The occupy Wall Street rabble have brought to the fore the old mantra of the badness of income inequality. Of course they have no idea of what is "equitable" because even few of this bunch would argue that everyone should have the same income. But let us imagine that everyone had the same income. Would this mean that wealth would also be equal? Of course not. My favorite example is the economics of a prisoner of war camp (http://www.albany.edu/~mirer/eco110/pow.html). Essentially all the prisoners start out the same. They have equal income. They are issued the same clothes and other goods. Monthly they all get the same package from the Red Cross. Thus, all incomes are the same. Complete income equality. Yet before long, the wealth distribution is skewed. Some prisoners are wealthy while others are poor even though their income is the same per month. How can this be? Well tastes and preferences differ. Some smoke and others don't. Barter takes place for cigarettes. Some gamble and lose. Some gamble and win. Some incur debts to others. Soon when the prisoners receive their monthly package, some have to give it or parts of it to those they owe. Some accumulate wealth while others go lacking. As a consequence even if you could start out in perfect socialist heaven, it will quickly become full blown capitalism if left to its own devices. Socialism simply does not work because it goes against basic human nature. The only way to make it work is to have the state enforce it through coercion. And be honest, would you want to share your wealth with society's dregs who don't have a life and are occupying Wall Street?
Harold A. Black is professor emeritus in the Department of Finance, University of Tennessee, Knoxville having retired after 24 years of service. He has served on the faculties of American University, Howard University, the University of North Carolina - Chapel Hill and the University of Florida. His government service includes the Office of the Comptroller of the Currency and as a Board Member of the National Credit Union Administration. He also has served on the boards of directors Home Savings of America and its parent company, H. F. Ahmanson & Co., Irwindale, California prior to its merger with Washington Mutual Savings Bank, on the board of New Century Financial Corporation, Irvine, California, then the nation’s largest real estate investment trust and as director and later chairman of the Nashville Branch of the Federal Reserve Bank of Atlanta. He writes an occasional article for the Knoxville News-Sentinel at http://www.knoxnews.com/staff/dr-harold-black/. His web page is haroldablackphd.com