On Limiting the Domain of Inequality

THE most difficult issues of political economy are those where goals of efficiency, freedom of choice, and equality conflict. It is hard enough to propose an intellectually defensible compromise among them, even harder to find a politically viable compromise. These are ancient issues. The agenda of economics and politics have always featured policies whose effects on economic inequality and on efficiency in resource allocation are hopelessly intertwined. But it is only in the last five years that they have regained the center of attention of American economists, with whom stabilization, full employment, and growth took the highest priority for the preceding three decades. When a distinguished colleague in political science asked me about ten years ago why economists did not talk about the distribution of income any more, I followed my pro forma denial of his factual premise by replying that the potential gains to the poor from full employment and growth were much larger, and much less socially and politically divisive, than those from redistribution. One reason that distribution has returned to the forefront of professional and public attention is that great progress was made in the postwar period, and especially in the 1960's, toward solving the problems of full employment and growth. It is natural that debate should now focus on intrinsically harder issues of the composition and distribution of the national product, and it is also natural, though disappointing, to find people with short memories questioning whether full employment and growth ever were problems worth worrying about. There are of course other reasons for the recent shift of emphasis, notably the belated commitment of the society to racial equality and the diffuse concern for social justice that is one feature of the cultural revolution of the young. American attitudes toward economic inequality are complex. The egalitarian sentiments of contemporary college campuses are not necessarily shared by the not-so-silent majority. Our society, I believe, accepts and approves a large measure of inequality, even of inherited inequality. Americans commonly perceive differences of wealth and income as earned and