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Progress vs. Inequality

Updated: May 23, 2020

For many, economic inequality has become something of an obsession. Prominent figures, from the Pope to the former president, have identified inequality as the singular social problem. Making matters worse, the press is a reliable echo chamber. In fact, the number of New York Times articles featuring the word “inequality” soared tenfold from 2009 to 2016.


As Steven Pinker explains in Enlightenment Now, economic inequality has long been a signature issue of the left. While inequality rose in prominence after the Great Recession, it reached its peak with Thomas Piketty, whose 2014 bestseller Capital in the Twenty-First Century became a “talisman in the uproar over inequality.”



In Capital, Piketty’s central argument is that inequality is ruining people’s economic prospects. Specifically, he argues the “poorer half of the population are as poor today as they were in the past, with barely 5 percent of total wealth in 2010, just as in 1910.”


In Enlightenment Now, Pinker makes a crucial counterpoint—the distinction between relative and absolute prosperity: “Total wealth today is vastly greater than it was in 1910, so if the poorer half own the same proportion, they are far richer, not ‘as poor’.” Put simply, people can be much richer in absolute terms despite a relatively smaller share of total wealth.


Pinker makes another important point about what happens when a society starts to generate substantial wealth: “An increase in absolute inequality (the difference between the richest and the poorest) is almost a mathematical necessity.” Conceptually and mathematically, then, Piketty misses the mark—though the problems don’t stop there.


In general, discussions on the distribution of wealth are based on a logical error equating inequality with poverty. According to Pinker, this “confusion of inequality with poverty comes straight out of the lump fallacy—the mindset in which wealth is a finite resource.” Helpfully, Pinker reminds us how the Enlightenment revolutionized our understanding of economics. First, by teaching us that wealth is created; and second, by showing that we can make more of it.


This simple but powerful insight often confuses the inequality crowd. They tend to lump poverty and inequality together, which is a clear category error. “Inequality itself is not objectionable,” Pinker says, “what is objectionable is poverty.”

The fundamental message of Enlightenment Now is that the majority of the world has become much better off, and that a market economy is the best poverty-reduction program we’ve ever known. Those who condemn modern capitalist societies, like Piketty, underestimate how miserable pre-capitalist societies were. They also take the miracle of modern capitalism for granted.


As Pinker points out, “A dollar today, no matter how heroically adjusted for inflation, buys far more betterment of life than a dollar yesterday. It buys things that didn’t exist, like refrigeration, electricity, toilets, vaccinations, telephones, contraception, and air travel.”


Piketty prizes historical measures of wealth, but by zeroing in on inequality he misses a critical point: “The combination of better products and new products makes it almost impossible to track material well-being across the decades and centuries.” In other words, technology doesn’t just improve products, it comes up with entirely new ones—and inequality metrics cannot capture this reality.


Moreover, all of this improvement in well-being is not merely materialistic. It is literally life changing: “The most precious resources of all—time, freedom, and worthy experiences—are rising across the board,” Pinker notes.


The bottom line is that inequality itself is not necessarily bad or good. In fact, it’s not even that important.


What matters is the long-term trend toward improvement for all. Now that’s enlightenment.


https://www.realclearmarkets.com/articles/2018/08/07/steven_pinker_critiques_the_inequality_alarmism_of_thomas_piketty_103378.html

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