Equality versus affluence?

Every policy which one might adopt in order to influence the distribution of . . . properties will have other effects and, in particular, will affect the efficiency of the economic system. (Meade, 1976, p. 189) The wealth of individuals, and hence their well-being, depends not only on the fraction of the social cake of wealth they possess, but also on the size of that cake. And the size of that cake, that is to say the amount of aggregate wealth available for distribution, depends inter alia on the distribution of wealth, for reasons explored in this chapter. But does its size increase or decrease when the distribution of wealth becomes (say) less unequal? The question to be examined, in other words, is whether greater equality in the distribution of wealth can be achieved only at the expense of affluence, or whether instead greater equality in the distribution of wealth would itself increase affluence. Discussion of the interconnection between the amount of aggregate wealth available for distribution and one of the determinants of the distribution of wealth, namely the distribution of inherited wealth, goes back as far as 1776. In The Wealth of Nations ([1776] 1976, pp. 385–6), Adam Smith argued that both primogeniture (where a deceased estate must pass to the first-born male) and entail (where the division of a deceased estate between descendants is strictly laid down in perpetuity) result in large properties whose relatively few owners devote themselves to ‘ ornament’, precluding the alternative of land improvement, which is likely to occur where there are numerous small proprietors. In other words, Adam Smith believed that if the amount of wealth in the aggregate, generated by devoting revenue to saving rather than consumption, is to be maximised, inequality in the distribution of inherited wealth, at least of the landed variety, must be limited.