Again: Why Worry About Inequality?
In his latest response to Paul Krugman on inequality, Greg Mankiw says:
Even if rising inequality is exogenous, the government could still respond to it by making the tax code more progressive. That is a coherent policy viewpoint, driven as much by political philosophy as economics, about which reasonable people can disagree. I am the first to admit that the study of economics by itself does not tell you how to balance efficiency vs equality. And it certainly does not tell you whether it is more noble to be an egalitarian or a libertarian.
Many economists—even super-smart ones like Mankiw—think that efficiency and equality are contraries rather than complements and that libertarianism isn’t a form of egalitarianism. This philosophical muddleheadedness of economists makes the policy debate frustratingly obtuse. But the fault really lies with philosophers, who usually think the same things. It’s sort of neat, in a bad way, how oppositions like “efficiency vs equality,” partly the fruit of philosophers’ embarrassing economic ignorance, get repeated by economists.
Krugman is apparently obsessed with nominal inequality, the difference in the size of people’s money incomes. There is no doubt that there is increasing nominal inequality. But it is almost completely mysterious why nominal inequality ought to concern anyone. I wish people like Mankiw would stop acting like it’s worth caring about. It just isn’t.
I think part of the problem is that nominal inequality is confused with material inequality—differences in material living conditions. But while nominal inequality is increasing, material inequality continues to decrease. As market competition pushes prices down, goods at the bottom of the price range more and more closely approximate goods at the top of the price range. (Which is why efficiency and equality are complements.) Food is probably the most striking example of material equalization. If you compare the diets of the top and bottom quintiles 100 years ago with the diets of the top and bottom quintiles now, you’ll see that we have become immensely more equal, not less. My favorite pair of jeans, which I bought at Wal-Mart for $16, is a close substitute for jeans that cost 5 times more.
The trend toward material equality in market societies helps explain several trends, such as the increasing value of good design. Substantive equality leads us to value aesthetic differentiation ever more highly. But even good design trickles down. Which is one reason why material equalization makes it ever harder to signal status and why the materially status-conscious (many of them ideological egalitarians!) are willing to pay an increasing premium to claim inherently scarce and strongly status-signaling positional goods, like spots at Ivy League schools, apartments with Central Park views, or what have you. The feverishness with which high school kids (and their parents) compete for scarce Ivy League slots is an indication of the drive to have something everyone can’t have in an egalitarian world where even the modestly remunerated can have most everything.
But why give a crap about material equality anyway? Why is it something we ought to aim at? What purpose does it serve? I care a great deal that people have enough in material terms to realize their basic capacities and to implement the projects that give their lives meaning. I certainly don’t think we’re there yet. For instance, by putting a wall between education and market feedback mechanisms, we have created an apartheid system that ensures that millions of the poorest among us don’t fully develop some of their crucial basic capacities, trapping them and their children (who will go to the same terrible schools) at the bottom of the pile. The point is not that schools need to be more equal, but that schools for the least well-off need to be as good as my $16 Wal-Mart jeans.
If you think money translates into political power, and that inequalities in political power are objectionable, then you’re right! Inequalities in political power are objectionable. People with political power can oppress people in a way that people with just money can’t. Libertarianism (used to be called “liberalism”) is, by the way, the egalitarian political philosophy that says that inequalities in political power should be minimized. And libertarianism tells you how to get money out of politics: take political power off the auction block by restricting political power to narrow limits.
No doubt a great deal of material inequality can be socially destabilizing. Hey, there’s a good reason to care! But we’re getting more, not less, materially equal. Fixation on nominal inequality leads some on the left to make absurd dark comments to the effect that the plump middle class will soon storm the streets wielding sharp barbecue implements unless the median wage keeps pace with productivity growth. Absurd. Some folks like Richard Wilkinson say material inequality as such makes us sick, or, like Robert Frank, that we’re so hopelessly status-conscious that we can’t help but be aggrieved by the success of others. Neither argument is very persuasive, for reasons Fly Bottle readers are probably already tired of hearing me rehearse.
Anyway, if anybody really cared about equality or sufficiency, they would be agitating to build a market in education. Union participation and the progressivity of the tax code are distractions (except insofar as unions are the chief antagonist in the fight to end educational apartheid.) Here is battle cry: Equality through efficiency! Equality through liberty!
September 8th, 2006 20:06
That’s a bit of a misrepresentation of economists. During the current rounds of exchanges many reasons why inequality is relevant have been provided, from different moral/political points of view (some more noteworthy than others–probably the purchasing of political pull is the most relevant, imo–and we should also remember that implementing libertarianism also takes political pull, not just slogans).
“Efficiency vs. equality” doesn’t just come up, by itself. it comes up in the form of a trade-off, usually in the context of discussing taxes. Many economists use this trade-off to point that there are disadvantages to taxation in terms of efficiency. It’s a relevant point.
The side-discussion on conspicuous consumption has also been rather productive.
So, I think, you’re selling economists short simply because they’re more plain-spoken than other academia.
September 8th, 2006 20:26
Has anyone actually done comparative studies of the top-to-bottom-quintile difference in diets over time? I don’t doubt you’re right that they’ve shrunk a lot, but it’d be interesting to see how much, and when most of the shrinkage happened.
And I suspect you’d see much more shrinkage in “sufficientarian” measures of difference (gross calories/day, intake of essential nutrients, etc) than in measures like diversity of things eaten which take into account the continuing drive for more subjective excellence in the diet of the best-off. I am perhaps particularly sensitive to this, as I eat my weekday lunches at a corporate cafeteria where pasta in lobster-cream sauce with beluga caviar is not luxurious enough to attract special notice, and where I’ve learned to avoid the rice pilaf because they put way too much saffron in it for my taste. But more generally the Whole Foods phenomenon is a nice illustration: the extremely expensive food they sell isn’t exactly an inherently limited positional good; rather it represents a huge jump upward by often-nebulous subjective quality measures, even though the stuff Wal-Mart’s grocery departments sell is almost as good by any basic nutritional criterion.
September 9th, 2006 05:13
Nicholas, I don’t think the difference between organic and non-organic food — or the difference between food from Peru and food grown locally — is a nebulous subjective quality measure. There is a huge difference between feeding your children soda, Twinkies, white Wonder “bread”, etc., all transported across the world via fossil fuels, versus buying a share of the crop of a local organic farm and eating actual food. I’ve seen the difference in the quality of life for my own children (fewer bouts of illness, no tendancy to overeat, more energy, etc.). The food from the local farm is a little more expensive, but not prohibitively so.
My wife and I wonder why most people — especially people at the lower edge of the middle class (say, those who work at Wal-Mart), who actually CAN afford the nicer food!, continue to eat crap.
In other words, the quality of food eaten by most people in this country has DROPPED SIGNIFICANTLY over the past century. Can anyone explain that to me?
September 9th, 2006 07:58
I suppose there’s a sense in which libertarianism thinks political power should be equalized since it tends to think there should be very little, if any, political power. But, left alone this just (quite obviously) leads to large inequalities in _private_ power. It’s far from clear that that’s preferable. It’s hard for me to imagine a libertarian society that doesn’t quickly end up looking like an area run by the mafia.
September 9th, 2006 08:31
“In other words, the quality of food eaten by most people in this country has DROPPED SIGNIFICANTLY over the past century. Can anyone explain that to me?”
Sure, I can explain it — it’s nonsense. My mother-in- law was a farm girl in the 20s and 30s. When spring rolled around they ate whatever was left in the cellar (last year’s marginally edible apples, potatoes, rutabagas, etc, etc). The fresh produce may have been better for the very brief time it was in season, but most of the time, they simply had no fresh fruits and vegetables (and didn’t eat much meat either). I remember reading my daughter the ‘Little House’ books in which, on Christmas, they had — I’m not joking — ‘fried mush with codfish gravy’. As a special treat. And my mother in law piped up that they’d eaten that too when she was a little girl — well into the 20th century. Yes, people certainly ate well back then:
http://www.bartbeck.com/page193.html
September 9th, 2006 08:35
“I think part of the problem is that nominal inequality is confused with material inequality—differences in material living conditions. But while nominal inequality is increasing, material inequality continues to decrease. As market competition pushes prices down, goods at the bottom of the price range more and more closely approximate goods at the top of the price range.”
Yes — exactly. It’s frustrating that people half know this to be true intuitively, but don’t quite realize it unless it’s pointed out and, at the same time, it seems to play almost no part in the inequality debate. Very odd.
September 9th, 2006 13:11
Slocum,
To answer you fully would take way too much space on Will’s blog, but here are some things to think about:
Corn mush with cod oil doesn’t necessarily sound tasty (especially if it’s prepared with a garnish of seagull poop, which I agree is not very sanitary). But it’s packed with excellent nutrients, including cod oil, which is a perfect source of omega-3 fatty acids — something that most Americans get nowhere near enough of today.
As for eating out of the root cellar, it’s true that most of the human race went through lean times and times of plenty every year. It’s what we’re used to, evolutionarily speaking, and it’s what we’re designed for. I suspect having less to eat every once in a while would make the obesity problem in this country disappear rather quickly.
If that’s not how you (or most people) would LIKE to eat — if they’d rather have a convenient Twinkie and a soda than homemade applesauce and root beer (both of which are dirt cheap if you do it yourself, healthy, and available in the winter if they’re stored properly) — then maybe that is the real answer to my original question.
September 9th, 2006 14:49
Will –
In the spirit of intellectual honesty, you recognize a possible objection to inequality (if only an indirect one):
“by putting a wall between education and market feedback mechanisms, we have created an apartheid system that ensures that millions of the poorest among us don’t fully develop some of their crucial basic capacities, trapping them and their children (who will go to the same terrible schools) at the bottom of the pile. The point is not that schools need to be more equal, but that schools for the least well-off need to be as good as my $16 Wal-Mart jeans.”
So (as you’ve repeatedly said) inequality per se is not the problem so long as the bottom tier has the basic elements to flourish. This idea seems pretty reasonable to me. But is it feasible to assume that we can have massive inequities in political power and still take care of our most disadvantaged groups to a satisfactory extent? It’s a logically consistent goal, to be sure, but why haven’t we accomplished it yet? Are there any historical examples of nations with huge economic inequalities that manage to take sufficient care of their least privileged?
I’m not sure if there’s an institutional answer or a more human (cognitive) explanation of this, but it seems to me that the burden of persuasion lies with people who don’t care about inequality to prove that it doesn’t necessarily lead to a lower class whose basic needs (educational, etc) are not met.
Comparative data regarding the relationship between inequality and the life standards of the lowest tier would help!
DED
September 9th, 2006 17:13
“As for eating out of the root cellar, it’s true that most of the human race went through lean times and times of plenty every year. It’s what we’re used to, evolutionarily speaking, and it’s what we’re designed for. I suspect having less to eat every once in a while would make the obesity problem in this country disappear rather quickly.”
Pick up a copy of this:
http://www.amazon.com/Gallery-Regrettable-Food-James-Lileks/dp/0609607820/sr=8-2/qid=1157839756/ref=pd_bbs_2/002-4004458-8296006?ie=UTF8&s=books
And see if you can make the case that we used to eat better, healthier foods. Not only did we eat worse, we were much less healthy. You might have run across this story, for example:
http://www.nytimes.com/2006/07/30/health/30age.html?ex=1157947200&en=ec3245284d494f7e&ei=5070
But
September 10th, 2006 05:32
Slocum, I’m certainly no expert on this topic. Still, here’s what jumps to mind:
* Concerning the Gallery of Regrettable Food, I completely agree that the diet of suburbanites has improved dramatically since the middle of the 20th century. The processed food industry has gotten a lot better at preserving and transporting food from farm to factory to grocery store. (It still has a long way to go, though. Only a very few of the hundreds of types of salad greens travel very well, so you only get a few types in the grocery store.) This is why my original question concerned diets from a century ago, not 60 years ago.
* The NY Times article has very little to say about nutrition, other than that most modern Americans are bordering on obese, and some studies suggest that poor nutrition in the formative years can lead to health problems later on. The article largely lays the blame for the poor condition of Americans in the 19th century at the door of disease, which was obviously a huge problem, especially for American urbanites (who mostly lived in tight-packed squalor).
The article also doesn’t compare body size and longevity of 19th-century Americans with people of other countries or previous centuries. You might find this (http://www.macleans.ca/topstories/science/article.jsp?content=20050404_103140_103140) intersting, for example. The Cheyenne of the 19th century were apparently some of the tallest people in the world; they certainly aren’t that way now, so you can’t lay the blame on genetics. The article has a definite socialist slant, but you can ignore that and just look at the data on height, which indicates that the Civil War period, the main point of reference for the Times article, was a definite low point for European-American health.
September 18th, 2006 17:44
Mr. Lilly, you may be interesting to read “The Escape from Hunger and Premature Death, 1700-2100: Europe, America, and the Third World” by William Fogel. Mr. Fogel’s historical research reveals the incredible nutritional improvements enjoyed by the human race in recent times. The fact is, until very recently, most people lived in appalling squalor, barely consuming enough calories to subsist.
Respectfully,
Whit
September 19th, 2006 04:36
David DiPianto: “Are there any historical examples of nations with huge economic inequalities that manage to take sufficient care of their least privileged?”
You will probably disagree, but I believe the U.S. is taking sufficient care of its “least privileged”. No one goes hungry in America. The abundance of non-profit hospitals and clinics ensures no one is lacking medical care. We’ve set up shelters all over the nation to care for the “homeless” - most of whom suffer addiction or mental illness. Both private and public funding provide billions in assistance for the disabled.
I’m not sure what your mean by sufficient care - what standard you have in mind. I do remember this 1984 campaign quote from Phil Gramm:
“Has anyone noticed that we live in the only country in the world where all the poor people are fat?”
September 19th, 2006 14:22
JohnDewey –
Fair enough…I don’t really know what standard to use to judge whether our least well off are treated well enough. When I asked the question, I had the following quote of Will’s in mind, so I merely assumed that we had not reached that point:
“I care a great deal that people have enough in material terms to realize their basic capacities and to implement the projects that give their lives meaning. I certainly don’t think we’re there yet.”
So, while it is unclear how close we are to that ideal, the flow of the discussion here suggests that our least well-off should have at least enough resources to flourish in enough different status compeitions (besides income) that they can effectively find their niche. It’s a weird way to think about inequality maybe, but this is the point of Will’s posting I think — if you can’t have income, you’ll compete on other dimensions.
While I do think we do treat our least advantaged groups fairly well in some ways, it seems pretty clear to me that those occupying the lower rungs of the social ladder have a narrow range of choices on which to compete.
Thus, while it may be easy for someone like Will to switch from one seemingly great status competition (grad school) to another (blogger/policy analyst or whatever) poor people would have to switch from one extremely modest competition to another extremely modest one. To assume away the effects of income — I called them “side effects” earlier but they are very important because they directly relate to opportunities to switch status competitions — seems kind of strange.
DED
PS: obesity (or mere “fatness”) among the poor is not necessarily a good sign…Being fat from too many Big Macs seems prefereable to starving, to be sure, but it carries with it many health problems that are compounded by lack of health education and other medical resources. THis phenomenon could be considered as much of a failure in terms of health as it is a success in feeding everyone…
September 20th, 2006 06:07
I always thought that it was knowledge as applied via technology to production .. rather than competition per se.. that enabled the poorest to improve their lot. eg. they may have little resource, but can now own a radio or tv, etc. which was once astronomical in cost.
But yes, if the least well off have all the basics and can pursue a full life then some of us who cared can go back to sleep.
Forgive me though, if i doubt they have much chance of a really satisfying life !
And I always thought the problem for the working poor, and for very many in better paid work, was the compulsion to work harder and longer and in less pleasant and rewarding occupations than they would chose if free.
To change this I am fairly sure, requires not some attack on wealth creation but an alteration in the fundamental relations of economic power, ( regarding land, labour and capital)
Fortunately I am getting old enough not to really hope for such idealistic outcomes!
regards David L.
September 22nd, 2006 11:25
I suspect having less to eat every once in a while would make the obesity problem in this country disappear rather quickly.
So it’s not so much of an obesity problem as it is a not-occasionally-starving problem.
October 1st, 2006 17:46
First let me say that, as an old man whose has long thought about these issues, I find your remarks on economic inequality both fresh and challenging. I’m a greatest-good-of-the-greatest-number kind of guy there is nothing I would like better than to stop torturing myself over the distribution of income in America, especially public policies (such as free trade with low-wage Goliaths and massive immigration of unskilled workers) which impact real wages at the bottom of the wage scale.
In particular I was struck by your distinction between nominal and material welfare, and your argument that the material conditions of the less well off are not so different from those at the top in qualitative terms. I think that is a point that is well worth pondering, and with a good deal of truth to it which I had not adequately considered in the past.
That said, I would like to make a couple of quibbles. First a minor one: it is true that total compensation, including fringe benefits, is a better guide than wages when looking at what workers earn. As an employer myself however I would like to point out that some of those fringe benefits do not in fact benefit the typical worker to the degree you might think. Take worker’s compensation: are you aware of the massive amount of fraud that goes on in that area? In my own company — a landscaping firm — there have been only a few piddling claims in twenty years if you don’t count the fraudulent ones. But they were massive, and had the effect of depriving honest workers of a big peice of their earnings (the tax rate in Tennessee for workers comp is close to 10%). Unfortunately there is no effective way to police this problem, at least so far.
Employee medical insurance is another problematic area: the huge escalation in the costs of medical care do not reflect real improvement in care and are largely beyong the power of employees to do anything about (or employers either, for that matter). There is enormous waste in the medical system which impacts workers with lower nominal wages disproportionately. You might acknowledge this reality which only qualifies but hardly refutes your main point.
Another area of consideration: material conditions are a matter not only of what we consume but also what we have to do in order to get the things we consume. Many low-skilled married couples find themselves forced to work full-time (both of them) outside the home, even when their children are only a few weeks old. This is a real issue of quality that does not impact many wealthier families. I think you should acknowledge that.
I believe you do acknowledge the problem of poor public schools: in low-income areas, and often throughout entire metropolitan areas (such as the one I live in, Chattanooga, TN)the conditions are abominable. In these communities private schools are the only quality alternative, and only affluent families can afford them.
Neighborhood safety is another fundamental problem that impacts low and high income families very differently. If you live in a leafy suburban neighborhood such as I live in you do not even have to lock your doors. Shoot, we don’t even have locks. Contrast that to people who have to worry and care about robbery, assault, etc.
Don’t get me wrong. I think you make a powerful argument. It might be even more powerful if you would candidly admit some of its shortcomings. This is not a perfect world even if it is infinitely better than any other world that has ever existed for most people.
In fact I
January 15th, 2007 13:46
While I do agree with your distinction between nominal and material inequality I have to ask why you did not discuss the relation between the two. Certainly nominal success leads to material success and that the market plays an influential role, but are we really better off?
The middle class developed after World War II because of the housing and G.I. support from the government. However back then a moderate lifestyle could be supported by a single working parent. Nowadays except for the wealthy, most families need to have both adults working full time to support an acceptable lifestyle. Given that a worker working full time on minimum wage earns below the given poverty line is truly frightening. Not to mention that when I am fired from a job for poor performance, my severance package rarely approaches the 200 million height.
Education is the solution, however to create an educational system that is based on a market already skewed towards the elitist society would only further inequality. We trap the poor and then blame them when they do not succeed. So what are they to do? And besides, does anyone personally need a net worth of over a couple million dollars? Why do economists believe that economic laws are equivalent to physical laws, unchangeable and necessary. The market is not God, despite how much you wish it to be.
January 15th, 2007 14:18
“No one goes hungry in America.”
statements like this undermine the entire comment base to this posting.
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