If we could afford a democratic economic program, both in fiscal and resource terms, wouldn’t redistribution of income from the top to the middle and bottom throw cold water on people’s economic initiative? Do we not need the stakes of economic success and failure to remain high in order for players to put everything they have into the game? Why
would investors invest, inventors invent, and workers work hard if the winners win less and the losers lose less?
Economists are fond of referring to these objections to a more equal sharing of economic rewards as the “equity-efficiency” or “equality-
efficiency” trade-off. More equality necessarily means less efficiency, they warn, and hence fewer goods to be distributed. A society must balance its desire for a more just society, it is claimed, against the conflicting desire for affluence. Once again, we are reminded, no free lunch. The equality-efficiency trade-off provides a ready justification for economic inequality—with its proposition that reducing inequality is too costly. But this proposition is a myth; it is illogical in theory and it does not prevail in practice.
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