The Inequality Bogeyman: Killing the Geese that lay the Golden Eggs

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By Thomas Sowell

During a recent lunch in a restaurant, someone complimented my wife on the perfume she was wearing. But I was wholly unaware that she was wearing perfume, even though we had been in a car together for about half an hour driving to the restaurant.

My sense of smell is very poor. But there is one thing I can smell far better than most people — gas escaping. During my years of living on the Stanford University campus, and walking back and forth to work at my office, I more than once passed a faculty house and smelled gas escaping. When there was nobody home I would leave a note, warning them.

When walking past the same house again a few days later, I could see where the utility company had been digging in the yard — and, after that, there was no more smell of gas escaping. But apparently the people who lived in these homes had not smelled anything.

These little episodes have much wider implications. Most of us are much better at some things than at others, and what we are good at can vary enormously from one person to another. Despite the preoccupation — if not obsession — of intellectuals with equality, we are all very unequal in what we do well and what we do badly.

They may not be innate, like a sense of smell, but differences in capabilities are inescapable, and they make a big difference in what and how much we can contribute to each other’s economic and other kinds of well-being. If we all had the same capabilities and the same limitations, one individual’s limitations would be the same as the limitations of the entire human species.

We are lucky that we are so different, so that the capabilities of many other people can cover our limitations.

One of the problems with so many discussions of income and wealth is that the intelligentsia are so obsessed with the money that people receive that they give little or no attention to what causes money to be paid to them in the first place.

Money itself is not wealth. Otherwise the government could make us all rich just by printing more of it. From the standpoint of a society as a whole, money is just an artificial device to give us incentives to produce real things — goods and services. Those goods and services are the real “wealth of nations,” as Adam Smith titled his treatise on economics in the 18th century.

Yet when the intelligentsia discuss such things as the historic fortunes of people like John D. Rockefeller, they usually pay little — if any — attention to what it was that caused so many millions of people to voluntarily turn their individually modest sums of money over to Rockefeller, adding up to his vast fortune.

What Rockefeller did first to earn their money was find ways to bring down the cost of producing and distributing kerosene to a fraction of what it had been before his innovations. This profoundly changed the lives of millions of working people.

Before Rockefeller came along in the 19th century, the ancient saying “the night cometh, when no man can work” still applied. There were not yet electric lights, and burning kerosene for hours every night was not something that ordinary working people could afford. For many millions of people, there was little to do after dark except go to bed.

Too many discussions of large fortunes attribute them to “greed” — as if wanting a lot of money is enough to cause other people to hand it over to you. It is a childish idea when you stop and think about it — but who stops and thinks these days?

The transfer of money was a zero-sum process. What increased the wealth of society was Rockefeller’s cheap kerosene that added hundreds of hours of light to people’s lives annually.

Edison, Ford, the Wright brothers, and innumerable others also created unprecedented expansions of the lives of ordinary people. The individual fortunes represented a fraction of the wealth created.

Even those of us who create goods and services in more mundane ways receive income that may be very important to us, but it is what we create for others with our widely varying capabilities that is the real wealth of nations.

Intellectuals’ obsession with income statistics — calling envy “social justice” — ignores vast differences in productivity that are far more fundamental to everyone’s well-being. Killing the goose that lays the golden egg has ruined many economies.

Thomas Sowell is a Senior Fellow at Stanford University’s Hoover Institute

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35 COMMENTS

  1. More fearmongering and scare tactics. Being the sperm that wins the race is not a skill.

  2. The very wealthy are engaged in killing the geese that lay their golden eggs, the formerly-great American middle class. It is their demand and ability to pay for goods and services that drive our economy. The more wealth that is being held at the top, and not “re-circulated”, the less that demand is.
    Wake up, America!

    • Exactly, it’s kind of like the game Monopoly. When one person owns everything the game is over. Well, game over.

      • If that person is the government, game not only over, revolution begins. Only in dictatorships does one person own everything. Those games do not end well. Sounds like the envy class is braying about injustice today.

        • The government doesn’t own the wealth, it’s in debt, remember? The sheep that bleat the loudest about “class-envy” don’t have any class, and no reason for anyone to envy them.

    • Yes, yes, yes, let’s blame the wealthy all the while you keep throwing your money at them. Did you ever stop to consider that (assuming your accusation of not re-circulating is correct, which I don’t completely agree with) you are missing the whole point of made by Sowell? He makes a very important distinction between wealth and money and if a person is not able to cogitate the difference then they will always be fooled.

      If the rich were really trying to kill the golden goose its taken them several millenia to do so and I seriously doubt your assertion. So what’s taking them so long? I am not convinced it is “them”. If anyone is killing said goose that would be the Government and their continued meddling in deciding who are the winners and losers. If the government cannot buy a hammer for less than a thousand bucks what makes you think they can “manage” any given sector of our economy? The simple answer; they cannot without damage to you, me, businesses and in general the economy.

      The vilification of “the rich” is a common tactic used by those as Sowell correctly states as being envious and used to chum up envy in others. Once that emotion has reared it becomes much easier for the “intelligentsia” to hook you with the next piece of bait; that the only “fix” is income equality and wealth redistribution because you know, wealth is zero sum.

      Which is a load of bull. If wealth truly was zero sum then we would have no more money than Solomon or name your favorite wealthy ancient person. Or at best we would still be trading with rocks.

  3. Dr. Sowell is correct, as usual. One has to be saddened at the kind of envy, hatred, and rage that leads people to fantasize about guillotining their fellow citizens or to stalk and harass them. It is a pity that these individuals prefer to wallow in their personal failures and lack of accomplishment, blaming everyone else, instead of trying to improve themselves.

  4. Thomas Sowell is one economist and thinker with whom I don’t recall having ever disagreed. This is no exception. He is brilliant.

  5. Anyone watch the republican response to the state of the union address? I think we’ve found the next Sarah Palin. What an idiot!

    • Lighten up dude. She is not an idiot. She is just an apple picker who got elected to congress. There are plenty of unqualified people on both sides of the aisle who get themselves elected. She is just a regular everyday American that probably reflects her constituency. Not a genius, not a Palin, and not an idiot.

  6. First of all the currrent vast income/wealth inequality/gap is NOT being caused because some are more productive than others. What a bunch of horsehockey.

    It’s being caused by the 1% buying are politicians to create laws that in essence privatize profits and socialize risk. Most of the 1% didn’t earn jackshat!

    It is the lower and middle class laborers whose productivity has skyrocketed over the last 30-40 years and their real wages(inflation adjusted wages) haven’t increased at all, ZERO. Does anyone think CEO’s and other 1%er’s are more productive than they were 30-40 years ago? That they are that more productive than average workers???

    The other way they get there is by LYING and MANIPULATING. Larry Ellison even ADMITS Oracle 2.0 was a beta version of his famous database software but he never told his clients that. So good ‘ol Larry went around the country selling bugged up Oracle 2.0 while his honest competitors were telling their clients the truth. Ellison also admits his early datatbase software was no better or worse than his competitors.

    So good ‘ol Larry sold Oracle 2.0 on the come while his staff worked 16 hour days to fix the bugs before Larry’s lies could be revealed. Larry became a multi-billionaire and his competitors basically all went out of business. I mention this ancedote story because there was a study that showed clients/customers bought more from the arrogant salespeople than the boring honest salespeople. It’s seem humans don’t mind being lied to as long as its done with bravado and confidence.

    So, I don’t really care what Sowell says, nor do I care what Krugman says or Uncle Milty or any other economist, even though they are professionally trained and skilled and their work is valuable.

    What I DO care about most are what the data, facts and studies say and what they say is that income and wealth inequality is at an all-time high and this extreme inquality this has extreme negative consequences for the American economy and Americans themselves.

    Less than 3 million Americans now control about $35T of our nations $90T net worth.
    We don’t truly have a free market economy anymore we have a series of oligarchies that squash competition and innovation.

    Ladies and gentlemen this is not a recipe for a succesful economy. We need a 30 percent increase in our minimum wage and a $3T government investment in infrastructure and electric grid. Yes it will take that much to get the 14T+ American economy moving again.

    • Good post. The idiots on this site truly think a CEO is proportionately 4000% smarter than 50 years ago.

    • Let’s not forget the Koch Bros. polluting our air, rivers and streams at our cost, harvesting trees planted by the CCC, but you can bet your asymtote those Koch Bros AND Sowell would consider thos profits were private and EARNED.

      And Good ‘ol Mitt Romney LBOing companies, firing half the workers, selling off the assets and then walking away from all the debt in bankruptcy court. What a businessman!(Snark) Then ‘ol Mitt puts his money in overseas bank accounts and just happens to NOT(cough cough) report the income and joins the amnesty program BUT, IOKIYAR(It’s Ok If You’re A Republican)

      I’m sure supergenius Sowell would vote for him.

      Then there is Medicare fraud Ricky down in FL I’m sure supergenius Sowell would just slober all over him too and would just love his pee in cup brigage.

      • You’re just presenting too many facts for the average republican to handle. Bravo.

  7. After listening to Brains-in-his-behind whine, whimper, and basically do anything except actually work, I see clearly that his own income inequality is richly deserved. It’s much like a sobbing slacker sitting on the side of a track and chowing down on food-stamp-purchased Doritos, while complaining that he never gets a medal, even though he can never haul himself to the starting line.

  8. I see that the communist, politics of envy, crowd are out in force today. Gimmie gimmie gimmie. Suckling the government teat. That’s all they know.

    • The best line in that article is:

      “Both McDonald’s and Wal-Mart are engaging in perfectly legal behavior.”

      Maybe there should have been a line in the president’s speech last night about closing the legal loopholes that allow this. Don’t say raising the minimum to $10.10 will do that either because it will not. In less than a year the prices will rise to account for it and they will be right back on public assistance again. By the way only about 1% of the working public is only earning the minimum wage and most of them are young and single. Read the following article. This is another back door way to grease the unions.

      http://thefederalist.com/2014/01/28/11-facts-about-the-minimum-wage-that-president-obama-forgot-to-mention-during-the-state-of-the-union/

      • (1) Only 1 Percent Of The U.S. Labor Force Earns The Minimum Wage)

        So if giving 1 percent of the total work force a raise, does that mean we’ll break the bank?

        Is paying CEO’s ten times more than in the past going to break the bank? How about union members getting a raise through collective bargaining or anyone union or non-union getting a raise, is that going to break the bank? How about roughnecks in North Dakota getting paid more than usual? Is that going to drive up cost so much to break the bank? Does the 1percent minimum wage earners request for a raise trump Wall Street’s financial crisis?

        If so, if we could get that 1percent to work for a little less, we should be able to pay off our national debt in one year and purchase China to boot.

        It’s always the poorest, littlest person in this country that’s the problem.

        Always

        • No I do not think raising the 1% by $3 an hour will break anyone’s bank. Here is the problem. What happens to a person who is making $10.10 per hour right now when the $7.25 people are raised to that level. The $10.10 person obviously has 40% more skills and value than the $7.25 people. Will that person get a raise to $14.14 to maintain percentage parity? And so on, and so on, until everyone in the workforce has gotten a 40% bump thereby raising the cost to operate a business by some large amount. My point is that there will be unintended consequences to this that may just break lots of banks. If everyone does not get an increase we will be screwing the 99% so the 1% can get a 40% raise. The ringing effect of this including renegotiating union contracts with minimum wage triggers will most certainly break the bank and lead to higher prices, layoffs or both. You gotta start thinking beyond next week to understand this stuff Regulator.

          The net effect a year down the road will be that $10.10 will buy what $7.25 does now completely negating the buying power of the big one time raise. Then the process repeats itself until the currency is completely worthless. How about an exception for the low skills crowd? It is demeaning to skilled people to earn the same as unskilled people. How about an age threshold of say 26 to coincide with the age at which people become responsible to pay their health insurance premiums?

          By the way the CEO’s pay is between the board of directors and the CEO. The board sets the pay. Buy some shares and raise a ruckus over excessive pay for CEOs. In my opinion most of them are overpaid relative to the value they create. One share = one vote. You may just make a good corporate activist.

          • ” If everyone does not get an increase we will be screwing the 99% so the 1% can get a 40% raise.”

            So we will be screwing everyone I mentioned above if this 1% your link mentioned gets an inflation adjusted raised?

            Let’s let that happen then see if your apocalypse happens.

            If what you believe is true, rest assured it will be taken care of.

            Dubya’s gone

            Thank God

            We’re in good hands with a black man

            • In all fairness there should be annual adjustments based on the cost of living. If that had been done over time, the immediate pricing impact would have been mitigated.

          • If we cut the min wage to $1/hr will prices on goods and services drop? No. This dispells the scare tactics pretty well.

            • If you cut everyone by $6 an hour then prices will drop and hiring will rise. If you cut only 1.5 Million people they will only drop a little. The picture I painted is a real picture. I am sorry do not understand the effects of spreading a bunch of cash around on demand.

  11. You guys can worm and squirm all day long and call us liberal loons and make nasty comments about the president and make sweeping generalizations about ecomonic systems, evidently, you know nothing about, and use your pathetic, hateful, misinformed analogies about lazy people sucking on the government teat and quote Uncle Milty and quote all your Foxbot/Frank Luntz/Thomas Sowell pithy bumper sticker slogans and anecedotes that let you rationalize and justify your phony outrage, blah blah blah.

    None of that means or proves a GD thing. None of it.

    The FACTS and the economic STUDIES show that income and wealth inequality are now the WORST in American history AND it is damaging and hurting the American economy and American citizens. Further class mobolity is now higher in every country in the developed except for the UK. Yeah we’re next to last. You’re living in a dream world.

    What’s sad is that you can probably count on ONE hand the number of people in the tri-state that are in the 1%. So you’re being hurt too.

  12. Put down the Doritos and latest issue of the Obamacomix. Get a real job and start being a productive citizen. It will be painful at first, but soon you will feel better about yourself, your rage and hatred levels will decline, and you will help reduce the income inequality that you believe is so important.

    • Try to refute Brains’ arguments rather than just attack him/her. You also falsely assume every liberal is on assistance which is far from the truth, but you’re not very interested in the truth.

  13. Yoda says:
    January 29, 2014 at 10:08 pm
    In all fairness there should be annual adjustments based on the cost of living. If that had been done over time, the immediate pricing impact would have been mitigated.

    Very good comment

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