Following the recent marking of the 40th
anniversary of Arthur Okun’s famous essay – “Equality and Efficiency”, Robert Samuelson notes:
“Its [“Equality and
Efficiency”] premise, as the title suggests, was that government faced a choice
in fashioning its economic and social policies. A bias toward more equality
might weaken economic growth by dulling the incentives to work, save and
invest; on the other hand, leaving matters to the market could worsen
inequality by widening income and wealth gaps. We could balance equality and
efficiency. Once stated, the logic seems impeccable. …
Okun’s book is
emblematic of an era of overconfident economics. The underlying questions
remain. Is the convergence of rising inequality and falling economic growth
simply a coincidence? Or is more inequality a cause of weaker growth, a
consequence of it — perhaps both? We lack definitive answers. Government must
routinely act without full knowledge. That’s the point: In the real world, we
often don’t know the true tradeoffs.”