Wednesday, May 28, 2014

Tyler Cowen Makes Strong Case That Inequality Destroys Wealth

Professor Cowen is a Libertarian nut who, I think -- in his weird "slavery was bad for white people too" post -- has just inadvertently made one of the best cases that income inequality actually destroys wealth. Here's a sampler:
I would suggest that most living white Americans would be wealthier had this nation not enslaved African-Americans... For instance it is generally recognized that freer and fairer polities tend to be wealthier for most of their citizens.

More specifically, many American whites benefited from hiring African-American labor at discrimination-laden discounted market prices, but many others lost out because it was more costly to trade with African-Americans. That meant fewer good customers, fewer eligible employees, fewer possible business partners, fewer innovators, and so on, all because of slavery and subsequent discrimination. The wealth-destroying effects are surely much larger here...
Strangely, as a Libertarian, Dr. Cowen shouldn't believe that unfair wages destroy wealth. In fact, Dr. Cowen has been very anti-Thomas Piketty recently -- and Piketty's new book is all about the hazards of wealth inequality. So which position does Cowen actually hold? That wealth inequality is bad, or that it's good?