Ethics and inequality

Thus, the primacy of luck as a determinant of wealth means that there is no moral justification for economic inequality. At this point, many well-intentioned radicals will conclude that we must therefore have total equality. But the “therefore” is invalid. Ensuring fairness and equity are important, to be sure, but so is eradicating poverty and improving opportunities for the middle class. Under current conditions, pushing for absolute equality could erode the incentive to work, leading to widespread economic breakdown. We have already seen this happen with many well-meaning social experiments in the past.

In this paper, I focus on cheating as a potential source of unequal outcomes. I find large differences in how to deal with these inequalities depending on political preferences. Supporters of left-wing parties substantially redistribute incomes when cheating is possible, while supporters of right-wing parties refrain from redistribution. A deeper look into my data reveals that left-wing spectators’ redistribution decisions are only affected by potential misreporting in cases of large income differences. This provides strong evidence that left-wing spectators suspect a “rich” stakeholder to be cheating. […] right-wingers refrain from redistribution although they believe that stakeholders are cheating and although they are themselves reluctant to cheat to the full extent. This shows that right-wing spectators hesitate to redistribute if they do not know for sure that high relative income was acquired by dishonest means, while left-wingers are less concerned about this.