurship decision, and you wanna run a railway line from City A to B, you will be either beaten to it by the super investor and your train will run in a loss, or if you are really lucky you may beat the super investor to it.
Even if he lived in a socialist society, you will have to make him the central planner, performing the same functions as he did in a free market economy[2].
The point is that although this society may not be as thrilling to live in as our current society, it will have a lot less poverty. Except for that superman guy everybody else would be more or less equally rich.
Society with real life men
In our society there is no such human being who knows each and everything about the economy. Nobody can really be that accurate, so that situation is highly unrealistic. But it tells us something, it tells us that inequality of wealth isn’t really a objectively bad or good thing. Sure if in North Korea if Kim Jong-Il is the richest man and his family owns everything and everybody else is terribly poor then that sure is a bad kind fo inequality, but for economies with private ownership of means of production(countries with stock market), if the stock investors are the richest people then that isn’t neccessarily bad thing. It would be a bad thing if they made all their money through government coercion, like being a politician’s relative who knows which property will be picked up for Olympics stadiusm etc etc.
Conclusion
Inequality figures on their own are completely useless piece of infromation. They don’t convey any information. Someone supporting equality, or someone being egalitarian[3] as in someone desiring an equal society does not say anything about them. Although whether someone supports use of violence(like supporting welfare and income redistribution schemes) or just social movement for voluntary charity is a completely different issue. Most economists in America support income redistribution and welfare programs.[4] General trend was that the more elite institution they were affiliated from the more they supported redistribution. In an earlier article I explained why Hollywood is so leftist[5], probably the similar mentality affects the economists.
Footnotes:- I am cutting the example short so that it does not complicate the article, so imagine him knowing everything about the future till the day he dies. [↩]
- Except theoretically he cannot plan everything in the society, so he has to choose, and you must incentivize him in some or the other manner to perform his task. Even in the free market society he has limited time so he had to choose between planning the resources by trading in the ownership of these capital goods, and spending leisure time. The huge profits ensures that he tries his best to utilize himself from most important to lesss important decisions. [↩]
- Was Gandhi a Libertarian II – By Unpretentious Diva, considers Gandhi as an Egalitarian, an accusation author considers sufficient enough to be considered as a negative attribute. [↩]
- In a 2003 poll of 1,000 economists, a majority of polled economists favor “redistribution”,safety regulations, gun control, public schooling, and anti-discrimination laws. They voted Democrat:Republican by 2.5:1 [↩]
- Why is Hollywood so Leftist? – by Renegade Division, RFL [↩]
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377 views10 Responses to “Inequality of Wealth: Is it a bad thing?”
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GP Says:
December 14th, 2009 at 3:17 amI totally agree – At the max you can do charity for your own mental satisfaction but can’t bring everyone at same financial level.Even it didn’t happen in era of –Satyayuga when Ram and Sri Krishna were rulers in their respective territory(if u do believe in mythology). I got small question - How exactly this Superman is different from dictator? How can you ensure that once he gets all the power and resources at his disposal won’t exploit citizens of society for his own good? I really don’t understand why this example was illustrated in support of – Free Market economy which is supposed to work on healthy competition among different service providers…… right?
August Says:
December 14th, 2009 at 4:36 amI like your conclusions, but even after reading many times your article, I am still trying to find out the logic on which you proved that “inequality of wealth rather than being good or bad, is simply right”.
Even your concept of superman did make free market society and a socialist society better, where did it prove that inequality is not objectively good or bad?
What I interpreted, you were trying to say The Superman even being richer than everyone, made whole society’s lives better, so even he is far richer than others, his inequality with other people is actually good.
I think this article is incomplete with respect to the message it wanted to convey.
Renegade Division Says:
December 14th, 2009 at 7:52 am@GP Said:
That’s an illogical question, I mean in a free market society he has the POWER to do everything with everybody’s consent(Is Warren Buffett misusing his power or acting like a dictator when he makes a decision to move Coca Cola factories to China shutting down factory you work in?)
Anything he needs is done by buying and selling. If he needs a palace for himself, he will have to hire people and pay them work make a palace for him. IF he wants to build a Pyramid for himself, he will have to hire people to build it for him, he can’t just make people do it involuntarily.
Lets take an extreme example, If lets say he wants some guy’s wife and he threatens to fire her husband if she doesn’t sleep with him. If she disagrees and he fires her husband, now he has created unemployment, a guy willing to work but has no job, that’s actually a violation of our presupposition that he knows every risk, in this case he didn’t know that his actions will create an unemployed guy.
Lets say for some reason if he keeps on doing those kinds of ‘dictatorial’ things, he will end up creating enough number of people who are not working for him(perhaps even more because he is pissing WAY more number of people), and they will start a competing company.
That example was given as a society with complete inequality(Gini coefficient would be 100, one person having all the wealth, 0 GINI Coefficient means perfect equality, everybody having equal wealth), YET this society is in no way less free, or less prosperous(in fact our imaginary superman will make it more prosperous than all the current societies).
Sure in a realistic society its not possible that one guy manages to have all the information,so there will be competition and everything. But again don’t make the mistake of giving some sort of intrinsic good value to ‘competition’. Just because a society is having competition that doesn’t mean its better in any way then a society with only one provider(my point is this information is incomplete to determine conclusively).
@August Said:
Well I didn’t bother to cover inequality being bad because people already have way too many examples and beliefs about that. So I focused completely on showing that inequality can be good. MY example of that society is a completely unequal society. It has perfect inequality in terms of ownership of wealth(its still not perfectly unequal in terms of income). This perfect inequality society is actually better than our equality society. That’s what I showed. My point was that inequality doesn’t demonstrate anything about a society, you could be better in an unequal society and you could be worse in a equal society.
No, I said Superman knowing everything WILL be more richer than everybody else, and he will become rich by using his knowledge to the best of the people(the only way he could become rich). MY assumption about the society wasn’t that he is richer than everybody else and then ponder the reasons why he was richer, I PRESUMED that he knows more, then he become rich by directing people’s labor to most profitable least risky ventures, by directing resources which he will end up owning, into their most productive use.
I think what you need to understand to understand my article is how a Capitalist society plans. When in a stock market a company A’s shares are go to the floor then the market is trying to let that Company know that its ventures are very inefficient for the current use of its capital goods. Buy selling stocks of that company the market lets the company know that it needs to either modify its business or declare bankruptcy and have its resources/capital goods used by another company.
It may be very possible that I presumed somethings everybody understands about market(because I have covered it many times before) and they may not, in that case you may read my earlier articles.
Help Poor farmers, speculate on grain
Why speculation is indespensible for free markets
satya prakash Says:
December 15th, 2009 at 4:34 amwhat if everyone wants to become the superman?
how many people are there in that society only the superman or the superman and all his dependents.
satya prakash´s last blog ..Inequality of Wealth: Is it a bad thing?
Unpretentious Diva Says:
December 15th, 2009 at 5:01 amIn my society, everybody want’s to be a superman, but none is able and they never will be.
The idea of Superman, or Overman comes from Nietzsche, it comes from philosophy of Existentialism, it comes from philosophy of Advaita Vedanta too.
Author here is trying to discuss about Economic Overman/Superman.
There can be various castes of Overman/Superman too. One can be Overman of Economic world, One can be Overman of scintific world, one can be Overman of philosophical world, One can be Overman of Spiritual world.
Nietzsche believed that Jesus Christ was an Overman/Superman and he considere that Gautam Buddha was also an Overman.
He further believed that there will be some scientific overman too.
Now, an economic overman cannot rule world by himself, nor can a philosophical or spirtiual or even scientific overman can rule or control the world. That is, even if there are some overmen, people will remain free and that will be the reason for their progress. In No way an overman can control all human, or even a significant part of world. But yes, because of his greatness, because of good qualities that makes him an Overman like Jesus Christ, he will certainly gain a lot number of voluntary fans/disciples, like Jesus Christ got or Buddha got.
If every one will try to be Overman, they may and they will fail, but because of their proper tries, the society will improve. Everybody should try to be an Overman, to be the best of his abilities, it is always good. But trying doesn’t mean being.
August Says:
December 15th, 2009 at 7:35 am@Author
Here you are completely wrong my friend, your whole above statement is conflicting in itself. Inequality exactly describes what a society is. Society is not an entity independent of individuals. Infact existence of society is just a coincidence, a mathematical abstraction. If I am worse in an unequal society, then there are better people than me in it. If I am worse in an equal society, then every individual is worse in the society. So here inequality completely describes what a society is. There is only one way to make a statement or judging a society and that is by making statement or judging individuals who live in this society and not making statement about society considering it as an independent seperate entity.
Actually what I was searching in the article was this or a version of this:
Every individual is an independent entity. The instant you start comparing, one man becomes far better than other. One man is Scientist, another is businessman, another is artist and another is crippled crawling insect by his choice and capabitiy. What a man produces, is the representative of his wealth. Since different men have different amount of produce and so the wealth and by their own choices and capabilities. And this is why inequality rather than being good or bad is just simply a mathematical expression or figure, which simply is right. If this figure is not right, then there is something wrong with this society and it should be corrected.
That’s what I questioned, you only cared to show inequality as good in the article (and you assumed as the article’s name itself indicates, there are many examples claiming inequality as bad). But you did not care to show anywhere inequlity is neither good nor bad, OR inequality simply does not tell anything about being good or bad.
In the above paragraph, what did you mean by “It”. I could not understand it.
What do you mean by “common people like you and me” here?… I hate this kind of notion in an article written by a person who claim to be libertarian. There are no common people in a libertarian society. Even your superman/overman did exist in the society, he can not make anyone common. Let him be a superman but a man is complete in himself, he is so far away from your superman and and any other man that, no one can even touch him, unless he himself wants to be touched. My this paragraph is bit out of context, but I hated your notion of common people and I put it.
@Unpretentious Diva
I believe I should read first this concept of “Existentialism” , may be this article then would make more sense to me.
Unpretentious Diva Says:
December 16th, 2009 at 10:51 pmWell, I was referring to Satya Prakash, who commented above me.
You dont need to read existentialism. It is the prototype of objectivism/indiviualism. Ayn Rand herself wanted to name her philosophy as Existentialism, but she refrained because t was already use by Nietzsche, if you will read it, it will be good, but if you won’t it won’t be a loss.
Roark or Galt can be said as Superman/Overman.
Every keating want to be a Roark, every Jim Taggart want to be Galt
Interloper Says:
January 7th, 2010 at 4:12 pmThis would be great if our society were really run by supermen, but it is not. Bill Gates stole most of his code for DOS from Tim Paterson, who received a pittance. Andrew Carnegie used bribes to take control over railroads. Many executives win through mergers, product tying, unfair competition, prank tactics, or manipulative marketing- their product is not the best product, and they are rarely the geniuses behind the good decisions. This is true of investments as well- how much of these stock market antics really contribute to the flow of capital and how much is ‘monkey juggling’, and the economic version of pscyhological warfare?
There is nothing wrong with true inequality- there is everything wrong with ‘artificial’ inequality which is what we’ve got. I had a job where I could assemble a widget in an hour for $200 that ordinarily cost $500- so I was saving $300 per hour for my company, and getting $18 per hour for the labor. A starving Angolan could have done the same- his inability to produce that is because he doesn’t work for that company and he doesn’t have access to the tools or resources. He is not ‘less productive’, he is simply marginalized.
Capitalism is unjust as it currently exists.
Renegade Division Says:
January 7th, 2010 at 4:40 pmIf your company is making $300 and paying you only $18 and they have managed to do it without any govt intervention or usage of IP(as in there are no new companies entering the market driving the wages down or market price of product down) then that is a natural inequality, not artificial. Only govt is artificial in a market because only they can truly move things in market against the wishes of the market. Market wishes that the price of this device to come down from $500 to $250 but for some reason its not coming down, that’s like saying water is not floating down from a hill, which means something is stopping it, market players are as controlling of a market as rocks are in controlling the flow of a stream.
The fact that $300 profit over a $200 product(150% profit, you gotta be smoking something to give that example like that) is rarely possible in market in long term. All those capitalists making 10-15% profit should be running towards this venture and invest heavily in this and its competing firms. The capital will keep on flowing in until profits come down from 150 to 10-15 or even 30-40%.
If development of that product and setting up of production took 3-4 years for this enterprise then such high profits can be explained, but it will only last for 3-4 years(that’s the time it takes for late entrees to catch up). And during these 3-4 years this company was recuperating the capital investment and compensate the risk taken by the investors. You the worker working for $18 per hour do not deserve a penny more than what your labor is worth in the market unless you were bearing the risk of the investment.
That’s the biggest difference between Socialists and Capitalists, the former refuse to count risk bearing as any form of labor or effort or input. Somehow the capitalist should bear all the risk but still pay a share from his profits to his non-risk bearing workers, and if he makes losses then he should simply suck it up.
tempo dulu Says:
February 26th, 2010 at 10:39 amshow me a society where there is equality of wealth and I can assure you it would be hell.
tempo dulu´s last blog ..Why are some countries richer than others?