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Abstract
Principles from the social thought of the Indian philosopher P.R. Sarkar are employed to show that there exists an optimal level of economic inequality that joins the values of economic justice and efficiency. Sarkar favored establishing a living wage as well as a maximum wage that allows for work incentives. It is argued that the primary justification for inequality is to provide incentives for individual productivity, and that the value of those incentives should not exceed the economic contributions they produce. To determine the relative importance of income incentives in motivating individual economic contributions, it is found necessary to develop a multifaceted model of human productivity. Such a model is developed using concepts from humanistic psychology. A Sarkarian individual productivity curve is introduced in diagrammatic analysis to demonstrate the existence of an optimal level of inequality, and also to explain the persistence of extreme income inequality.
Acknowledgment
I am grateful for the comments of two anonymous referees.
Notes
Tomer argues that his model is an improvement over Leibenstein (Citation1975) because the older model implies that the only way to improve productivity is to increase pressure from the boss. Leibenstein (Citation1982) disputes this point. For a detailed critique of Tomer's model and a related defense of Leibenstein's theories, see Frantz (Citation1982).