Inheritance can be controversial, as some people inherit great wealth while others inherit nothing or even debt.This apparent unfairness is such that even conservative economist James Buchanan supported Huge inheritance tax. In contrast, another free market economist, Milton Friedman, said: claimed Such taxes are inefficient because they encourage people to spend over their lifetime rather than save, which is better for economic growth. The financial inheritance we receive from our parents is only a small portion, if any, of our total inheritance. Over time, technology and knowledge become the main inheritance, passed down from generation to generation. On the one hand, we all benefit from it.
Consider a universal basic income (UBI) policy, where the government provides a minimum income to all members of society.Several be against Because UBI could be a hindrance to work. If policy has such an effect, then regardless of whether UBI is implemented, the much larger legacy received in the form of advanced technology will likely have similar and perhaps even more perverse disincentive effects in the future. likely to bring about Those who oppose UBI should consider whether they should also oppose technology.
The inequalities of our time seem less problematic when placed in the context of this broader inequality Across time. My children were born in an era when home heating, the internet, and vaccines were common, while my ancestors didn't have lights, plumbing, or cars to transport their children. I can't say it's unfair. This does not mean that large income and wealth disparities are not a problem.The inequalities that result from corruption are deeply worrying, but perhaps the problem there is corruptionand inequality is just one of the many negative byproducts.
There is also a large income gap between people living in the United States today and people living in rural areas of Mexico or India, for example, and this is largely due to where they happen to be born. However, while such differences are large, they seem relatively small compared to differences over time. Many poor people in developing countries now own smartphones. And plumbing and electricity, although not universal, will become so in the not-too-distant future. The technology that Bill Gates and I have access to is not that different, even though he is an order of magnitude richer than I am. On the other hand, a king who lived 400 years ago would never have dreamed of enjoying my standard of living.
Today's inequalities can be frustrating because luck plays a huge role in success. Still, there are several reasons to accept it. One reason is that acceptance frees us from frivolous emotions such as jealousy and envy. Once you realize that most successful people are not significantly better than anyone else, you have little reason to envy them.
Successful people tend to work hard, but among groups of hard-working people, success probably has less to do with achievement, intelligence, and perseverance. Big companies like Elon Musk and Jeff Bezos look smart because their companies are growing under their leadership, but if these guys weren't at the helm of their respective industries, similar Someone else with the skills or a similar company will likely take their place and probably do a similar job, if not better.
![](https://www.econlib.org/wp-content/uploads/2020/09/Steve-Jobs.jpg)
Steve Jobs may be a rare exception given his unique vision. Still, Apple seems to be doing just fine without him.
It's natural to feel dissatisfied with inequality if so much of it is down to luck. But there is little reason to expect markets to produce outcomes consistent with human conceptions of justice. The market is an evolving selection machine, not a meritocracy. This means that the market selects the most profitable companies, and there is no guarantee that those working for successful companies were successful because they understood the nature of the markets in which they competed. It's the profit that matters, not the intent. Even after the fact, it can be difficult to understand why some techniques and business practices worked and others failed. However, individuals in successful industries and companies will receive more compensation regardless.
In some markets, network effects and revenue growth play such a dominant role that companies can gain important long-term advantages just by being first in the market. This doesn't seem fair. But again, markets create wealth, not justice. Once you stop expecting them to produce justice, you will rarely be disappointed in them.
All this may seem like further discussion Redistribution, which is probably true to some extent. (For example, this author supports UBI.) But insofar as redistribution prevents the wealth creation machine from working, it comes at the cost of passing on a richer world to our descendants. Attempting to reduce „bad“ kinds of inequality within our time often means reducing „good“ kinds of inequality across generations as well. That is also a kind of injustice.
Perhaps all inequality is bad, including timeless inequality, but I'm skeptical. Rather, it seems that if there are ways to benefit the poor without sacrificing growth, then those practices should be prioritized over more naive welfare state redistribution schemes.
If today's fortunate people have any moral duty or duty to others, it may be primarily to save, rather than help, today's poor people. Investments that are liquidated for consumption, even if for a good cause, give up a potential source of future income that could yield a larger return. Compared to solving global inequality, increasing personal wealth through saving and investing is also something we have control over.
But there are other options. One of the best ways to kill two birds with one stone is to invest in developing countries when it is safe and then take a „buy-and-hold“ strategy. Similarly, a UBI could be funded by an investment fund, similar to what exists in Alaska today. These frameworks may offer the most promising opportunities to capture wealth-producing markets. and justice.
If we could change the past, perhaps we would have stronger moral obligations to our ancestors than we do to address the inequalities of today. On the other hand, just as our actions affect our future, our ancestors also made choices that affect our own lives. There is no doubt that many of these effects were harmful. Just as we overconsume and reduce our future standard of living, our ancestors chose to increase welfare in our time by consuming income from wealth that could have been invested. Did. In many cases, they may owe us more than the other way around. But nothing can be done about it.
Given these realities, it's not even clear how much we should care about inequality. To the extent that we should care, we should focus on solutions that help today's poor and at the same time leave us with a richer world. The market mechanism is well suited to both purposes, but harnessing its power requires accepting its impersonal and, yes, quite arbitrary nature. The market tends to lift all boats, but some boats rise faster than others. This result is difficult to accept. Especially because addressing inequality, even if the effort is completely futile, gives so many people deep purpose and meaning in life. Overcoming such biases is paramount if we are to succeed in building a prosperous and just world.
James Broughel is a senior fellow at the Competitive Enterprise Institute, where he focuses on innovation and dynamism.