The New American Divide

Charles Murray has a new article out in WSJ about the growing inequality in society.

America is coming apart. For most of our nation’s history, whatever the inequality in wealth between the richest and poorest citizens, we maintained a cultural equality known nowhere else in the world—for whites, anyway. “The more opulent citizens take great care not to stand aloof from the people,” wrote Alexis de Tocqueville, the great chronicler of American democracy, in the 1830s. “On the contrary, they constantly keep on easy terms with the lower classes: They listen to them, they speak to them every day.”

Americans love to see themselves this way. But there’s a problem: It’s not true anymore, and it has been progressively less true since the 1960s.

I do not deny the good intentions of the people who vote for most government entitlement programs. The same goes for people attempting to address social inequality.

My spear for people who act on emotional ideas of good intentions, primarily women and liberals (social conservatives are by no means exempt), is that they blindly refuse to see how the implementation of their good intentions very frequently accomplishes the opposite of what they intended.

Applied Economics.  Government laws like minimum wage hurt the poor by preventing them from making capital investments in themselves.  If their labor is worth less than the minimum wage, they are prohibited by law from working at a lower rate until their experience raises the value of their labor.  Much like college students working for free, there is a capital investment of their time with the expectation that the value of their labor later in life will be significantly greater.  Poor people are prevented from making this capital investment in themselves, are thus unable to raise the value of their labor and hence frequently end up unemployed and unemployable with no way to escape.  All because of the good intentions of do gooders.

However, people seem blind to this and other negative consequence of their good intentions.

Step 1: Implement laws based on good intentions.

Step 2: Check to see that the results are commensurate with the intent.

Step 2 has been sorely missing

Welfare and government re-distributive schemes change the incentive structure of the fabric of society and clearly disincentivises community action.  Why help in the community when you already pay the government to do that? It’s the government’s responsibility now, not mine.  Not everyone thinks that way, but the logical outcome of many social programs are completely predictable and undesirable despite their well meaning.

This leads into thinking about The proper role of government and how it accomplishes that role.  One thing the government is uniquely capable of is creating incentives of many sizes, shapes and forms. Running the gamut from simple proclamations, to community awareness programs, all the way to taxes, regulations, and lethal force, government can shape powerful incentives in ways both big and small.  The art is crafting the proper incentive that is both effective and compatible with the principles of freedom.

I think Charles Murray’s solution is clearly compatible with the principles of freedom, but there are still plenty more incentives the government could bring to task on this particular issue consistent with freedom.  In particular the community solution to this problem should start at the community level!  That very breakdown of addressing problems at the community level seems in part due to big government intervention.  Therein may lie a significant part of the solution.

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