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If the governor (or administrator) of a small town decides to keep the town economically equal by taking away the wealth of all residents and then redistributing it equally among the residents. In such a social experiment, will the town continue to be economically equal or is it destined to become an unequal society with rich and poor population over time? What factors are responsible for moving towards inequality? Can the administrator control such factors to certain extent? [Assume the town is free of external influence and is self-sufficient.]

I wonder if reaching economic equality is ever possible or it is just a hypothetical concept?

Riq
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    are you talking about one-off redistribution of wealth or continuous one? Also how do you define economic equality? There can be wealth equality/inequality, consumetion equality /inequality, income etc, economic equality is not a defined term – 1muflon1 Dec 06 '23 at 21:51
  • @1muflon1 Yes, I meant one-off redistribution. By economic equality, I meant eventual wealth equality. – Riq Dec 07 '23 at 01:56
  • What would stop the wealthy from escaping the town before redistribution? Undoubtedly, news of such a measure would reach the people before implementation. That said, capital flight could doom this policy before it sees the light of day. This is just something to think about. :) – Nazarene Dec 09 '23 at 05:14
  • @Nazarene The goal of my question was to understand the feasibility of economic equality policies. That is why I mentioned an Assume section in the question which is not exhaustive, therefore for your point: Assume that no one leaves the town willingly. – Riq Dec 10 '23 at 06:21

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The town will be eventually unequal that is inevitable. Wealth inequality does not primarily stem from some primordial unequal wealth distribution.

Wealth, is in economics the value of net assets you own and hence it is formed from saved or invested (macroeconomically they are the same thing) income accumulated over time.

Even if you do one-off redistribution of wealth people:

  • have different skills and productive capacity (and other factors) leading to different income.
  • have different saving and spending habits.

Which will ultimately lead to unequal wealth distribution.

Of course the difference in income and in spending habits and saving is further derived from other factors. For example, income from some work might be more stochastic (e.g. prospecting), so luck for example also plays a role. Difference in preferences can be due to different genetics and upbringing.

Hence, unless you actively continuously redistribute wealth, wealth inequality is inevitable.

To not have any wealth inequality administrator would have to ensure everyone is literally a copy of everyone else, has the same preferences, buys the same things, has same saving rate and chooses the same investments. Moreover, everyone would have to do the same job because even 2 identical people might be differently productive in 2 different jobs and make sure all incomes are deterministic or somehow ensure everyone has the same luck. This is clearly unrealistic and outside of the control of administrator.

1muflon1
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  • Thanks for your critical insight. Basically, there are so many intermingled factors which lead to these economic inequalities in society that it is impossible for an administrator to control all those. Reaching equality is more like achieving an ideal communist society, which is practically impossible. (I couldn't upvote due to lack of reputation but will accept as answer if there aren't any better answer.) – Riq Dec 08 '23 at 19:46