What can we learn from our visit to the Chancy Islands?
- From Flat Island:
It might be good to live in a society where everyone has equal talent and capability, works equally hard, has equal (and reasonably high) wealth, and where luck plays no role, though it might also be quite boring. Of course, it is unlikely there is any place even remotely like Flat Island outside of the fictitious Chancy Islands.
- From Rugged Island:
Without any countervailing forces, a society in which every household has equal wealth and every person is equally capable and hardworking will eventually become quite wealth stratified, simply from the effects of random, expensive natural events such as serious illnesses, bad accidents, and severe weather. Some households will amass vast fortunes without having done anything to justify their windfall; others will slide into poverty and homelessness without having done anything to warrant their impoverishment.
In a situation in which all other possible factors (inborn traits, personality, skills, education, effort, persistence, etc.) have been completely eliminated, luck is solely responsible for all of the growth in inequality. In such a society, there is no possible moral justification for wealth inequality. And, in such a society, those who feel empathy and compassion for those who have been hurt by random adversity would likely seek to reduce wealth stratification.
- From Debt Island:
Measures, such as loans, that shift money or other important resources from the poor to the wealthy will make inequality worse — especially if these measures are predatory (exploitive) or punitive. Loans are useful in providing temporary resources to those who need them, but if there is no easy way to repay those loans, they just become another burden that weighs down the poor and enriches wealthy lenders.
Timing is also fateful: those struck early by severe financial misfortune are forever burdened by loan payments while those who escape misfortune for a while are able to amass significant financial reserves which enable them to weather large expenses later.
- From Mercy Island:
Unlike loans, measures such as bankruptcy — that give a break to the unlucky poor (and impose the costs on everyone else) — will greatly reduce wealth inequality, especially among those at the bottom.
But an unequal allotment of bad luck will still cause stratification to develop over time. For example, after 100 years, the resulting wealth distribution on Mercy Island — with a few big economic winners and many losers — begins to resemble U.S. society in 2016.
- From Combo Island:
Progressive taxes that are much higher for wealthy households can also greatly reduce wealth inequality, especially if the proceeds generated by the taxes are shared widely.
- From Parity Island:
Using many complementary measures — such as strongly progressive taxes, reduced interest rates, bankruptcy-restoration laws, and distribution of tax revenues and bankruptcy costs equally to everyone — can greatly reduce wealth inequality, and in direct proportion to the stringency of the measures. Very strong measures can almost totally erase wealth inequality.
- From Skewed Island:
Generous bankruptcy laws, low interest rates, and a strong wealth tax can also greatly reduce stratification in a society that is already extremely stratified.
Government policies can vastly alter wealth inequality. Implementing stringent anti-inequality measures greatly reduces wealth stratification. If a society desires to reduce inequality, it can be done.
[N]o one “deserves” hunger, homelessness, ill health, or subjugation – and ultimately, no one “deserves” giant fortunes either. All such outcomes involve a large portion of luck.
Unlike the Chancy Islands, in our real world, not everyone is born equal, not everyone has the same aptitude, the same skills, the same education, the same experience, or works at the same level of effort. Given that, how much should a society seek to reduce its wealth inequality?
Is wealth inequality inherently bad? Should it be reduced to a minimum? Or is wide wealth stratification necessary to provide enough incentive for people to work long and hard at difficult jobs and to work hard in the near-term for a payoff later?
Does wealth inequality reward socially beneficial behavior and penalize slacking and procrastination? Or does it just reward luck, ancestral ownership, exploitation, corruption, and fraud, and reinforce class-based prejudice? Are there other ways to motivate people to work that are as effective as wealth inequality? Is the government the best way to implement measures such as these or are there other, better ways?
These are important questions, but not ones for which the Chancy Islands can provide much insight. You’ll have to locate the elusive Motive Islands, Chicanery Islands, and Privatize Islands to learn about these topics.