The Cause Of Inequality: Institutions, Culture Or Taxes?

David B. Grusky blames the first:

There’s much empirical evidence suggesting that Americans are prepared to accept even substantial inequality as long as it’s generated under competitive market rules. It’s therefore wrong to interpret public outrage about CEO pay as a protest against high compensation in and of itself. This outrage is not driven by the class envy about which the GOP presidential candidates so frequently complain. It is, rather, a protest against rationing, corruption, sweetheart deals, and foxes guarding the henhouse. It is a protest, in other words, against the corruption of markets by power. The rush to a tax agenda leaves the corruption untouched and instead fixates on a redistributive band-aid that Americans have never much liked. The market principle is, by contrast, one of our core commitments and a more promising base upon which to take on extreme inequality.

Glenn Loury picks the second – culture:

It doesn’t make much sense to think about rents and market failures when inequality is mainly a product of our impoverished ideas about autonomy, community, and solidarity. The failures here are political, not economic, and they are likely to be remedied only by a politics of cross-class and cross-race solidarity—the kind of politics about which I heard far too little at the Occupy Wall Street rallies I attended.

And Thomas Piketty, Emmanuel Saez and Stefanie Stantcheva take door number #3:

The bottom line is that rich countries have all grown at roughly the same rate over the past 30 years, in spite of huge variations in tax policies. Using a model in which the response of top earners to top tax rate cuts is due in part to increased rent-seeking behavior and in part to increased productive work, we find that the top tax rate could be as high as 83 percent—as opposed to 57 percent in the pure supply-side model—without harming economic growth.

All three contributions are part of a Boston Review roundtable on inequality and taxes, which you can read in full here.