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Equality for Taxi Drivers and Surgeons?

Research & Commentary
December 28, 2016

by Bob Lord

Those who defend extreme inequality by arguing against complete equality are doing their best to divert our attention from the questions that matter.

By Bob Lord

It never fails. Every opinion piece purporting to counter the voices opposing today’s extreme inequality employs the same sleight of hand: Justify economic inequality in the abstract, without commenting on the actual level of inequality we face.

The latest example appeared in this past Sunday’s New York Times. In Growth, Not Forced Equality, Saves the Poor, University of Illinois professor Deirdre McCloskey can’t even get past the title without swerving into an argument against Soviet-style communism.

What level of income disparity between brain surgeons and taxi drivers ought to give us pause? As a society, we need to ask that question.

What level of income disparity between brain surgeons and taxi drivers ought to give us pause? Our society needs to ask.

“Forced equality”? I’ve read hundreds of articles and tens of books on the subject of American economic inequality. Not one has argued for “forced equality.” Robert Reich,  regarded by many as the leading voice against America’s extreme inequality, has a new book out entitled Saving Capitalism. I’ve not read it yet, but I’ll bet that Reich’s ideas for “saving capitalism” don’t include “forcing equality.” Just a hunch.

Consistent with the title to her piece, McCloskey writes as if Reich and other contemporary egalitarian activists advocate pure communism.

“If a brain surgeon and a taxi driver earn the same amount,” McCloskey contends, “we won’t have enough brain surgeons. Why bother?”

Does McCloskey truly believe that the average brain surgeon yearns to drive a cab, if only cabs paid as much as performing surgery? Funny, I’ve never heard that perspective from any of the brain surgeons I know.

I get the distinct impression from my contact with doctors that they prefer the intellectual stimulation of their work to the more mundane work of driving taxis. I know this: If I could make the same amount serving in a restaurant or working construction as I do practicing law, I’d continue to practice law. I just like doing legal work better, the same way restaurant servers or construction workers may prefer what they do all day over studying arcane tax regulations.

But I digress. The question is not, as McCloskey suggests, whether zero inequality would be a good thing. Rather, it’s whether extreme inequality is a bad thing.[pullquote]Bill Gates, one person amid 320 million, has one-thousandth of America’s wealth.[/pullquote]

Our analytical starting point ought not be exploring whether paying brain surgeons and taxi drivers equally would be a good idea, but exploring what level of income disparity between brain surgeons and taxi drivers ought to give us pause.

Would our society benefit, for instance, if brain surgeons made 300 times what taxi drivers do, such that brain surgeons would earn more on the first work day of the year than taxi drivers could earn in an entire year?

Would you consider this 300-times gap unconscionable? Much of our economy is already operating at that level of disparity. CEOs currently take home over 300 times the pay of average workers at America’s large corporations, many of which pay little or nothing in corporate tax.

Do we benefit from the incentives to innovate an unequal society provides to the likes of a Bill Gates? In all likelihood, yes. But that’s the easy question. The tougher question, which McCloskey never raises, is whether people like Gates need $80 billion to feel incentivized. Would Bill Gates really have operated any differently if his financial upside could only have hit $80 million? If not, hasn’t American society overpaid for his genius by a factor of a thousand?

McCloskey doesn’t seem bothered one bit by the size of the Gates fortune. But Gates,  one person in a country of 320 million, controls one-thousandth of our nation’s total wealth. Place Gates in Philadelphia or Phoenix and the Microsoft man would hold about 20 percent of either city’s entire wealth. How much is too much?

McCloskey feels no discomfort over the size of the Gates fortune in part because of his charitable contributions. But other billionaires do next to nothing philanthropically, and even Gates has chosen to hang on, until death, to the bulk of his fortune. That could be more than a quarter century from now. And does it make sense — in a democracy — for one individual to decide how such an immense accumulation of wealth gets employed?[pullquote]Inequality and growth do not exist in separate spheres.[/pullquote]

McCloskey’s main point seems to be that growth, not the reduction of inequality, will solve poverty. But inequality and growth do not exist in separate spheres. In real life, the more that wealth and income concentrate at the top, the more the economic benefits from growth flow to the already rich — and away from the alleviation of poverty.

Is increasing wealth and income concentration the price we have to pay for the growth McCloskey contends would significantly reduce poverty? McCloskey doesn’t say, but the data from prior periods of robust economic growth suggest the opposite: that a more modest level of inequality would stimulate growth.

McCloskey’s new Times piece exalts capitalism. Yet surely she must be aware that insufficiently regulated and insufficiently taxed capitalist economies tend to drive income and wealth to the very top. America’s two worst economic collapses of the past century each followed periods where the rich, facing little in the way of taxes or regulations, amassed incredibly outsized shares of America’s income and wealth.

McCloskey and those who share her world view are ignoring an inconvenient truth: The growth she considers the antidote to poverty depends on the de-concentration of wealth and income at the top.

Which is exactly what Robert Reich and others have been arguing all along.

Bob Lord, an associate fellow at the Institute for Policy Studies, practices tax law in Phoenix. 

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