In the last decades, there has been an undeniable increase in concerns about inequality. The recurrent fear is that rising inequality is not only unfair but that it may seep into the ability to generate sustained economic growth. Economists from right to left have echoed this argument.
Article by Vincent Geloso from AIER.
However, the argument that inequality is adversely tied to growth has, at best, mixed empirical support. Some studies find that it does reduce economic growth. Others find no effects of inequality on growth. A few find that inequality can increase economic growth up to some point and hurt growth beyond that point.
How can we make sense of such different results? The answer lies in the premise made by many. That premise is that there is an optimal level of inequality (a sweet spot) that is generally well-shared across societies. I disagree with that premise because it generally omits the important role of institutions. The type of institutions under which inequality emerges determine whether (and/or to what degree) it is harmful to economic growth.
In a recent article in the Journal of Institutional Economics co-authored with Vadim Kufenko, I make that case by focusing on a unique and highly illustrative microcosm: summer Olympic games.
Because sporting talent is innate, you expect very little relationship between skills and income. However, the costs of training an athlete are the same for everyone. Essentially, the talented poor and rich must clear the same hurdle (i.e. the training cost) to be able to hone their talents and compete in the Olympics. In that case, one could say that inequality – all else being equal – would limit the chances of the talented poor to compete. As a result, his home country will not send the optimal team to the Olympics and the medal count will be smaller than it otherwise could have been. Thus, we have a microcosm that links individual constraints to aggregate (i.e. country-level) performance via income inequality.
But there is a countervailing force that needs to be mentioned and this is where institutions come in. Economically free countries tend to have secure property rights. Because they have secure property rights, they allow athletes to appropriate the fruits of their efforts with little risk of expropriation. Phrased differently, property rights generate the incentive for effort.
In the case of our microcosm, that incentive works strongest for the talented poor. If the rewards are the same for all (in absolute), then they are likely to be marginally more important to the talented poor. Property rights provide a force that mitigates inequality’s effects on society. Notice the crucial implication here: institutional settings modulate the detrimental effects of inequality.
It is this potential implication that Kufenko and I investigated. We used the 2016 Olympics and considered each country’s number of medals won per million inhabitants, level of income inequality and level of economic freedom (which includes the property right component). We found that income inequality does influence medal counts. However, that effect is found within the group of countries with low scores on the economic freedom index. In the group of countries with high levels of economic freedom, income inequality has no significant effect.
We also tried to run what essentially amounts to a horse race between economic freedom and income inequality. We found that economic freedom increased the chances of winning more than 1 medal and the chances of winning more medals in excess of that first medal. While income inequality does have an adverse effect, its impact is much smaller when compared to that of economic freedom.
Inequality’s effects thus appear to be conditional on a country’s institution. This point is frequently ignored by economists concerned with inequality. When it is acknowledged, it is casually mentioned, and no implications are made from this. This is a major fault in the profession. Inequality can be hurtful and lead to social instability.
However, for inequality to be harmful, certain institutional conditions must be met. As Finis Welch pointed out: “Inequality is destructive whenever the low-wage citizenry views society as unfair, when it views effort as not worthwhile, when upward mobility is viewed as impossible or as so unlikely that its pursuit is not worthwhile.” Economically free nations tend, by virtue of their protection of property rights, to produce more rewards to effort which increases the likelihood of upward mobility.
There is one simple implication from this: if you are concerned about the societal effects of inequality, you really are concerned by the low quality of institutions.
‘The Purge’ by Big Tech targets conservatives, including us
Just when we thought the Covid-19 lockdowns were ending and our ability to stay afloat was improving, censorship reared its ugly head.
For the last few months, NOQ Report, Conservative Playbook, and the American Conservative Movement have appealed to our readers for assistance in staying afloat through Covid-19 lockdowns. The downturn in the economy has limited our ability to generate proper ad revenue just as our traffic was skyrocketing. We had our first sustained stretch of three months with over a million visitors in November, December, and January, but February saw a dip.
It wasn’t just the shortened month. We expected that. We also expected the continuation of dropping traffic from “woke” Big Tech companies like Google, Facebook, and Twitter, but it has actually been much worse than anticipated. Our Twitter account was banned. Both of our YouTube accounts were banned. Facebook “fact-checks” everything we post. Spotify canceled us. Medium canceled us. Apple canceled us. Why? Because we believe in the truth prevailing, and that means we will continue to discuss “taboo” topics.
The 2020 presidential election was stolen. You can’t say that on Big Tech platforms without risking cancellation, but we’d rather get cancelled for telling the truth rather than staying around to repeat mainstream media’s lies. They have been covering it up since before the election and they’ve convinced the vast majority of conservative news outlets that they will be harmed if they continue to discuss voter fraud. We refuse to back down. The truth is the truth.
The lies associated with Covid-19 are only slightly more prevalent than the suppression of valid scientific information that runs counter to the prescribed narrative. We should be allowed to ask questions about the vaccines, for example, as there is ample evidence for concern. One does not have to be an “anti-vaxxer” in order to want answers about vaccines that are still considered experimental and that have a track record in a short period of time of having side-effects, including death. One of our stories about the Johnson & Johnson “vaccine” causing blood clots was “fact-checked” and removed one day before the government hit the brakes on it. These questions and news items are not allowed on Big Tech which is just another reason we are getting canceled.
There are more topics that they refuse to allow. In turn, we refuse to stop discussing them. This is why we desperately need your help. The best way NOQ, CP, and ACM readers can help is to donate. Our Giving Fuel page makes it easy to donate one-time or monthly. Alternatively, you can donate through PayPal as well. We are pacing to be short by about $3700 per month in order to maintain operations.
The second way to help is to become a partner. We’ve strongly considered seeking angel investors in the past but because we were paying the bills, it didn’t seem necessary. Now, we’re struggling to pay the bills. We had 5,657,724 sessions on our website from November, 2020, through February, 2021. Our intention is to elevate that to higher levels this year by focusing on a strategy that relies on free speech rather than being beholden to progressive Big Tech companies.
During that four-month stretch, Twitter and Facebook accounted for about 20% of our traffic. We are actively working on operating as if that traffic is zero, replacing it with platforms that operate more freely such as Gab, Parler, and others. While we were never as dependent on Big Tech as most conservative sites, we’d like to be completely free from them. That doesn’t mean we will block them, but we refuse to be beholden to companies that absolutely despise us simply because of our political ideology.
We’re heading in the right direction and we believe we’re ready talk to patriotic investors who want to not only “get in on the action” but more importantly who want to help America hear the truth. Interested investors should contact me directly with the contact button above.
As the world spirals towards radical progressivism, the need for truthful journalism has never been greater. But in these times, we need as many conservative media voices as possible. Please help keep NOQ Report going.
Join fellow patriots as we keep Americans informed and advance the cause of conservatism.
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