Assignment #3 Ch. 21
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The major causes of income inequality are incentives and efficiency. Income inequality largely rewards to individuals for supplying their talents and resources to the economy. Proponents of income equality falsely assume that there is some fixed amount of output produced and therefore income to be distributed. In reality, the government takes tax and transfer process of high-income individuals and rewards it to low-income individuals. In short terms, taxes are a reduction in the rewards from increased productive effort; redistribution through tax transfers is a reward for diminished effort. The basic argument for income inequality is income inequality is justified because it results from differences in the quantity and quality of labor and other resources supplied by individuals to the economy and it is an unavoidable consequence of maintaining the incentives needed to motivate people to produce output and income year after year. There is also, a difference in inheriting property and inheriting a high IQ and inheriting property. When inheriting property, one can manage the property and make a living out of the property if they use their ability to manage the property right. Inheriting high IQ on the other hand is different because whatever the person chooses to do with their IQ is up to them. Making it big or being wealthy all depends on incentives, luck, and connections.
In my opinion, a nation’s income should be distributed to its members according to their contribution to the production of that total income. If you work hard for something, then you deserve the great rewards that entails with hard work. If a nation’s income were based on the member’s needs, then the income would not be very high. Nobody would work for their income if they were allowed to receive help from the government. In reality, I think there is a mixture of both that makes up the...
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