Tuesday, May 08, 2007

Embrace the Wealth Gap

Income inequality is one of those forces that makes capitalism superior to all other types of markets. It drives people to take risks and it drives them to innovate instead of sit on their laurels.
clipped from www.spectator.org
In a recent op-ed, economist Robert Samuelson said "there is something unsettling about extremes of wealth and poverty." He obviously meant it pejoratively, but in truth, extremes of wealth and poverty are the very source of the economic advances and creativity that we regularly witness around the world. As Canadian economist Reuven Brenner wrote in his 1983 book, History: The Human Gamble, "it is the perception of inequality that induces people to take risks."
Importantly, none of the people described here started out rich. Indeed, while the fortunes of many are presently the source of unease about wealth gaps, there was a time when all were on the outside looking in. If income equality were the norm in the world, it's arguable that some would not have taken the risks that are at the root of our economic vibrancy today. As such, fears of income inequality are misplaced. The latter is the driver of economic and human creativity, so rather then bemoan it, we should embrace it.
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