Inequality Based Incentives – A Baseball Analogy

On The NewsHour, NYU Law Professor Richard Epstein argued that, “Inequality creates an incentive for people to produce and create wealth.” I don’t disagree, but there’s a caveat inherent with his statement.

Let’s use a baseball analogy: let’s say you’re Seattle and you’re trailing Philly by a run or two. Regardless of where you are in the game, you know that you still have a chance to pull out a victory. That’s incentive.  Let’s say it’s a 3- or 4-run lead. Even in later innings (i.e. approaching retirement age) you still have the possibility of a grand slam either winning the game to taking it to extra innings. That’s incentive…pie-in-the-sky incentive, but incentive nonetheless.

However, if the Phillies have a 5-run lead–or worse, a 10-run lead–heading into the 9th…well, let’s face it, you’re just waiting for the game to be over. You aren’t going to win. The best you can hope for is not to get injured. Of course your perspective changes depending which part of the game we’re talking about (i.e. how late in your career), but even if it’s the first inning, your incentive to overcome a 10-run deficit is pretty iffy.

So yeah, inequality helps to create incentive…but only insofar as the inequality is perceived as being surmountable. If it isn’t, then you’re just playing two different games. In this case, it might as well be the New York Yankees versus FC Barcelona for a baseball game in Yankee Stadium. Where’s the incentive then?

See also: NewsHour and the One Percent — PBS newscast presents the upside of inequality