Saul says that income inequality is cause for concern, but doesn’t say why. If the basis of the concern is mere envy, that is not a legitimate concern – in fact it is very anti-social and it’s anti-social to suggest income redistribution based on force of policy.

On the other hand, if income inequality is bad, why not distribute income equally? Obviously
a) this must spell the end of modern civilization, or
b) at the end of the first day it would be back to unequal again,
but that’s not the point. If the only way to get more income is by providing goods or services that society wants more than the alternative uses of the same factors of production that went into producing them, then attacking income inequality is only attacking the means by which everyone is made better off than they would have been if incomes were more equal.

Thus, absent government intervention, there’s nothing unfair about income inequality resulting from market transactions. It is the means by which the direction of all production is put in the hands of the masses.

Also, the term ‘distribution’ is ambiguous. In market transactions, distribution is an inseparable part of production. It is not as though society produces everything equally in common, then puts it into a common pool, and then there is a separate operation of unequal “distribution”. Unequal incomes arise only because the owners of private property are more or less successful in using it to satisfy the most urgent and important wants of society, as judged by society. It is rational in the sense of consumer evaluations, in a way that government confiscations and handouts can be nothing but arbitrary and counter-productive.

Anyone who doesn’t like the high executive incomes of a company has their remedy – don’t buy their products. Actions speak louder than words. The fact that some people who complain about such companies, continue to patronize them, proves that freedom is better than coercion, even in their own terms.

Three current graphs would greatly assist my appreciation of Mr Eslake's numbers:

Australian gross income distribution,
Australian after-tax income distribution
Australian wealth distribution

The horizontal scale would be percentile, the vertical scale would be income (or wealth) and would need to be a logarithmic (powers of 10) scale.

Comparable sets of graphs for 1970 and 1990 would help put some of his points a clearer context for me. I'd be pleased to know where any such (or similar) graphs might be found.

Actually JKJ I did spell out why I thought 'too much' inequality in the distribution of income and wealth could be a Bad Thing - 1) because it could (and in the US did)contribute to the accumulation of unsustainable levels of household debt, as people whose incomes are stagnant borrow in order to sustain levels of spending, and 2) it can undermine support for a market economy and the policies that make a market economy possible, instead fuelling support for things like protectionism and greater government intervention in the way the market works.

"Sir Victor", it's very hard to publish charts on this site, but you can find long time series of the data I used in writing this article on the web at http://g-mond.parisschoolofeconomics.eu/topincomes/.

There isn't much data on the distribution of wealth in Australia; the most recent source is the ABS publication Household Wealth and Wealth Distribution 2009-10, catalogue no 6554.0

We seemed to have entered an era where financial profits and profits through inflation...sorry "capital appreciation" have come at the expense of real wealth creation.
I believe the stats show that more even income and wealth distribution are associated with more growth, more robust growth and better democratic outcomes...but like all statistics it depends what you measure.
Until "Quality of life" indexes are closer to approximating the mysterious economic quantity "Utility" than the currently meaningless "GDP" then the profits of war or waste will be given equal value to the saving of lives or the provision of efficient essential services.
Obscene wages need not be banned...just fix the progressive income tax system to say...tax anything more than $400K by 80%. Also need to tax war/waste and financial profits by enough to stop their parasitic actions on the real economy. There is nothing wrong with real profits...but when the economy is rigged by bankers for bankers...private profit/public risk, corporate welfare funded by taxpayers, etc. This is not Capitalism, it is corruption.

Your article suggests that the concessional treatment of capital gains in Australia is causing income inequality but the evidence points to an opposite conclusion.

Prior to September 1985, there was no capital gains on any asset owned for more than 12 months. In other words there were greater concessions on capital gains in the past but income inequality was much less. It would suggest that your conclusions are invalid.

I appreciate that income inequality is a problem but please stick to the facts.

Saul Eslake,
Thanks for the links.