We Can't End Inequality, But We Can Stop Picking Favorites
One Takeaway
Inequality can be harmful, however what matters is whether it comes from outcompeting or from rigging the rules to serve yourself.
Inequality is Everywhere
No two people are the same. We have different skills, priorities, and luck. So, it’s no surprise that we don’t all end up with the same results. Inequality is an inescapable feature of life.
Both societies with markets and good institutions and societies with bad markets and institutions have inequality. The question is, which does better compared to the alternative? The results overwhelmingly favor those with markets held together by good institutions.
A widening gap in wealth within a country can harm overall prosperity. The question isn’t whether inequality exists. It’s understanding why specific inequalities exist so we can do something about the ones that matter.
What Causes Inequality
Market inequality arises for natural reasons:
Different Skills and Preferences: People make different choices. Some work longer hours, take more chances, or prioritize family over career.
Entrepreneurial Success: Some create products people want and are rewarded for it.
Savings and Investment: People who delay consumption and reinvest earnings tend to build wealth over time.
And yes, some wealth is inherited. That’s a real advantage. But even inherited wealth can be quickly disciplined by markets over time. Families that don’t continue creating value tend to lose it within a few generations. Political advantages, by contrast, can be locked in indefinitely. The question isn’t whether starting points are unequal. They always will be. The question is whether the system rewards continued value creation or allows advantages to be protected through favoritism.
Market Inequality vs. Political Inequality
Not all inequality is the same. There’s a distinct difference between market inequality and political inequality.
Market Inequality happens when people serve others differently. It rewards value creation. Some people create more value for others and earn more as a result.
Political Inequality happens when people seek special treatment through the government. It rewards lobbying, favoritism, and manipulation.
This distinction matters. One reflects voluntary exchange. The other reflects favoritism and control.
A company that wins in the market because it serves customers better should be celebrated. But a company that wins because it lobbied for government payouts or blocked competitors through regulation is not creating value. It’s capturing it.
One important point to make is that these two categories can blur in practice. Sometimes entrepreneurs can start focused on value creation and serving others and then over time begin to focus on seeking special treatment. This blurring makes it difficult to separate the effects of each. And that blurring is itself the problem.
Why Equal Outcomes Are Harder Than They Sound
Most of us want a fair society, and for good reason. But there’s an important difference between equalizing opportunity and equalizing outcomes.
When we try to guarantee equal results, we often have to override the very processes that create opportunity in the first place. If the rewards for taking a chance, building something new, or investing years of effort can be redistributed after the fact, fewer people will take those chances. Not because they’re selfish, but because incentives matter.
The goal shouldn’t be to prevent anyone from getting ahead. It should be to prevent anyone from rigging the rules so that others can’t.
What We Can Do Instead
We can reduce political inequality without trying to erase market differences:
Eliminate barriers to entry so new competitors can rise.
End favoritism by stopping subsidies, bailouts, and protections.
Decentralize power so people can’t rig the system from the top.
This encourages competition. Not everyone will win equally, but everyone can play under the same rules. With fair rules markets reward serving others rather than keeping them down. The more competitive the market the more success relies on making what consumers value for the lowest possible cost.
The Bottom Line
Inequality can be the result of both political and market forces. Inequality isn’t always a problem. It’s often the result of freedom and diversity. But how inequality arises matters. Market inequality rewards people for serving others. It reflects choice, not coercion. Political inequality rewards people for manipulating rules. It creates resentment and wastes resources. If we care about fairness, progress, and opportunity, we need to target political favoritism, not success.