Identifying the Causes of Economic Inequality
In Race & Economics, Walter Williams emphasizes the importance of causality in understanding racial inequality. He argues that it is not enough to document and track economic inequality — it is necessary also to understand its causes.
Without understanding the causes of any perceived problem, any attempts to resolve it are no more than wild stabs in the dark. For example, Kamala Harris recently argued that black people are less likely to be homeowners, a phenomenon that in her view is caused by the fact that “ninety-seven percent of appraisers are white,” which in turn leads to “inequity in the home appraisal system.”
Having thus identified a problem and decided that the cause of the problem is “racial bias,” the solution in her view is “making information about home valuations and the race and ethnicity of homeowners available to the broader public.” In her view, if people know the race of homeowners, that will “root out racial bias,” which in turn will lead to more black people being homeowners. This approach to social problems is surprisingly popular and is partly explained by the fact that the causes of social problems are considered irrelevant by egalitarians.
The equality industry, which is devoted to eradicating inequality, does not concern itself with the causes of inequality. Egalitarians stipulate that inequality is a problem, assert that this problem is self-evidently caused by injustices such as historical oppression or racial discrimination, and declare that the appropriate remedy is wealth redistribution. When wealth redistribution inevitably fails to make everyone equally wealthy, they take that as evidence that more redistribution is required. This is characteristic of an ideology that revolts against reality: Because the causes of stated problems are irrelevant, the selected remedy is random — anything that strikes the egalitarian fancy — and it follows that the failure of any selected remedy proves nothing.
Some of this disdain for investigating the causes of inequality may be due to ignorance or hubris, but a large part of the disregard for ascertaining the causal factors behind wealth and income distribution is due to the ideology of egalitarianism — egalitarians are not looking for causes of inequality as they regard the link between means and ends as irrelevant. The premise of egalitarian reasoning is that all people are equal, and economic outcomes would therefore also be expected to be equal in the absence of discrimination or oppression. Their theory is that if racial bias is eradicated, all races will default to their “original state” of being equally wealthy. The same reasoning applies to explaining wealth inequality between different countries, as egalitarians attribute global inequality to imperialist exploitation. As the great development economist Peter Bauer observes:
The idea of Western responsibility for Third World poverty has also been promoted by the belief in a universal basic equality of people’s economic capacities and motivations. This belief is closely related to egalitarian ideology and policy which have experienced a great upsurge in recent decades. If people’s attributes and motivations are the same everywhere and yet some societies are richer than others, this suggests that the former have exploited the rest.
Ludwig von Mises has a different premise. He argues that if we acknowledge the reality that people are not equal in the first place, we would have no reason to expect their wealth or income to be equal. In his view, people are not equal, and the concern should therefore be with peaceful cooperation and productivity that improves the material conditions of society, not with equalizing the material circumstances of the unequal: “In any social system the main issue is how to promote peaceful cooperation among people markedly different from one another not only in bodily characteristics but also in mental capacity, willpower and moral strength.”
Mises emphasized that causality is essential to the scientific method. He argued that science “aims at tracing back every phenomenon to its cause” and that ascertaining the causes of phenomena is therefore central to all human action. As Mises explains, “In order to act, man must know the causal relationship between events, processes or states of affairs.” Scientists do not simply make wild guesses on the causes of phenomena — home ownership patterns are caused by racial bias in the home appraisal software! — but instead seek to understand accurately their causes and effects.
It is common sense that the causes of things matter. That is the only rational foundation on which anyone can ascertain the appropriate means to achieve the desired outcome. Mises explains:
Man is in a position to act because he has the ability to discover causal relations which determine change and becoming in the universe. Acting requires and presupposes the category of causality. Only a man who sees the world in the light of causality is fitted to act… In a world without causality and regularity of phenomena there would be no field for human reasoning and human action.
Egalitarians, unconcerned with causality, persist in equalizing wealth through legal interventions. They err in their pursuit of economic progress because, as Mises explains, “the means chosen are not appropriate to attain the ends sought.” Socialism is not an appropriate means of attaining economic productivity. Not only will it fail to produce material progress, as the predictable outcome of wealth redistribution schemes is that everyone will be less wealthy, but it will also disrupt peaceful cooperation and racial harmony.
Originally Posted at https://mises.org/
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