The New Economics of Inequality and Redistribution

Economists warn that policies to level the economic playing field come with a hefty price tag. But this so-called 'equality-efficiency trade-off' has proven difficult to document. The data suggest, instead, that the extraordinary levels of economic inequality now experienced in many economies are detrimental to the economy. Moreover, recent economic experiments and other evidence confirm that most citizens are committed to fairness and are willing to sacrifice to help those less fortunate than themselves. Incorporating the latest results from behavioral economics and the new microeconomics of credit and labor markets, Bowles shows that escalating economic disparity is not the unavoidable price of progress. Rather it is policy choice - often a very costly one. Here drawing on his experience both as a policy advisor and an academic economist, he offers an alternative direction, a novel and optimistic account of a more just and better working economy. 'Over the past forty years, the gap between rich and poor has widened dramatically in many industrialised countries, and what Americans call the 'middle class' has shrunk. Samuel Bowles argues that, quite apart from its moral dimension, such inequality is economically inefficient. It leads to excessive expenditure on the enforcement of property rights and on crime prevention. It also reduces labour productivity. He argues that a redistribution of income and wealth would increase productivity and encourage entrepreneurship amongst social strata that are currently locked out of credit markets. These stimulating essays are a valuable contribution to the current debate about equality.' Robert Rowthorn, Emeritus Professor of Economics, University of Cambridge 'Bowles and his collaborators show how, in a globalized world economy, independent democratic national states can implement programs of egalitarian redistribution and social insurance. Included are better educational opportunities, employee ownership of workplaces, land reform, stimulus to the formation of cooperatives, support of home ownership, expansion of subsidies designed to promote employment and increase earnings among the poor. But even better, Bowles also considers the Unconditional Basic Income proposed by Van Parijs and van der Veen, which would truly be a step in the direction of a society of real freedom for all. The book is especially relevant for all of us who would like to use the instruments of economic policy to advance the main principles of justice.' Eduardo Suplicy, Fundacao Getulio Vargas, Member of the Brazilian Senate, and Founder of the Workers' Party of Brazil 'Samuel Bowles offers both the world of science and the world of politics an extremely valuable synthesis of new thinking about inequality, integrating innovative analyses of fundamental causes, sustainable solutions, human behaviour and normative conceptions. Both unjustified 'equality pessimism' and traditional redistributive approaches are put to the test of rigorous analysis and empirical research. The outcome is an inspiring account of ways and means to create more just societies in today's global world.' Frank Vandenbroucke, University of Leuven, and former Minister, Belgian GovernmentList of figures; List of tables; Preface; 1. The new economics of inequality and redistribution; 2. The economic cost of wealth inequality; 3. Feasible egalitarianism in a competitive world; 4. Cosmopolitans, parochials and the politics of social insurance; 5. Altruism, reciprocity, and the politics of egalitarian redistribution; 6. Conclusion; Appendices; Works cited; Index.