ABSTRACT
This chapter suggests that inequality has both positive and negative effects. On the positive side, differential rewards provide incentives for individuals to work hard, invest, and innovate. On the negative side, differences in rewards that are unrelated to productivity—those that result from racial discrimination, for example—are corrosive to civil society and cause resources to be misallocated. The chapter argues that, for various reasons elaborated below, all of these forms of inequality are of concern to contemporary American society, and that America has reached a point at which, on the margin, efficiently redistributing income from rich to poor is in the nation's interest. It also argues that religious beliefs provide as strong (or weak) a justification for views toward society's implicit welfare function as do philosophical reflections behind a veil of ignorance. The chapter disputes that inequality could grow so extreme that it eventually jeopardizes any type of "widespread acceptance" of a democratic capitalist society that might be established.
