 Hi, Professor Gerald Friedman, Department of Economics, University of Massachusetts at Amherst. And we're here today to talk about, is inequality good? This is actually a two-parter. The first part that we'll do right now is utilitarianism. That's another one of those words that you can take home and show off to your parents or your younger sister who's always like, you're embedded in you, well throw utilitarianism at her and ask her if she knows what it means. You all know what it means. And that will put her in a place, right? Okay, utilitarianism is the idea, which goes back to Jeremy Bentham, an English philosopher of the late 18th and early 19th centuries, that social policy should be directed to produce the greatest good for the greatest number. Note, this was a revolutionary doctrine because it said we should value everybody's happiness equally. So, a policy that maybe increased some poor guy's happiness on the streets of London more than it increased the queen's happiness, Bentham would approve of that. The queen was no special person. Everybody was equal. Everybody's happiness was equal. Bentham, by the way, you can still find him, not only on Wikipedia. Go to the University College London, his body was preserved, and it's on exhibit. You don't believe me? Google Jeremy Bentham Body London, and you'll see pictures. He was ugly, even in life he was ugly. In death, okay. Some utilitarianism, we get this basic graph, diminishing marginal utility. You know about that. This is standard orthodox economics, diminishing marginal utility. This is where they get the demand curve, a downward sloping demand curve. What they also should get from diminishing marginal utility is this, a graph showing total utility in a society as a function of the degree of inequality. Lots of inequality where, you know, the rich get lots more than the poor. The rich are down here, the poor are up here, they're very low happiness. Total happiness. As you take from the rich and give to the poor, reducing the level of inequality, you're taking from somebody over here, they don't care. They already have so much, they don't even notice that you took some money from them. And you give them to people up here, and they're like, I can finally feed my children. Yeah, take a little more. They still don't notice, the rich still don't notice, but the poor are like, not only can I feed my children, but I can take them to a movie occasionally and give them clothes. So total happiness goes up as you take from the poor and give to the rich. And that continues until everybody is at the same place. The same level of happiness, the same marginal utility, the same income. Total happiness for society is maximized at a level of no inequality. An egalitarian income distribution, remember that sister of yours? Tell her you favor or oppose an egalitarian income distribution. Egalitarian. That'll impress her. You'll send her looking for a dictionary. Once you have an egalitarian income distribution, what happens if you keep taking from the people who used to be rich and giving to the people who used to be poor? Those who used to be rich start moving down this line further. Yeah, they benefit from giving them more money, but not all that much. And the people who used to be rich are moving up. They're starting to suffer now. And they're like, oh, can't go to the movies anymore. Oh, can't buy new clothes. Oh, can't afford to eat. So the diminishing marginal utility means that once you move away from egalitarian distribution, once you move away from equality in either direction, you're worse off. Taking from the rich to give to the poor raises total welfare. Taking from the poor to give to the rich lowers total welfare. It doesn't matter who's poor or rich. Total welfare is maximized at an equal distribution. Now, you may think this is unfair, which is fine. This is utilitarianism. This is bentham. You may not like bentham. You may think it's unfair that redistribution is unfair. Shouldn't take from anybody. Robert Nozak, the late Harvard philosopher, wrote a whole book about how taking from anybody to give to anybody else is a form of slavery. You can trace that type of argument back to John Locke, the 17th century English philosopher, although I think Nozak misinterprets Locke a little bit. But, yeah, but Nozak, by the way, is very good looking. Not like bentham. There are other reasons, by the way, why you might favor an egalitarian income distribution. And John Rawls, another Harvard philosopher, one not as good looking as Nozak, argued an insurance motive for inequality. If there's diminishing marginal utility and you don't know where you are going to be on the distribution, what sort of income distribution would you want? You don't know whether you're going to be here or here. Have lots of stuff or very little stuff. If you don't know, then you would try to minimise how bad things can be. That's a rational motive under uncertainty. It's what people often do. It's why they buy insurance. What's the point of insurance? You're accepting a lower income now so that if you die or if you get a disaster, you'll be protected. You won't be all the way up here if something bad happens. What are the bad things that could happen? You could be born blind. You could be born blind, deaf, and dumb, and sure play a mean pinball like Tommy. Yeah, those things can happen. What sort of distribution of income would you want if you don't know where you're going to be? If you don't know if you'll be the blind kid or the far-seeing kid. You don't know if you'll be the dumb kid or the smart kid. You don't know if you'll be a-rod or somebody who gets washed out of single-a-ball. If you don't know where you're going to be, you'll want an egalitarian distribution because that minimises how bad things can be for you. You would want to make sure that the poor, the blind, the incompetent are well cared for. If you don't know whether you're going to be one of them or one of the successful people. If you don't know whether you'll be homeless or live in a mansion, you want everybody to have a decent house. And that would be Rawls' argument, supplementing Bentham's argument for an egalitarian distribution of income. Okay, next we'll be talking about another approach to income distribution. But for now, have a nice day. Thank you, bye bye.