Bob Lawson and I have an op-ed in Barrons with a new perspective on inequality. Kamala Harris said inequality “The economic challenge of our time.” Indeed, the Gini coefficient of the United States is 0.4, which is one of the developed countries, and Senator Bernie Sanders says that the inequality of the US is “disgraceful.” But consider another economy:
In this economy, the Gini coefficient is 0.60—higher than in the United States or almost any country in the world. Living in this economy must be miserable, right? Well, what if we told you that the average salary in this economy was there $3 millionmedian income close to $1 million, while the poorest 1% earn about $800,000 a year?
The economy we’re talking about is the NFL. Is comparing inequality between countries and inequality within a sports organization an unfair or irrelevant comparison? We don’t think so. NFL disparity can teach us a lot about what disparity statistics mean.
First, inequality does not mean poverty. The average income in the NFL is higher than the average income in the US. Even the poorest 1% is doing well. Is that a special case? Not at all. The average income in the United States is higher than the average income in the world. And while our poorest 1% don’t have it easy, their situation looks much better compared to most people in the developing world.
Second, inequality does not mean injustice. Salaries in the NFL are set by competitive market forces. Jared Goff (Detroit Lions) at the top of the NFL’s list leads more than that Cameron Sutton (Pittsburgh Steelers), who earns the veteran minimum. But Goff did not steal his position from Suthini. And Goff’s wealth does not come from the Sutton advantage. Goff doesn’t earn much because Sutton earns less. Goff earns more because he is more productive.
[Some people warn that inequality leads to envy, resentment, societal dysfunction and even collapse. But] Steph Curry’s salary is much less than that of his Golden State Warriors teammates. However, do we see anger expressed in court? Are Steph Curry’s underpaid teammates refusing to give him the ball or are they secretly hoping for his downfall? Instead, Curry’s teammates are surrounding him. They realize that his success raises their chances of winning competitions, improves their visibility, and possibly increases their market value.
The dynamics throughout our society are certainly more complex, but the sports analogy illustrates an important point: When inequality is seen as a result of merit, effort, and value creation—rather than exploitation or unfair advantage—it fosters cooperation instead of resentment.
In such a situation, people see high earners as role models and partners in success, not enemies. In the same way, if inequality in the United States is seen as a result of competence, effort and value creation can help the US team cooperate against competitors around the world. Go Curry! Go Team USA!
[Sports inequality helps us to understand inequality more generally.] The goal should not be to eliminate inequality, but to ensure that it reflects the creation of real value in a system with adequate opportunity and dignity for all people. That is best achieved through competitive markets. Do that, and inequality changes from a divisive force to a driver of progress.
In short: Don’t be afraid of inequality. Fear of injustice. Build the right system, and let the scoreboard show the game.
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