Jonathan Rothwell on Market Egalitarianism

Gallup’s Principal Economist Dissects Just vs. Unjust Inequalities in *Republic of Equals*

Have Americans become jaded by unjust inequality?

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Jonathan Rothwell on Market Egalitarianism

Bob Zadek: Thank you so much for listening this Sunday morning. We are today and always the show of ideas. I was an undergraduate at Syracuse University, an astonishingly mediocre college, and I was the poster child for mediocrity in that undergraduate school. The only course I got an F in, although I loved it, was Greek Mythology. I took a one credit course in Greek mythology because it was what was known at the time as a “football players course.”

Income Equality: A Procrustean Desire?

So the question as to this income inequality, as to that economic fact, what is wrong with it? What’s wrong with some people having more than others, so long as that inequality is the result of the simple inequality in skills and drive, motivation, psychology, intelligence, and energy from one person to another. If it is the natural result of people being different, what’s wrong with it?

Unequal Access to Markets: Modern-day Guild Systems

J.R.: Sure. So I talk a lot in the book about the importance of providing equal access to markets. I believe that a right that has been largely ignored and political science theory and scholarship, but it’s really important once you start thinking about it. And there are a few historical examples that I think really illustrate how a lack of access to markets, which was created by government laws and rules has created inequality throughout history. So in medieval Europe, one of my favorite examples is the Guild system. You have distinguished occupations that were highly skilled and required years of training and preparation in an apprenticeship-like system to develop the craftsmen like skills that were valuable in cities throughout Europe. The guild regulated who was allowed to provide these services and in very strict ways. You had to in many cases be the son of somebody who was a guild member.

A Data-Driven Understanding

J.R.: What concerns me about income inequality is when it’s not based on merit and when it’s unfair. So just to put this in perspective, Gallup just partnered with some economists at the Norwegian School of Economics and they conducted a fascinating new study in 60 countries with roughly 70,000 people around the world. They gave people different scenarios to assess how fair they believed income inequality was in their country and under different scenarios. In two scenarios, they presented people around the world with a case where a worker performs a task and gets paid six U.S. dollars, another worker performed in the same task and gets paid nothing. And they asked how much would you give from the worker who performed the task for $6 to the other one. And then they had the same scenario but in this case, the one who gets $6 was told that he or she worked harder and performed the work at a higher quality.

Income Inequality in a Political Context

Bob Zadek: Your book seeks to motivate people who form public policy to understand the issue and to fix income inequality the right way. The purpose of the book is to provide the data so people can understand it. In your opinion, as a political observer, if politicians were to say, I have the cure for income inequality and I can do so without taking from A, at the point of a gun, to do a wealth transfer to B. I can do so in a way that everybody benefits except for those people who have for too long been living in the protection of what amounts to a Guild, is that a winning political argument as opposed to just taking money from A to give it to B? A crass wealth transfer?

Corporations: Unfairly Demonized?

Bob Zadek: You pointed out that the president and many others will blame income inequality on markets. That’s like blaming markets for making diamonds so expensive. It is not the market. The markets only tell you through the price mechanism what something is worth relative to something else. The markets are simply a generator of invaluable information about relative costs. The markets don’t cause something to be valuable or not valuable. That’s a function of our old friends supply and demand. If we have a lot of something, it’s not that valuable. If we have less of something, it’s more valuable. That’s not the market’s causing it. It is the amount of supply versus the amount of demand. So to say markets cause inequality is an absurdity. Markets never cause anything to be worth anything. They immediately tell you the bad or the good news, what it’s worth relative to something else.

Future Practical Steps to Reducing Income Inequality

Bob Zadek: Now, Jonathan, there are a lot of influences and market leaders and politicians and aspirants for high public office who are glued to their computers and radio listening to this show. We have some time left. What are the lessons you want them to learn so when they go and plead for votes and offer a cure for income inequality, they least have a data driven cure. What are the lessons of the book that you will share with all of us, including all of the influencers who are listening this morning? • host of The Bob Zadek Show on 860AM – The Answer.