Income Inequality Poser

Richard Epstein has a brilliant thought experiment for the liberals who decry income inequality and wealth disparity and the supposed greed of the 1%:

Consider two hypothetical scenarios.

In the first, 99 percent of the population has an average income of $10 and the top 1 percent has an income of $100. In the second, we increase the income gap. Now, the 99 percent earn $12 and the top 1 percent earns $130. Which scenario is better?

This hypothetical comparison captures several key points. First, everyone is better off with the second distribution of wealth than with the first—a clear Pareto improvement. Second, the gap between the rich and the poor in the second distribution is greater in both absolute and relative terms.

The stark challenge to ardent egalitarians is explaining why anyone should prefer the first distribution to the second. 

I would add that a rational thinker ought to prefer even a scenario where the 99 percent remain at $10 in income while the 1% go up to $130, because the collective wealth/purchasing power of the society as a whole has gone up, which ought to mean more economic activity, more jobs, etc.   Call it trickle-down if you want... I just like to call it "economics."  

The real problem with the psychology fo the left is that they act as if they would prefer a scenario where the income of the 99% went down to $9, so long as they could bring the income of the 1% down to $80.   The income gap would be smaller in both absolute and relative terms.   But so, of course, would the wealth of all individuals and the society as a whole.   They are willing to punish the poor, so long as they can exact a pound of flesh from the rich.  

That's why the Judeo-Christian tradition teaches that envy is a sin.