Policy and Inequality
It is sometimes argued that inequality is natural or inevitable and that state policy can only affect at the margins how much inequality there is. In one variant of this argument, differences in natural talent are assumed to underly differences in market outcomes, and any societal efforts to suppress the rewards that accrue to natural talent are understood as sentimental at best and wasteful or counterproductive at worst. Is state policy indeed as irrelevant as this account suggests? In addressing this question, it is important to recognize that inequality regimes are social inventions, the outcome of generations of policy decisions, large and small. The task of policy analysts is to analyze how such policy decisions have determined when markets should be used, how markets should be organized, and how market-generated inequality may be reduced (or increased) via after-market redistribution.
When should markets be used?
Should health care be organized via a market model? Are soaring CEO salaries indeed the result of market forces? Should they be? Should the state intervene to set equal pay rates for comparable male and female jobs?
How should markets be organized?
How do the rules governing interfirm relations (e.g., antitrust laws, insider trading laws) serve to increase or reduce inequality? Are retraining programs effective and efficient ways to respond to worker displacement? Do minimum wage laws reduce poverty? Do they lower employment rates? How do laws governing unionization increase or reduce inequality?
Have recent reforms of the welfare system reduced poverty and increased employment? To what extent have recent changes in tax law increased inequality? Does Social Security increase or reduce inequality?
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