Should We Care About Inequality?

Left-libertarian market anarchist Roderick Long argues that worrying about socioeconomic inequality as such does not count as envy. He gives some examples in support of the position, including a utility that will shut off service to a non-paying customer, while a customer can’t shut off payment to a utility with poor service, and a tenant who has to agree to broad provisions in a rental contract.

Long believes that these sorts of problems are ultimately the result of government intervention, but Bryan Caplan responds that existing markets don’t really work in such an anti-consumer way, and that to the extent that government gets involved currently, they often tilt things away from producers. Long’s response to Caplan is here. I may be the closest thing to a left-libertarian on this blog, but I tend to agree with Caplan that left-libertarians “make mountains of mole-hills, then implausibly blame government for mountain-making.” I recall a conversation I had with a minor landlord in the Boston area a few years ago, and he detailed all the ways in which government makes it possible for someone to live rent-free on his property more or less indefinitely – and there is a certain group of tenants who routinely take advantage.

But let’s assume that Long is right about the way that existing markets work. Are these really problems of inequality of wealth, income, or resources as such? They are presumably problems of market power, not inequality. Long seems to acknowledge this in his response, arguing that land and labor markets are not competitive. If so, the solution would be to make those markets more competitive. Is income inequality related to market power? In a mostly agricultural society, it probably is, because very high inequality would imply that a small number of landowners owned most of the most productive assets of society (think latifundia Latin America).

In 21st century America, inequality generally reflects differences in human capital, which is the most productive asset in our society. Unlike land, human capital cannot be monopolized. If an innovator makes millions with a new invention or business model, I am not materially worse off; indeed, I am very likely better off for it.

I care about market power. I care about poverty. To see inequality as such as morally problematic is to see it as problematic that someone enriches herself without harming anyone else. To favor reducing the resources of the rich, without making anyone else materially better off, is essentially envious. If we’re moral, we should not care about inequality.

12 thoughts on “Should We Care About Inequality?

  1. I suppose this is the basic argument between thin and thick libertarians (I’m more in the camp of the former). It’s easy to sympathize with left-libertarians like Long – he often makes spectacular points. But when we start bundling some of these divergent social values (with or without liberty as a constraining value) things start to get a little fuzzy in discussion.

    For instance, I’ve often seen someone with a deontilogical perspective on liberty get “free-market left-libertarians” riled up to the point where they start dismissing the notion of private property altogether. And when they eventually circle back around, their arguments about free-markets become consequential. They are likely to say, “Well, in a free market inequality X wouldn’t really exist.” Fair enough. But it seems fairly clear to me that inequality would still exist in many respects, and perhaps even larger inequalities than exist now in some instances. What I’m not clear on is if such “market anarchists” would still support free markets at that point, or if they just perceive a free economy solely as a means to the ends of equality.

    From my experience, so-called “right-libertarians” (including ANCAPS) do share many values with left-libertarians. But I get the impression that whereas right-libertarians generally see liberty as a primary value constraining tangential values, left-libertarians see equality as the primary constraining value. To me, that makes sense of many a conversation’s wayward drift from disputing “liberty” to disputing “power.”

  2. They are likely to say, “Well, in a free market inequality X wouldn’t really exist.” Fair enough. But it seems fairly clear to me that inequality would still exist in many respects, and perhaps even larger inequalities than exist now in some instances.

    Yes, that’s a separate point about left-libertarianism that irks me too. Typical left-libertarian hobbyhorses like abolishing limited liability, intellectual property, and all corporate welfare are unlikely to affect income inequality very much – although some of these policies (like abolishing IP and voluntary corporate limited liability) might make everyone poorer. Abolishing corporate welfare, especially in the form of ag subsidies & tariffs, might actually increase inequality by reducing demand for unskilled labor.

    Anarcho-capitalism on the right has a similar utopian strand to it as well – not thinking very seriously about problems like pollution externalities.

  3. I can’t avoid concluding, from reading history, that the market distributes power to the powerful unevenly, and this is a positive feedback loop that eventually leads to social collapse. The history of governance development is simply the search for methods of tilting market power away from the powerful without empowering any individual / group or destroying the market, in the search for social stability.

    1. market distributes power to the powerful unevenly

      By “power,” do you mean political power? What kind of power does the market distribute?

      1. by power I mean economic power, but economic power begets political power. As for what kind of power, the power to spend money.

        The market is really good at creating efficiencies, but all participants in the market have a vested interest in creating inefficiency where they can. As the % of overall market volume captured by a single decision maker increases, the power to create inefficiencies increases, until in the end a monopoly is formed. After this, you get profit-taking until something (semi)violent occurs (social rebellion or external invasion).

        Democracy is best way to prevent the market running out of control without ceding power to a particular stakeholder group. Only, it’s starting to look rather tenuous lately.

      2. Certainly every business strives to become a monopoly – in most industries, however, that’s impossible. I see market power as the exception rather than the rule. There are a few industries that tend toward monopoly or oligopoly: water and sewer systems are perhaps the best example of a natural monopoly. But it’s interesting how few and far between these examples really are.

      3. Really? I’d love to see good research on it – particularly the relationship of transaction costs and market distortions. There’s some, but not enough. Examples actually abound: airports, refineries, telecommunications, IT, banking, security, education, healthcare.

        In these, companies compete at some levels, and collaborate at others to destroy competition (it’s called standards).

      4. “Examples actually abound: airports, refineries, telecommunications, IT, banking, security, education, healthcare.”

        I think it’s kind of interesting (telling?) that these are industries (for the most part) that I’d associate with government interaction more than most – through direct regulation or municipal relations. To the extent that direct threats to monopolization (ie: competition) are stifled by barriers to entry or operation, color me not-surprised.

      5. Economists tend to look favorably on voluntary industry standards, benchmarking, & the like. These devices usually appear to be means for businesses to signal to consumers the quality of their products. I suppose they do have some anti-competitive effects, but only because smaller firms often aren’t as good at quality control through mechanization and standardization as larger ones.

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