optimal inequality

What a great phrase.

I followed a not very good Tom Paine item to a very good New York Times article about not just the disparities of pay between a company's top and bottom rung employees, but also about the fascinating crucial aspect that shapes and motivates our society: fairness, or its absence.

I only followed the link, which on Tom Paine was of the typical and increasingly boring 'bad Wal-Mart!' variety (not that I'm liking the behemoth any more, I just get tired of hearing them get bashed without holding others up to the same desired standards, and I think that lack opens up those who complain to easy skewering and blanket generalization of liberalism), because it didn't take any effort to read that one sentence and click on it. The first item of note was that the NYT, probably knowing it would get the article picked up by all sorts of bloggers and newsfeeds, seemed to have played the Wal-Mart card, because even though the first sentence talks about the CEO receiving 850 times what most floor workers receive in pay, the very next sentence dismisses that as small potatoes, pointing out an exec in another company that makes 4,000 times what his rank and file makes.

But I digress. The interesting point of the article is that economists disagree on the degree of inequality that is optimal for society: no inequality means that effort tanks and the overall economy shrinks to just about nothing, while rampant inequality means that inertia favors the richest, as they shape companies' bottom lines and purhcase politicians to ensure future success, thereby undermining competition and shrinking the economy; as economist Richard Freeman points out in the article with a golf metaphor, "If Tiger won everything, nobody would want to play."

Of course we all do want to play, meaning we need to figure out where that inequality optimality should exist (and how much that position shifts based on our own position in the wealth spectrum). Basically if we can agree that it's fair that it's not fair, we still have to agree on how much not fair is fair.

(It was interesting that the article didn't point out what I heard awhile back on NPR, that the huge disparity in salaries (currently the greatest it's been since the '20s, with the top .1% grabbing 7% of income in the country) isn't due only to a bunch of guys in a board room scratching each others' backs. It's evidently greatly exacerbated by a legislative move intended to tie executive salary to company performance, which, in this age of HUGE companies has the unintended consequence of huge paydays as well. Ooops.)