View source for Begging The Inequality Question

<!-- you can have any number of categories here -->
[[Category:Chris Dillow]]
[[Category:Market Failure]]
[[Category:Assuming Theory Applies To A Real World Example]]
<!-- 1 URL must be followed by >= 0 Other URL and Old URL and 1 End URL.-->
{{URL | url = http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2014/04/begging-the-inequality-question.html}}
<!-- {{Other URL | url = }} -->
<!-- {{Old URL | url = }} -->
{{End URL}}
{{DES | des = All too often, market advocates assume that markets work fine and fixing inequality might make them inefficient.  But actually existing markets always depart from perfect models, and already have inefficiencies.  Fixing the inequalities might make them more efficient. | show=}}
<!-- insert wiki page text here -->
<!-- DPL has problems with categories that have a single quote in them.  Use these explicit workarounds. -->
<!-- otherwise, we would use {{Links}} and {{Quotes}}  -->
{{List|title=Begging The Inequality Question|links=true}}
{{Quotations|title=Begging The Inequality Question|quotes=true}}

{{Text |
Tim Worstall says Labour's idea of predistribution is inefficient because it is "cocking up markets". However, Labour defends predistribution - for example the freeze on energy prices - by claiming that markets are broken already. If they're right, such a freeze might be efficient in second-best terms.

What Tim's doing here is - literally - begging the question. He's assuming what must be proved - that we have an tolerably well-working market, intervention in which would be inefficient.  

This, though, seems to me to quite a common error on the right. For example, Garrett Jones says we should become more tolerant of inequality, and less covetous. What this misses is that many of us dislike inequality not because we envy the mega-rich but because it is (sometimes) a symptom of malfunctioning markets - that, as Scott says, "the system is rigged." The fact that so many bosses get paid millions even for failure suggests that they are not paid their marginal product. Instead, some mix of agency failure, efficient wage considerations (bosses must be paid not to steal corporate assets) and arms races force pay above marginal product.

Sure, you can write models in which inequality emerges as if it were the product of free choices in a free market economy. You can also model a man's empty house as if he had called in the removal men - but if he has in fact been burgled, your models miss something.

I fear that some free market advocates - not all by any means, but some - are mistaking the map for the terrain. They forget that the textbook perfect competition model is not a description of reality but rather of a utopia against which to assess actually-existing markets. And sometimes - not always but in some important respects - they fall well short.

You might reply that this error is not a common one. Maybe not. But it could be a costly one. Insofar as advocates of free markets such as Garrett and Tim also defend inequality, there's a danger that the case for free markets gets poisoned by its association with indefensible inequalities.

My view of a free market economy is much the same as Gandhi's of western civilization: it would be a good idea.

A clarification. Of course, a free market economy would and does generate inequality. But most of us are more relaxed about J.K Rowling or Cristiano Ronaldo's wealth than about Dick Fuld's or Bob Diamond's. Free market inequality raises different issues than actually-existing inequality. 

}}