The Impact of Economic Inequality on Economic Freedom

Contemporary economic policy debates are dominated by concerns regarding the rise in inequality (Stiglitz 2012, Piketty 2014). Primarily, this has led to a focus in re-invigorating redistribution. For instance, Robert Shiller (2014) has recently argued for indexing top marginal tax rates to inequality and using the revenues to fund transfer payments. Secondarily, there are the longstanding objections to “neoliberalism” in general, which has encouraged globalization and the liberalization of markets. To the extent that liberal reforms have improved economic institutions, might today’s inequality subsequently derail them? It is often difficult to find firm evidence linking negative outcomes to inequality (Deaton 2003, Porter 2014). However, some economists have argued that inequality may harm the quality of institutions. For example, Acemoglu et al. (2013) have argued that concentrations of wealth may subvert democracy. This argument is also present in political science (Bartels 2008), and Easterly (2001) has made similar points. Such arguments offer a more rigorous conception of the popular notion of inequality subverting politics, a concern that is especially salient following Citizens United v. Federal Election Commission, and more recently, McCutcheon v. Federal