Why Inequality Doesn't Matter

'Some Personal Reflections on Economic Well Being and Income Distribution'

From the corridors of power in Washington to protest encampments on Wall Street, economic inequality is once again at the forefront of American public debate. The combination of rising fortunes at the upper end of the income distribution and stagnation lower down has led to calls from the left for actions to redress the imbalance and punish what Theodore Roosevelt called "malefactors of great wealth." If the immediate circumstances are new, however, battles over the significance and implications of inequality are not, and in this context we feel it useful to resurrect a skeptical perspective on the subject from a previous era. Irving Kristol's 1980 essay "Some Personal Reflections on Economic Well-Being and Income Distribution," originally prepared for the National Bureau of Economic Research and published in Reflections of a Neoconservative, is thus reprinted below.

--The Editors

 

It is my understanding, from surveying various studies of trends in income distribution in the United States over the past three decades, that economists have found very little significant change to have taken place. There does seem to have been a slight increase in the proportion of national income received by the very poor, a slight decrease in the proportion received by the very rich. What goes on in between is such a complex muddle that economic analysis can tease few unquestionable inferences from the data. Moreover, the very methodology of studying income distribution has, over these decades, become ever more controversial. Just what is to be included in the concept of "income" becomes less clear every time a new governmental "entitlement" program is launched (whether it involves food, housing, medicine, or whatever). And it has become ever more apparent that in order to take account of normal age differentials in earnings, of changing demographies, and of economic mobility (both up and down), the distribution of "lifetime earnings" would give us a far more valid report than any cross-sectional survey at a moment in time. The trouble is that economists have not come up with any accepted procedure for measuring any such distribution of lifetime earnings, and there are even some grounds for thinking they never will.

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