Inequality and Poverty

Abstract

Economists tend to be quite egalitarian in their evaluation of social issues. According to one survey, 71 percent of American economists believe the distribution of income in the United States should be more equal, and 81 percent feel that redistribution of income is a legitimate role for government.' Support for these positions is even stronger among economists with academic affiliations, and stronger still among economists with elite academic affiliations. Of course, as economists we also have a healthy regard for economic efficiency; we are concerned with the size of the economic pie as well as with its distribution. Borrowing from the title of Alan Blinder's recent book [1], economists can be characterized as having hard heads and soft hearts, hardheaded in our emphasis on efficiency and soft-hearted in our concern with equality. The hard-headed, soft-hearted approach is familiar to economists who argue that it is reasonable to sacrifice a bit of efficiency in return for greater equality. In principle, this position seems unobjectionable, but I intend to argue that we may have gone too far in attempting to promote economic equality through government policies. In taking this position, I run the risk of being labeled hard-hearted, and perhaps soft-headed as well. An important part of my argument, however, is based on distinguishing between economic inequality within the large nonpoor part of the population and the poverty that afflicts a small portiop of our population. I fav9r a role for government in helping the truly needy, but I will attempt to show that extending that role to permit redistribution among the general population is often counterproductive.