America, as a relatively free society and economy, has historically been the home for many innovations.  Innovative products tend to first be acquired by the wealthiest in our society.  But the luxuries of today become the necessities of tomorrow.

F. A. Hayek:

If today in the United States or in western Europe the relatively poor can have a car or a refrigerator, an airplane trip or a radio, at the cost of a reasonable part of their income, this was made possible because in the past others with larger incomes are able to spend on what was then a luxury.   The Constitution of Liberty.

Hayek said: that in a progressive society, the comparatively wealthy citizens are somewhat ahead of the rest of us in the material advantages that they enjoy.  The wealthier live in a phase of economic evolution that the others have not yet reached.  The wealthy are the early adopters and are paying for things at a higher rate than the lower-income citizens will later pay.  The definition of poverty changes with the times to incorporate into necessity what was once a luxury.  Poverty in that sense becomes a relative concept rather than an absolute and static concept.

What then can we say about the current political fixation on income differences.  After we acquire food, shelter and clothing (not necessarily in that order) are we want for more?  Most of what we strive for, in the discussion about income inequality, are things (other than basic food, clothes and shelter) that others have and can afford that we cannot.  But why?  What is our motivation, once our basic needs are met, to sacrifice free time and effort or to risk savings to earn or acquire more income?  Do we want to be first?  The wealthy had the first cars and the first mobile phones at a time when the price for these things were out of reach for most of society but these are now considered almost essential today and are apparently affordable, in a more advanced form then when first introduced, to most of society.  The recognized doctrine of economies of scale tells us that the spreading of fixed costs across more sales volume can greatly reduce the costs of production and increase profit margins.  The wealthy early adopters pay the necessary high price for new innovations until the scale economies can be reached (such as with the electric car trend.)  So what the wealthy do is take risks with their savings, sacrifice more free time and effort in pursuit of higher income simply to fund the innovation that is later made available to the lower-income segments of the population at a price they can afford.

In a purely engineered socialist society with a planned economy, there would be need to designate individuals to try out the latest advances long before they were made available to the rest of us.  But where would these advances come from?  In a free economy, the very people who first try out the innovations at the highest price are the innovators who seek higher incomes.  The same pattern is true with people as it is with nations, according to Hayek:

Not only are the countries of the west richer  because they have more advanced technological knowledge but they have more technologically advanced knowledge because they are richer.  And the free gift of the knowledge that has cost to those in the lead much to achieve enables those who follow to reach the same level later at a much lower cost.  Indeed, so long as some countries lead, all others can follow, although the conditions of spontaneous progress may be absent in them.  The Constitution of Liberty.

What would be the result of moving to some average standard of living for all by moving resources from the wealthiest to the poorest until we had absolute and complete equality?  Hayek states that there is no more effective way of making a society stationary or effective way of slowing down progress than by imposing upon all something like the same average standard or by allowing the most capable innovators a standard the same or only slightly above the average.

What we need to ask ourselves as we are told that “income inequality is a problem” is:  what will income equality look like?  What are we striving for when we talk about a change?  We have to ask ourselves if we, by preventing progress at the top, will prevent it for all?  Are we better off having a rich society where everyone will eventually enjoy the advancements but only after they are enjoyed by fewer with more wealth than having an “equal” society where we do not have these advancements at all?  What we have today, as a function of a society where incomes have been unequal, is the average citizen able to afford amazing technology (a care with Bluetooth allowing for communication without wires and that provides directions, airbags and collision warnings) and yet a focus of our president is that 1% of our population gets to have exclusive use of innovation for a time at a much higher price than the rest will pay later.  Is this really a problem or is this a positive hallmark of our free (or at least once relatively free) society and economy?