Defending the 1%.................................

Greg Mankiw publishes an essay on income inequality.  It is worth the reading.  A few excerpts:

At the outset, it is worth noting that addressing the issue of rising inequality necessarily involves not just economics but also a healthy dose of political philosophy. We economists must recognize not only the limits of what we know about inequality’s causes, but also the limits on the ability of our discipline to prescribe policy responses. Economists who discuss policy responses to increasing inequality are often playing the role of amateur political philosopher (and, admittedly, I will do so in this essay). Given the topic, that is perhaps inevitable. But it is useful to keep when we are writing as economists and when we are venturing beyond the boundaries of our professional expertise.

A relevant fact here is that, over time, an increasing share of government spending has been for transfer payments, rather than for purchases of goods and services. Government has grown as a percentage of the economy not because it is providing more and better roads, more and better legal institutions, and more and better educational systems. Rather, government has increasingly used its power to tax to take from Peter to pay Paul. Discussions of the benefits of government services should not distract from this fundamental truth.

For example, many economics professors could have pursued higher-income career paths as business economists, software engineers, or corporate lawyers. That they chose to take some of their compensation in the form of personal and intellectual freedom rather than cold cash is a personal lifestyle choice, not a reflection of innate productivity. Those who made the opposite choice may have done so because they get greater utility from income. A utilitarian social planner will want to allocate greater income to these individuals, even apart from any incentive effects.