ABSTRACT
An implicit assumption made by many intellectuals troubled by rising inequality is that it is linked with a stagnation of middle- and working-class incomes. This leads them to conclude that recent increases in inequality do not meet the test of Rawls’ “difference principle” because they do not work to the benefit of the least well-off. According to this “Progressive” view, broadly free market economies, including the U.S. economy, do not meet the Rawlsian test, which leads its adherents to believe that greater government intervention is necessary. By contrast, adherents of the “Classical Liberal” view argue that not only would free market economies meet the difference principle in theory, but that even imperfectly free economies like that of the United States actually do meet it in practice. In this chapter, I present evidence that suggests that the Classical Liberals have it right. I also explore the relationship between these two perspectives on inequality and larger concerns about “fairness.” I distinguish between desirable and undesirable forms of growing inequality and argue that most of the causes of rising inequality that do not meet the Rawlsian test are ones that would be characterized as “unfair.” They result from different groups of people getting different treatment under the law, with some getting access to special privileges while others are denied the opportunity to pursue the economic activities they wish to.
