Home > Uncategorized > Contemporary inequality is a challenge to economics

Contemporary inequality is a challenge to economics

from Peter Radford and The Inequality Crisis

The challenge of contemporary inequality is not just to the cohesion of modern society it is also a challenge to economics, because it is economics and its values that sit squarely within the social framework that has allowed inequality to become so pervasive and debilitating. We have built a society resting on only one view of liberty and equality, that of the economic sphere, rather than on a more holistic view that allows the inclusion of other spheres. We persist in believing ourselves as free, but it is a harsh and hollow freedom built upon individuality and isolated action, rather than on solidarity and communal action.

There are economists of a certain type who question whether there is any distortion produced by inequality. They often repeat the claim that inequality is a benign consequence, a side effect of little interest, to the march of economic progress and the accumulation of modern prosperity. It is a profound error to think this. Then again these same people are often oblivious to the existence and importance of society, so they regard themselves as bereft of such an error.

This is a denial of the history of the very ideas that they have used as the foundation of their perspective. Economics did not begin so willful in its exclusivity, but as it became more and more inwardly focused, formal, and narrow it was forced to shed any of its origins that foreclosed on the avenue it chose to follow.

So, to understand the role of economics in fostering our current inequality we need to understand the history of the idea of inequality, and how it became belittled beside the stature of other parts of the project economics has become. This history, of course, began back in the moments when the revolt against centuries of aristocratic, monarchic, and religious oppression were being thrown off. In that early part of our modern world equality was a multifaceted concept. It was relational. Rosanvallon expresses it this way:

“This relational idea of equality was articulated in connection with three other notions: similarity, independence, and citizenship. Similarity comes under the head of equality as equivalence: to be ‘alike’ is to have the same essential properties, such that remaining differences do not affect the character of the relationship. Independence is equality of autonomy; it is defined negatively as the absence of subordination and positively as equilibrium in exchange. Citizenship involves equality as participation, which is constituted by community membership and civic activity… Economic inequalities were seen as acceptable in this framework only if they did not threaten the other modes of relational equality that defined the society of equals” (emphasis in original).

This was a web of interlocking and mutually dependent relationships. It was not simply the equality of equivalence only. Economics appears to have forgotten this. How? Why?

  US   UK   JP   AU

  1. Ken Zimmerman
    November 24, 2020 at 1:28 pm

    Some economists get it, most do not. Amartya Sen sets out the deficiencies in economics regarding inequality. “How much guidance—it is reasonable to ask—can we expect to get from modern welfare economics in analysing problems of inequality? The answer, alas, is: not a great deal. Much of modern welfare economies is concerned with precisely that set of questions which avoid judgements on income distribution altogether. The concentration seems to be on issues that involve no conflict between different individuals (or groups, or classes), and for someone interested in inequality this can hardly make the air electric with expectations.

    The so-called ‘basic’ theorem of welfare economics is concerned with the relation between competitive equilibria and Pareto optimality. The concept of Pareto optimality was evolved precisely to cut out the need for distributional judgements. A change implies a Pareto-improvement if it makes no one worse off and someone better off. A situation is Pareto optimal if there exists no other attainable situation such that a move to it would be a Pareto-improvement. That is, Pareto optimality only guarantees that no change is possible such that someone would become better off without making anyone worse off. If the lot of the poor cannot be made any better without cutting into the affluence of the rich, the situation would be Pareto optimal despite the disparity between the rich and the poor.

    Suppose we are considering the division of a cake. Assuming that each person prefers to have more of the cake rather than less of it, every possible distribution will be Pareto optimal, because any change that makes someone better off is going to make someone else worse off. Since the only issue in this problem is that of distribution, Pareto optimality has no cutting power at all. The almost single-minded concern of modern welfare economics with Pareto optimality does not make that engaging branch of study particularly suitable for investigating problems of inequality.” (Amartya Sen, On Inequality-Enlarged Edition, 1997, pp. 6-7)

    In other words, no economists are looking to find inequality, so it is not surprising when they do not find it. Equally not surprising is that when economists do not find inequality, they do not look for causes and solutions for the situation. For economists, inequality is simply not a topic on their list for consideration. They are blind to its existence. This outcome is certainly relational. But for me and many others its origin is the wrong relationships. Relationships that create inequality are ignored. Or more accurately simply are ‘ruled out’ of economics.

  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.