Chris Tilly Why Inequality is Bad for the Economy: Geese, Golden Eggs, and

Traps
Wealth Inequality Reader, 2004

Chris Tilly is a professor of Urban Planning and Director of the Institute for
Research on Labour and Employment at UCLA. He teaches courses on
economic development and research methods. In his article Why Inequality is
Bad for the Economy: Geese, Golden Eggs, and Traps (2004) Tilly challenges
conservatives prescription that economic inequality is essential for growth and
tries to show how equality can promote growth while inequality hinders it. The
article flows smoothly, the focus is obvious and maintained, however, the
number of sources is not sufficient and no statistical data is provided. Also, the
article covers only left perspectives on economic affairs and creates an
atmosphere that it does not serve to find the truth but is the propaganda
against conservatives.
In the first part of his article Inequality: Goose or Goose-Killer? Tilly
describes conservatives two main arguments that economic inequality is
essential for economic growth as it generates the financial incentives for
individuals to work hard, innovate, and invest wisely all of which will result in
economic growth and even the poor people will benefit indirectly from
economic inequality as some of the benefits of faster economic growth trickle
down to them. Then he criticizes the well-worn trickle-down theory by using
Keynesian justification that much individual savings can be harmful as it leads
to less investment (paradox of thrift). Author considers so called incentives
argument a little weightier but tries to eliminate it and suggests economists
William Easterlys and Gary Fields summarized evidence in favour of equality:
more ethnically homogeneous countries and countries with equal incomes and
land distribution grow faster. To strengthen his opinion Tilly focuses on match
effects (for instance, well-educated people are more productive when they
collaborate with ones who are also qualified) which is less likely attainable in
very unequal society. Also, he says that often called closing off the low road
policies create Pressure effects and final result of it is economic growth as it
makes business owners to be more productive to remain profitable. Author
also states that growth itself does not promote equality (as conservatives
claim) but only in case when policies and institutions to support equality are in
place. Tilly tries to show links among inequality, conflict and growth. He says
that ethnic variety is connected to slower growth and suggests solution which
is not ethnic cleansing but diminishing ethnic inequalities by using the tools
of government such as strong rule of law, professional bureaucracies,

protection of contracts, and freedom from expropriation. Finally, he concludes

that being in inequality trap and following with wrong economic policies leads
country towards slower growth and stagnation and everyone is going to pay
the price.

Tilly discusses one of the main and highly controversial issues in

economics and attempts to increase public awareness about the
danger associated with inequality and persuade policymakers to take an action.
But his arguments are not sufficiently convincing and evidence-based as he
relies on limited number of research (mostly on Easterlys). Also he uses vague
language (study after study has shown) and insufficient statistical data is
suggested to make conclusion (for example, when he talks about correlation
between ethnical diversity and slow growth). But the most important is that
author covers only positive sides of policies he suggests. For instance, when he
says that pressure effects created by closing off the low road policies
promotes growth, ignores the fact that the great majority of economists
criticize these policies as they increase unemployment among the young and
unskilled. The Nobel-prize winning economist Paul Krugman wrote in 1998:
So what are the effects of increasing minimum wages? Any Econ 101
student can tell you the answer: The higher wage reduces the quantity of
labor demanded, and hence leads to unemployment. (Washington
Monthly, Sep 1, 1998, book review).1
Thus, pressure effects argument might be considered as weakness of the
article, especially when the claim is radical (conservative prescriptions are
absolutely, dangerously wrong says Tilly).
Every author has an opinion about the content he writes and shows his bias
toward the subject, but Tillys approach about trickle-down theory has little
intellectual foundation and seems like so called "mudslinging", because
whether trickle-down theory exists and it belongs to conservatives is
questionable.
Thomas
Sowell,
an
American economist
and political
philosopher , in his book Basic Economics: A Common Sense Guide to the
Economy, wrote:
The phrase trickle down often comes up in discussions of tax
policies . . . But no recognized economist of any school of thought has
ever had any such theory or made any such proposal. It is a straw man. It
1

Krugman, Paul. Living Wage: What It Is and Why We Need It. The Free Library (01 September 1998)
http://www.thefreelibrary.com/Living Wage: What It Is and Why We Need It.-a021103427

cannot be found in even the most voluminous and learned histories of

economic theories.( p. 213)2
In addition to that, Tilly uses phrases such as the advocates of unfettered
capitalism and if you dont buy this incentive story, which emphasize the
opinion that the article is propaganda against conservatives.
To conclude, radical claim accompanied with poor examples and biased
attitude overshadows the work. If the author had been more concentrated on
solving the problem rather than attacking his opponents, the article would be
more valuable.

Works Cited
Krugman, Paul. Living Wage: What It Is and Why We Need It.( Washington Monthly, book
review , 01 September 1998)
Sowell, Thomas. Basic Economics: A Common Sense Guide to the Economy4th edition (28
December 2010)

14.5 A good and forceful critique. Keep up the good work.

2 Sowell, Thomas. Basic Economics: A Common Sense Guide to the Economy4th edition (28 December

2010)