There is a great yawning divide between those who care very much about economic inequality and would do anything [Editor: anything?] to make sure that henceforth everybody will have the same amount of stuff, and those whose only response to the reams of data proving beyond doubt that some people are richer than others is to ask: ‘so what?’
If we start by asking whether we can reduce inequality while still enhancing market efficiency, we are assuming that ultimately we want to continue enhancing market efficiency; or at least we don’t want to push inequality-busting policies beyond the point at which efficiency would begin to erode.
What does it mean to say that a worker is being paid more than they deserve, or less than they deserve?
We are all concerned with being paid as much as other people so we can all have the same amount of stuff and feel that life is equal and fair, but we don’t usually worry about the inequality of production, or the fact that some people and nations are far more productive than others.
The problem with income inequality is that most people don’t like it when others are richer than them. As soon as winter is over and the weather turns pleasant the 99% will take to the streets to riot, burn cars, etc., to show how unhappy they are about some people being billionaires. Of course, the assumption is that billionaires must have done something wrong (cheating, stealing, being greedy, being unfair to other people, etc) to invite public ire.
Artificial intelligence is good news for skilled workers, and tragic news for unskilled workers. For sufficiently skilled workers, it will increase their productivity and free up time that would otherwise be spent doing large amounts of repetitive work so that they can focus their energies on being creative and innovative and having more fun at work, doing cool stuff. For insufficiently skilled workers, they’ll soon be replaced by robots.
It's very easy to argue that rich people should be made to pay for the stuff other people want, because they're rich and they can afford it. This is usually justified as being necessary for the public good.
It will not surprise you to learn that employees do not feel better off at work just because of overall rising economic prosperity. As prosperity and abundance rise, so does income inequality. Perfect conditions for unhappiness right there. What's the point of being a bit better off, if other people are much better off?
One of the challenges of teamwork is deciding how to share the profits of joint enterprise. This is precisely why executive pay is so interesting. Why should the boss take most of the profit and leave the rest of the team to share out scraps among themselves?
This is a post about executive pay, in which we agree that we're not sure exactly how much corporate executives are paid but we know that it's Far Too Much. In this post I show that the problem of income inequality is actually quite easy to fix, once the roots of the problem are carefully exposed and logically unraveled.