Economic equality is a pipe dream

by judahlevi

examples of this type of economic system are the former East Germany and Soviet Union where “fairness” and “equality” were the government’s economic goals

There are many people who are arguing for “fairness” in economic wealth in the country. But what is fair and who decides?

Two economic principles describe fairness in economic terms. One is called the “utilitarianism principle” and the other is the “symmetry principle.” One tends to be a forced solution where you are forcing all incomes to become equal by the government taking wealth away from the productive members of society until all incomes across society are equal. The other is completely voluntary where the only legitimate, and legal, way of distributing property is by voluntary transfer.

Utilitarianism is the principle of forced re-distribution of wealth from those who have more to those who have less. Government power is at its peak. Wealth confiscation by government agents, whether the IRS or other agents, is forced upon those who have worked hard and created more wealth than others. From an economic viewpoint, and also individual rights viewpoint, this has severe problems. In the short run, it may create more economic equality for more people. In the long run, it would be an economic disaster.

Utilitarianism will disincentivize the producers of society since any excess wealth they create will be taken from them. They no longer have an economic reason to be creative or work hard. Although not all people are motivated purely by money, the vast majority work harder than they normally would for the incentive of a better life. Their reduced motivation to work will contract domestic GDP so that you may have everyone getting a equal slice of the pie but the pie will be much smaller. It also has the problem of the huge costs involved in creating a bureaucracy to administer such a wealth transfer which would be an economic burden to the country. The examples of this type of economic system are the former East Germany and Soviet Union where “fairness” and “equality” were the government’s economic goals.

Symmetry is where all exchanges of property of any kind are done voluntarily. Everything of value is owned by someone and the only way to exchange it would be a voluntary exchange between two parties. Government’s only role would be to enforce private property rights and preserve the sanctity of legal contracts. From an economic perspective, this principle would produce the most efficient allocation of resources in a society. An economic example of this is a democratic society with a fully free market economy which does not currently exist anywhere in the world today. The United States economic system comes close but is not as free as the symmetry principle proposes.

It seems clear that economic equality is a pipe dream. Just as people are different, their outcomes in life will be different. You cannot force equal outcomes on all people without a police state type of authoritarian government which has no respect for private property or individual rights. Yes, we should have a social safety net that prevents any citizen from falling through but we should never try to equalize wealth in the United States. To do so would be to economically destroy the country.