Is Inequality a Bad Thing? (1)

Economic inequality is a controversial issue. In Japan the economic gap between the rich and the poor is said to be widening and is paid attention to as a serious problem to be solved.

I raise an elementary question: Is economic inequality a bad thing? This question is very hard to answer. To begin with, is economic inequality a problem? If it is a problem, what does it affect? And can it be solved by a policymaker? My views about economic inequality are as follows:

First, what causes an economic inequality? My answer (some economists' answer) is that a good lack causes an economic gap. If I was born with a silver spoon in my mouth, I could learn at a good private school whose tuition is very high and so I could more likely catch a good job whose salary is very high. If you were born into lower-class family, you might less likely go to a good private school and less likely get a high-pay job. Where I and you are born is a problem of good lack, neither of hard work nor of effort, that is, an uncontrollable matter. The only god knows whether you are rich or poor.

If some of my readers hear the above story, they might ask me: does a hard work also cause the gap? Yes, it does. A hard work would more likely take you into economic success. And many people believe in the power of hard work. Some of entrepreneurs who get rich were born in a less wealthy or working-poor family. Their success story would encourage some dreamers to launch a new business and to take the challenge. Dream of making a fortune drive the motor vehicle of modern capitalism. And taking the risk boosts up their mind of hard work. As a great British economist, John Maynard Keynes said, "the animal spirit" is the cause of the endeavor with danger and the engine of modern capitalist economy. The success due to hard work is called "success story ", or "the American dream" called in the U.S. society and is admired among many people.

However as a fact that we don't want to admit, other entrepreneurs fail their business and in the worst case commit suicide, worried about outstanding debt. This tragedy also promotes capitalism to work. Learning from the failure, some businesspersons would try to success and their behaviors change their business model into more making-profit model.

Economic gap is the proof of good lack and of hard work. Hard work bears fruit or not. It depends on good luck. High competence and high quality of worker would give the worker high income. To say more precisely, greater demand for the output produced by the worker in the market would more likely end up high payment for the worker. In contrast decreasing demand for the good produced by you leads to low income. Demand and supply in the market of the worker work together and determine the worker's pay or income. Even if you are competent(the supply of your output is efficiently increased), the demand for your output is decreasing and thus gives you low income. What operates the demand? Nobody knows it. Maybe the current people's preference for the output shifts the demand upward or downward. This is also an evidence of good luck.

If good luck makes us rich or poor, is the inequality brought about by good luck a bad thing? For whom is that bad? For the poor and unhappy people? If the inequality is bad, does the public policy remedy it? And if possible how does the public policy do it? My answer may be incomplete but somehow reasoning. (To be continued.)