This article was originally published by Michael Njoku at The Mises Institute.
It is popularly deemed a sign of moral superiority and a mark of the “progressive” mind to heavily criticize the existence of inequalities of wealth and income within the social order of the division of labor and private ownership in the means of production.
However, the sober mind, careful of being unduly biased by errant ideological presuppositions, is often found to hold views that run contrary to the prevalent lines of reasoning advanced by these critics. This includes the validity of the teachings of economics, not on the basis of blind belief, but as an outcome of scrutinizing the logical chains of reasoning advanced and the necessity of certain conclusions, including the reality of the existence (and even benefit) of inequalities in a free-market, capitalist society.
This article affirms an economic ground for differentials in wealth and income of individuals under a capitalist system of production. Additionally, it offers a defense of these differentials, as logically necessary outcomes of socio-biological inequalities among acting men within the social order of division of labor and private ownership in the means of production.
Social Division of Labor As Means To Ends
Classical economics recognizes that greater productivity is to be derived from the social division of labor relative to autarkic self-sufficiency. It also recognizes that labor—the human factor of production—is essentially defined by its variability and differences in capacities possessed by various individuals in society. In regard to this last fact, all that the economist can say is that inequality exists among individuals and that it is causally relevant to the emergence of subsequent differences in outcomes among acting men within a market economy. Mises put it very clearly in Human Action as follows:
Economists must never disregard in their reasoning the fact that the
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