This article is the third part of a series on 'The Theory of Cost'. Initially, I intended to write it all in one article, but I found the author's language to be very concise. Omitting too much would harm the essence, while omitting too little would make it too lengthy, so I decided to split it into multiple articles. The author of 'The Theory of Cost' is Professor Zheng Yefu, and the first edition of this book was published in 1997. It truly feels like a case of meeting too late. Douban Book Link

Is Economic Equality Possible?

"Distribution according to need" is the ultimate goal of those who idealize equality. It transcends the category of equality, thus eliminating the significance of discussing equality and inequality. However, the reality is that the issues of equality and inequality will persist for a long time, permeating our social lives, and we cannot eliminate this pair of problems from social life.

Proponents of distribution according to need believe that "distribution according to labor" is a transitional scheme from extreme inequality to distribution according to need. However, regardless of whether distribution according to labor can truly bring about equality, it remains unrealistic. This is because "labor" cannot be measured. The reason labor cannot be measured is that when you attempt to measure it, you must measure the social benefits brought about by that labor. The standards for social benefits are difficult to establish. The author provides an example:

If the evaluation of a nail factory is based on quantity, the manufacturer will spare no effort to produce a large number of small nails; whereas if the standard is based on product weight, the manufacturer will shift to larger nails.

Assuming we can indeed solve this nail problem, the principle of distribution according to labor differs from market mechanisms; it requires a visible hand to manipulate it. This visible hand cannot establish efficiency standards for millions of types of labor and billions of types of products, which also include countless ever-changing factors such as raw materials, technology, and tools. Therefore, the nail problem is bound to arise. Another example of the difficulty in measuring labor efficiency is the comparison between mental labor and physical labor. The former is complex labor and requires more time accumulation than the latter. However, the ratio between the two can only be determined by either the supply and demand relationship in the market or subjective human judgment. Objective distribution according to labor does not exist, and it is impossible to pursue equality based on this principle.

Since neither distribution according to need nor distribution according to labor works, what about "regardless of how 'labor' and 'need' are defined, insisting on equality in income"? Here, the author provides another perspective on price control:

Unfortunately, when a sound market mechanism exists, there are no barriers between income and consumption; however, in places where the market mechanism is artificially disrupted, the equality obtained in income is difficult to realize in consumption. Because in this system, the prices of goods do not fluctuate according to supply and demand. Scarce goods must either be queued for purchase or controlled by tickets. In the rush to buy, those who are quick-eyed and quick-handed get the goods, effectively transferring competition from the production field to the consumption field. In production, the capable are limited in what they can earn, while in consumption, they are allowed to earn more. According to market logic, scarcity leads to an increase in goods, thus those who obtain scarce goods actually signify an increase in income, and equality is completely lost.

The principle of equal distribution merely shifts competition from the production field to the consumption field, from tapping into productivity to tapping into interpersonal relationships.

Distribution according to need, distribution according to labor, and equal distribution are either unimplementable or, if implemented, still result in inequality. Economic equality in social and economic life is impossible.

Is Economic Equality Desirable?

The reason for discussing "whether something that cannot exist is desirable" is that not everyone is willing to admit that equality is impossible, not everyone is immune to the temptation of an equal utopia, and not every politician has abandoned the social practice of economic equality. If we can argue that even if equality is attainable, it is undesirable, perhaps it can help people become more aware of the gains and losses of pursuing equality and abandon unrealistic fantasies.

Firstly, income equality does not stimulate workers' enthusiasm. People cannot hope for a life without comparison and competition, just as they cannot hope for a sports game to end in a tie before it even begins. Human nature has a competitive spirit; people always want to prove that they are stronger than others in some aspect. The economic field, like all other fields, is a stage. A person who becomes wealthy can give back most of their wealth to society in various ways, but society must not suppress their talent and performance in the name of "equality." A society that enforces income equality typically only allows a few individuals—those who design this ideal—to perform, while the majority can only passively accept it, leading to a loss of motivation in that society.

Secondly, even equivalent exchange does not stimulate workers' enthusiasm. When we talk about "exchange," it inherently carries the connotation of "voluntariness." First— as we have previously argued— calculating an objectively fair price for everyone is impossible, but even if such a price ratio truly existed, it would not stimulate people's enthusiasm. This is because people are actually seeking "profit," even greater than what is typically expected from transactions. In this sense, it is unequal exchanges that can stimulate people. If we exclude deception, the source of profit is scarcity.

A merchant tirelessly transports tea leaves from the farming area to the pastoral area to sell them at a high price. If his earnings follow the principle of distribution according to labor, meaning he should only receive the value of the tea leaves at the origin plus transportation costs, isn't he equivalent to a mere transporter? Why would he bother? Some manufacturers go to great lengths to create new products because they can stimulate or fill a latent demand. If there were not unusually high prices, greater than "equivalent exchange," wouldn't it be easier for them to produce traditional products? Of course, one might argue that it is the unsold tea leaves at the origin that force some people to go to the pastoral area, and the poor sales of traditional products that compel others to explore new products. But this also illustrates that what has been prevalent in society is "unequal exchange." A merchant always strives to avoid unfavorable positions in "unequal exchanges" and seeks advantageous positions. Without the stimulus of such "unequal exchanges," tea leaves and new products might still be transported and developed, but not as rapidly. It is the factors of inequality that continuously stimulate people to meet the demands of society. Equality seems beautiful, yet it rarely manifests here.

Does Equality Mean Justice?

Any ideals about equality mentioned above can be categorized under "outcome equality" in terms of justice, and they cannot be considered "fair." Critics of outcome equality argue that it overlooks the differences in innate abilities among individuals, does not guarantee equal rights to compete, and suppresses and deprives the strong and capable.

Thus, we have a second ideal of justice beyond outcome equality: "starting point equality," which refers to equal opportunities and fair competition. However, does this solution truly eliminate inequality? The "History of Race in America" mentions that anyone's achievements in life are the result of generations of struggle by their family. There is also a saying in our country: "Dragons give birth to dragons, phoenixes give birth to phoenixes, and the children of mice will dig holes." Setting aside the random genetic differences that lead to innate disparities, even if two individuals have identical talents, the differences in their growth environments can be enormous. The children of professors and engineers clearly have advantages over the children of illiterates in terms of their growth environment. We desire equal opportunities, which means starting point equality; however, the starting point has never been equal, and we have never stood on the same starting line. Since competition is not equal from the very beginning, why can't we allow those who have an advantage at the finish line to make some compensation?

From the above discussion, we can see that both "outcome equality" and "starting point equality" are lacking in terms of justice. In social practice, we can only choose the method with a smaller cost. Clearly, the idea of emphasizing equal opportunities and fair competition incurs a smaller cost and yields greater benefits than the idea of emphasizing distribution equality.

To implement equal opportunities, society can strive to improve and popularize education, ensuring that young people have access to education and working to make educational conditions in various regions more comparable, thereby bringing more fairness to future job selection and competition. In this regard, the "potential for justice" that can be uncovered by distribution equality is evidently inferior.

Next, let's look at a practical application of knowledge:

Denying and exploiting the results of generations of effort from others is simply too "unfair" to them. For me, although many people are already standing on the shoulders of giants at birth, with their starting point far ahead of mine, as long as this society recognizes effort, acknowledges hard work, and rewards me accordingly through harsh competitive rules, and protects the rewards I earn through effort by law, allowing me the "opportunity" to catch up with the generational gap compared to others, this society, even if the wealth gap continues to widen, is a good society. Regarding the wealth gap, I would like to mention an example from "General Economics." Bill Gates is very wealthy, but if he were not wealthy (not making money through Windows), we would all be poorer. The wealth gap does not mean that relatively poorer people are not wealthy enough.

Finally, Professor Zheng Yefu concludes:

In summary, ultimately, whether from the perspective of justice or the practical significance, equality does not exist. People can only choose between several forms of inequality: one is the inequality brought about by privileged identities; the other is the inequality brought about by market competition with complete rules. The latter inevitably carries the "stigma" of the former, such as family education and inheritance limiting the fairness of competition. However, there is an essential difference between the two: the latter eliminates privilege from the perspective of individual rights. It cannot control everything before stepping onto the starting line, but once in market competition, the rules are applied equally. We can only choose between these two social structures that will lead to unequal returns. Attempting to break the rules of competition, even out of a desire to pursue equality, can only lead to a return to a privileged society. This is true in practice, and theoretically, no other possibilities seem to exist.