Inequality is a necessary evil. Discuss. (400 words).

Include the views of economists such as Adam Smith, Karl Marx or J.M Keynes. For decades economists have wondered whether inequality is necessary for an economy to function efficiently. On one hand economists such as Adam Smith are for inequality and argue that it is a natural consequence of the free market functioning effectively, since each individual receives a share of income according to their marginal productivity. On the other hand other economists such as Karl Marx emphasize the social costs associated with inequality and believed everything should be owned equally by everyone. They see the underclass who have few opportunities due to their social status are deterred from achieving their full potential because of barriers to participating in education, work and social life. There are various advantages and disadvantages associated with inequality within a society, however in general it has economic benefits, but social costs. The economic benefits are mainly derived as a result of the incentive effects of inequality. It has the ability to encourage the labor force to increase their education and skill levels in order to achieve a higher quality of life. In addition, the potential to earn higher incomes produces an incentive for workers to work harder, longer hours, which may enhance our economic growth. In a society without inequality, entrepreneurs would be less likely to accept risks and therefore there would be fewer entrepreneurs and businesses and a lower rate of economic growth and fewer jobs. Thus income inequality can lead to an increase in the productive capacity of resources within an economy, and encouraging innovation and risk-taking thus providing an increase in real GDP per capita which in turn rewards and benefits the labour force with higher wages. On the other hand, high levels of inequality can result in lower levels of wellbeing acroos a society. Research has shown that social problems such as mental illness, crime, however levels of life expectancy are all related to a countries level of inequality. It also leads to higher levels of poverty within a society and industrial disputes due to large differences in incomes, which build tension between employees in the same workplace.

In conclusion however though these negative social costs exists, they are outweighed by the economic benefits and it can be seen that for an economy to truly develop successfully inequality is a necessary evil.