Debunking The Income Inequality Fallacy, Step By Step

by John Glenn

Reading books about economics can be tedious, but when a sharp analysis of a prominent debate becomes available, that’s enough to pique my sustained interest. Equal Is Unfair: America’s Misguided Fight Against Income Inequality is the kind of analysis that pulls back the curtain on one of today’s most contentious topics, and as such, should interest many others. President of the Ayn Rand Institute Yaron Brook and fellow Don Watkins work methodically to refute the mainstream notion that income inequality is one of the greatest threats facing American society.

Their opening salvo is grounded in a truth that those concerned about income inequality are working hard to obscure: “The reason Americans have never cared about economic inequality is precisely because they recognized that it was the inevitable by-product of an opportunity-rich society.” I suspect that the vast majority of Americans still don’t really have a problem with rocket scientists earning more money than cashiers or with superstar basketball players raking in more pay than professors.

Equal Is Unfair is really a critique of the misleading nature of the income inequality debate, which plays on people’s emotions and economic angst. Watkins and Brook make good use of history, statistical data, and economic theory to dispel the notion that economic mobility is no longer possible in America.

The book sets out to explain what it means to live in a free society. And it quickly stakes the claim that a free society places demands upon individuals—to think and produce, to be self-supporting, and to make the most out of their own advantages, as well as overcome challenges.

So what is income inequality? According to Equal Is Unfair, the catchphrase is rarely spelled out by pundits or the media, but it has a lot to do with the idea that middle class incomes have stagnated over the last thirty or forty years while the rich have seen an enormous increase in wealth. The solution invariably offered is to increase taxation on the 1 percent.

Before going on to critique the oversimplifications in some of the leading studies on income inequality, Watkins and Brook dismantle the argument that income inequality is somehow unjust by questioning the “fixed-pie” and “group-pie” assumptions. The fixed-pie narrative assumes that one person gains wealth at the expense of another; when, in fact, the wealth pie expands as more wealth is created. The group-pie narrative wrongly assumes that all wealth belongs to the nation and that it should be distributed by society evenly.

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Debunking The Income Inequality Fallacy, Step By Step