Most analyses of income inequality neglect two major points. First, the inequality of personal well-being is sharply down over the past hundred years and perhaps over the past twenty years as well. Bill Gates is much, much richer than I am, yet it is not obvious that he is much happier if, indeed, he is happier at all. I have access to penicillin, air travel, good cheap food, the Internet and virtually all of the technical innovations that Gates does. Like the vast majority of Americans, I have access to some important new pharmaceuticals, such as statins to protect against heart disease. To be sure, Gates receives the very best care from the world’s top doctors, but our health outcomes are in the same ballpark. I don’t have a private jet or take luxury vacations, and—I think it is fair to say—my house is much smaller than his. I can’t meet with the world’s elite on demand. Still, by broad historical standards, what I share with Bill Gates is far more significant than what I don’t share with him.
Compare these circumstances to those of 1911, a century ago. Even in the wealthier countries, the average person had little formal education, worked six days a week or more, often at hard physical labor, never took vacations, and could not access most of the world’s culture. The living standards of Carnegie and Rockefeller towered above those of typical Americans, not just in terms of money but also in terms of comfort. Most people today may not articulate this truth to themselves in so many words, but they sense it keenly enough. So when average people read about or see income inequality, they don’t feel the moral outrage that radiates from the more passionate egalitarian quarters of society. Instead, they think their lives are pretty good and that they either earned through hard work or lucked into a healthy share of the American dream. (The persistently unemployed, of course, are a different matter, and I will return to them later.)
Thursday, December 16, 2010
Year in Ideas
Via Kottke, the New York Times' 2010 Year in Ideas. If you're feeling particularly gloomy this holiday season, check out the section "The 2000s Were a Great Decade".
The 10-year retrospective is written by economist Tyler Cowen, who runs the must-bookmark blog Marginal Revolution.
Cowen recently wrote a piece exploring both bogus and legitimate fears about income inequality in America. Here's an excerpt that touches on some of our discussions about material wealth and its connection to well-being:
Enlightening read.
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2 comments:
I confess that I didn't read all of Cowen's piece, and I admit that he has a point. In many ways, the sort-of well off are today about as well off in ways that count as the really well off. But there is a serious rise of income inequality in America -- the stuff of which revolutions are made.
Between 1979 and 2004 average real after tax income rose as follows:
Top 1% 176%
Top Fifth 69%
Fourth Fifth 29%
Middle Fifth 21%
Second Fifth 17%
Bottom Fifth 6%
The rich are getting very rich, the middle class is hobbling along and the poor are getting nothing.
I only skimmed the article also, but he does offer some explanations of why this disparity in income growth may not be as real as it seems. I don't deny that it is a problem, but I also think, as I suspect James does, that there are really two issues here.
1) The first is, as Myk points out, "serious rise of income inequality in America—the stuff of which revolutions are made." This is a problem of keeping up with the Jones. Basically, it is jealousy. It won't go away without the market economy going away. Advertising is so ubiquitous that it takes a very special person to avoid coveting our neighbors' goods.
2) The second is the Cowen focus of whether the poor (or middle class) are not able to live a productive life.
Personally, I could care less about income disparity if the following 3 criteria were met.
1) The lowest income bracket have food, shelter, education, healthcare, and the means to pursue happiness.
2) The wealthy earn their money by providing legitimate products or services for people—not contract killing, loan sharking or investment banking.
3) The wealthy are taxed. The government should have the means to address problems and provide services that would otherwise never be done via the market economy.
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