An Equality-Efficient Trade-Off?

If we could afford a democratic economic program, both in fiscal and resource terms, wouldn’t redistribution of income from the top to the middle and bottom throw cold water on people’s economic initiative? Do we not need the stakes of economic success and failure to remain high in order for players to put everything they have into the game? Why would investors invest, inventors invent, and workers work hard if the winners win less and the losers lose less?

Economists are fond of referring to these objections to a more equal sharing of economic rewards as the “equity-efficiency” or “equality-efficiency” trade-off. More equality necessarily means less efficiency, they warn, and hence fewer goods ...