Seven years ago, Sam Brittan wrote about the 'religion of equality' in a beautifully destructive book review for Prospect.  The review starts with anecdotes about the perennial difficulty of advocating any measure that might - inadvertently or otherwise - increase income inequality, regardless of its other merits.  Brittan's basic charge against the book he is reviewing is that it doesn't defend egalitarianism, but simply assumes it.  Towards the end he produces a beautiful summary of why, in my view, a pragmatic redistributive liberalism, which attacks the extremes on either side, is the best guide to economic policy.(John Kay thinks it is the most popular policy amongst economists)

These insights may seem obvious, but the state of the debate leads me to doubt that they are always well stated:

There are two ways of looking at income and wealth. One is to envisage a pie to be divided up by a central authority, like a mother cutting a cake for her children. From this point of view it is departures from equality that have to be justified. The other is the entitlement theory. What each person gets, he or she receives from others as a legitimate transfer or in exchange for a service that he or she has provided.

Neither theory entirely corresponds to the facts. The weakness of the pie theory is that there is no fixed sum to go round, as individuals add to the pie by their activities. The final distribution of resources is the unintended product of many individual decisions. The weakness of the entitlement theory is that the very content of property rights and the rules governing their transfer, as well as their physical protection, are the result of collectively enforced rules which we are at liberty to change. To muddle through with a mixture of the two concepts (Redistribution, yes, equality no) is better than the hell on earth which would prevail if either were carried through to its logical conclusion.

I think the sentence in bold is the best statement I can find on what is so wrong with Tory "hands off my money" politics. It is the height of economistic naive folly to assume that an individual's rewards straightforwardly reflect their social contribution and are therefore just: people doing very similar jobs have been paid absurdly different amounts depending on the economic and institutional structure they inhabit.  Is Steven Seagal so much richer than was David Garrick through a superior acting contribution? Or because of the elaborate structure of property rights and the technology of film distribution that he was born into?

But the point about the individuals building up the pie is also in need of constant defence. All these Wonkish discussions about where spending should take place assume a thriving private sector producing more than it consumes and allowing the government to spread out the surplus.   It is particularly easy to lose sight of this one within the Westminster/Politics bubble, where all one seems to do for months on end is give other people stuff to read . . . normally about how your superior morals and judgement would dispose of someone else's economic contribution. 

The blogosphere now has an interesting debate about the paramount importance of equality, sparked by a piece of Will Wilkinson's called Thinking Clearly about Economic Inequality. It takes a variety of angles: distinguishing income from consumption inequality, introducing happiness inequality, arguing that an obsession amongst the rich with pointless display/positional goods effectively neuters the advantage of their extra wealth, and more that I have not got to.  Like James Kwak, I am just at the 9th page. James's long post takes real issue with the idea that the consumption choices of the rich somehow diminish the problem of inequality:

From a moral standpoint, if there is a problem in one person having ten times as much money as someone else, that problem does not go away because he blows it on cocaine. From a policy standpoint, whether or not people use their money in ways that increase their happiness, money is the thing that they care about, and trying to base policy decisions on happiness is both paternalistic and impractical. If it turns out that rich people are no happier than poor people, should we simply stop worrying about poverty?

There are further comments from Tyler Cowen,  and more critically from Ezra Klein.

My view of inequality is that it's primarily a symptom of a problem rather than a problem in itself. It has a tendency, for instance, to accompany wage stagnation among the middle class. It also has a tendency to predict massive economic crises.

There is also a good debate about relative poverty in the comments on Dillow's piece attacking Dizzy's mathematical incompetence vis a vis the concept. 

Mark Thoma in the meantime has uncovered a paper on wealth inequality, and the particular case of the US, which has, uniquely it seems, increased this inequality since the 1920s:

Sweden starts off in 1920 with 40% of wealth in the hands of the top one percent, and falls fairly steadily to just under 20% in 1992. UK starts at a staggering 60% (!) in the hands of the top 1 percent in 1920, and again, falls steadily to a 1992 level of just over 20%.  The US  . . . starts at 35% in 1920 (lowest of all three countries); then rises and falls slowly around the 30% level. The US then begins a downward trend in the mid-1960s, falling to a low of 20% in the 1970s; and then, during the Reagan years and following, the percent of wealth rises to roughly 35%

What an amazing figure about the UK - no wonder Conservatives call it the good old days. Note that our wealth inequality in 1992 is 15% lower than the lowest level for in the three countries sampled in 1920

If you want my views on the whole debate, I believe in redistribution and have welcomed initiatives like tax credits.  Coming from the City I am perfectly aware of the disconnect between economic contribution and rewards.  But I am suspicious of any policy area where a goal is taken for granted and debate is effectively cut out. In this case, it may be happening for the goal of equality.  I also think that material/income equality as a measure gains prestige from the "economists searching under streetlamps" syndrome: because it is measurable, it is what matters.   As with school league tables, faulty measures can lead to very wrong and perverse decisions (I have particular personal experience of this). Trying to chase the 000's you move above or below a relative poverty line is not how to improve society.  The sort of inequality that bothers me far more is of this nature:

Department of Justice figures show that African-Americans and white Americans use and sell drugs at similar ratios to their share of the population. Yet the US is 10 times as likely to imprison a black offender as a white offender for the same offence.