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Equality and growth: a non-linear
relationship.
The question whether equality is
beneficial for economic growth and
progress has occupied the minds of the greatest scientific thinkers as
well as policy makers. Evidence from a broad panel of recent academic
studies shows the relation between income inequality and the rate of
growth and investment is indeed robust however not linear..
In his study " Inequality
and Growth in a Panel of Countries"
Robert J. Barro (Harvard University) found
that higher inequality tends to retard growth in poor countries and
encourage growth in well develloped regions. In their study
for the World Institute for Development Economics Research
, Giovanni Andrea Cornia and Julius Court (2001) reach similar
conclusions. They found that both very high
egalitarianism and high inequality cause
slow growth, and that the relation between equality and growth follows
an inverted U-shape curve. The authors therefor
recommend to pursue moderation also
as to the distribution of wealth and particularly to avoid the
extremes.
 Extreme
egalitarianism
leads to incentive traps, free-riding, high operation costs and
corruption in the redistribution system, all reducing a country's
growth potential. However also extreme inequality diminishes growth
potential through the erosion of social cohesion, increasing social
unrest and social conflict causing uncertainty of property rights.
Therefore public policy should target an ‘efficient inequality range’.
The authors claim that such efficiency range roughly lies between the
values of the Gini coefficients of 25 (the inequality value of a
typical Northern European country) and 40 (that of countries such as
China and the USA).
The precise shape of the inequality-growth relationship depicted in the
Chart obviously varies across countries depending upon their resource
endowment, history, remaining levels of absolute poverty and available
stock of social programs, as well as on the distribution of physical
and human capital.
See also : Inequality
and Growth: What Can the Data Say? Abhijit V. Banerjee and Esther
Duflo
See also : Does
equality reduce growth? Some empirical evidence. by Marta Bengoa a
and Blanca Sanchez-Robles a
See also : The
Path To Sustainable Growth - Lessons From 20 Years Growth Differentials
In Europe.
Please also visit our 
with free downloads of
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 The Road to Serfdom. This masterpiece of
Nobel Prize laureate Friedrich Hayek
is an eye-opener,
strongly advocating the free market principles. In this all-time
classic Hayek persuasively warns against the authoritarian utopias of
central planning and the welfare state. Fascism, communism and
socialism share these utopias. For the implementation of their plans
these authoritarian ideologies require government power over the
individual, inevitably leading to a totalitarian state. Every step away
from the free market toward planning reduces people's freedom and is a
step toward tyranny. Planning also cannot assess consumer preferences
with sufficient accuracy to efficiently co-ordinate production.
However in a free market, "Price" is the all-inclusive source of
information, guiding entrepreneurs to produce whatever is wanted and
directing workers wherever they are most needed. Free markets also
provide the entrepreneurial climate for a thriving economy and for
releasing the creative energy of its citizens. Free individuals in
their native strive to develop their talents and to improve their fate
produce spontaneous progress.
All public interference in the economic process disturbs the market
equilibrium, distorts the optimal allocation of resources and
consequently reduces the level of wealth. Where planning replaces free
markets people do not only loose their freedom and individuality.
Resulting slow
growth also increases welfare demands causing dependence similar to
slavery. In the end people's self-reliance and self-respect is ruined,
and citizens are degraded to a means to serve the ends of the
collective mass. |
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Free condensed pdf
Comments
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Abstract
Overview
Paperback
Version
Readers'
Digest
More Books of
Friedrich
Hayek here |
- The
Tragedy of the commons by Garrett
Hardin Free
access
and unrestricted demand for a finite resource ultimately
dooms the resource through over-exploitation. This occurs
because the benefits of exploitation accrue to individuals,
each of which is motivated to maximise his or her own use of
the resource, while the costs of exploitation are
distributed between all those to whom the resource is
available (which may be a wider class of individuals than
those who are exploiting it). The theory itself is as old as
Aristotle who said: "That which is common to the greatest
number has the least care bestowed upon
it. more
here
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-
The Farm
Problem Edited by Paul L.
Poirot
This anthology includes writings by
John Chamberlain, Edmund A. Opitz, Grover Cleveland, W.M.
Curtiss, Clarence Carson, and E.C. Pasour Jr., among others.
After more than 70 years of government intervention, these
damaging policies continue to plague American agriculture.
The resulting distortion of the price system and an
unconscionable tax burden can only be eliminated by a return
to the free market.
Download as
PDF
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Dr. Martin De Vlieghere
is economist and doctor of philosophy since 1993. His PhD was
written on the
conditions of modernity in the works of Habermas and Hayek. He has been
assistant professor at the Department of Philosophy of the University
of Ghent. He is president of the "Free Association for Civilization
Studies" and member of the board of directors of Nova Civitas.
Paul Vreymans is econometrist and advisor at the Free
Institute for Economic Research. As
an international businessman he is a close witness of Europe's
industrial collapse and the rise of the parasitical bureaucratic
complex. He is a founding member of the Brussels' think tank WorkForAll.
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