No, the real problem is that the one making $10,000,000, (or ten billion), gets away with murder. Anything they do can be excused, and anything done to the one making ten thousand can be excused. Inequality as it pertains to those real social consequences of money is the problem, not who has how much of it.
Actually, plenty of revolutions intentionally did just that, and much, much worse (as in executing aristocrats and land owners and giving all of their possessions to the poor).
Whether that leaves the countries better or worse in the mid-term than places where the levelling wasn't done (Russia, China versus US, Europe) is something I'm sure can be long debated.
Well, that.
But also the real real problem: Economic professors making up social theories by conducting a "simple experiment using a game" (and childish slides).
Explain to me, how is that a problem. Suppose someone invents a method to make lots of clean renewable energy very cheaply. They make a company and earn $10,000,000. Did they not deserve the fruit of their labour? Is that a problem?
The idea that we live in a meritocracy, and intelligence and novelty are rewarded more than being a corporate drone.
We don't live in a meritocracy, but it's an ideal that many (probably a lot of folks who work in startups) would rather push towards: replace the "lucky" rich with the "deserving" rich.
But this argument assumes that financial incentives actually encourage and yield good work. Studies have shown this to be false. When you provide monetary incentives to achieve a goal, the outcomes are worse than the outcomes from people who pursued the same goals for no financial incentives.
Without financial incentives, people do work that gives them purpose and meaning, which ends up helping other people more than any financially incentivized goals.
They deserve more compensation because their work is worth more. It is that simple. Not everyone produces the same amount of value - in fact, how much value people produce at work usually diffes by a lot!
Someone who shovels dirt by hand moves less dirt in a year than one person with machines in a day. The idea that everyone produces equal value is not only ludicrous, it is deeply toxic and removes any incentive for individuals to excel and solve problems in a productive and creative way.
Agreed.
> They deserve more compensation because their work is worth more. [...] removes any incentive for individuals to excel and solve problems in a productive and creative way.
How does that follow from your premise above? It seems you're also assuming that only financial incentives motivate people to do good work. Do you actually believe that's true? Because psychological studies have shown that people who things for financial incentives actually perform worse than those who do them for non-financial reasons.
So frankly the evidence doesn't support the premise that financial incentives are useful. So you have to justify that they are somehow necessary.
[1] http://charris.ucsd.edu/articles/harris_salovey_2008.pdf
Artists don't have a financial motives. They're often poor, and yet they continue to pursue their art. People will do things that give them purpose and provide them meaning, that will never change. But if the financial incentive is removed, you won't crowd the field with people whose only purpose is to make money.
People don't just have one motivation, you see. If I have a desire to do something but it isn't strong enough to follow through, other factors can motivate me to complete the goal.
Sure, some people will starve for art. Most of the time, that's not because they desire to become as skilled as possible, but because they desire social and moral superiority and associate poverty with status and acceptance in their community. I don't personally see that as any greater or worse than pure profit motivation, and see it as much worse than a motivation to earn money in order to accomplish other goals, such as feeding, sheltering and clothing family.
Agreed.
> I don't personally see [social standing motives] as any greater or worse than pure profit motivation, and see it as much worse than a motivation to earn money in order to accomplish other goals, such as feeding, sheltering and clothing family.
But we're talking about financial rewards that far exceed what's needed to feed, shelter and clothe your own family.
You initially mentioned the risk/reward calculation, and rewards certainly affect it, but suppose instead of incentivizing via rewards, we remove the disincentive of risk. You no longer have the exorbitant rewards attracting people who are just after money, but you still encourage innovation for those who have insufficient motive absent high rewards given the risks.
If you remove the risk, that changes the calculation too, definitely. That's much harder to do, though, than increasing the reward opportunity or the perception of reward opportunity. Do I believe it is worthwhile to move in that direction? Certainly, but it's frankly impossible to administrate that solution today.
I'm not convinced that's true. It hasn't really been tried, and we know that financial incentives make people's work worse through psychological studies, so it's frankly worth trying for that reason alone.
If the typical person making that amount of money had invented "a method to make lots of clean renewable energy very cheaply" then it wouldn't be a problem, but those aren't the people we see making that kind of money.
And when the money is made from dirty energy, or high frequency trading, or executives who deny employee raises to boost profits, or just good old fashioned interest on inherited wealth, people start to wonder what everybody else is getting in exchange for keeping society structured in a way that causes those people to make that amount of money.
If I think it's close, then what the researched observed may kick in, even if it's no where near close.
Because that was never the problem with income inequality to begin with.
The problem isn't that one person makes $10,000 while another makes $40,000. Those people are both struggling. The problem is that one person makes $10,000 (or $40,000) while another makes $10,000,000.
Reversal never even enters into it. If you took $9,900,000 of the richer person's money and split it between 1000 poorer people, the richer person would still have more money. Even though that would imply a 99% tax rate.