But why does inequality matter?

By Paul Walker 06/02/2014 10


There seems to be lots of talk on the blogs these days about inequality (e.g. here, here and here), but no one bothers to explain why we should care about it, it just seems to be taken as a given that we should care. Over at the The Fly Bottle blog Will Wilkinson writes,

I’m tired of arguing about inequality. It’s frustrating. It’s unproductive. Nobody is really interested in the analytical arbitrariness and moral insidiousness of measuring intra-national economic inequality. Nobody is really interested in the fact that multiple mechanisms–some good, same bad, some neutral–can produce the same level of measured inequality, rendering the level of inequality, taken in isolation, completely useless as a barometer of social or economic justice. Nobody really cares. Because many different combinations of causes can produce the same level of inequality, it’s not so clear that high inequality, as such, can reliably cause anything. The consequences of inequality depend on the mechanisms driving inequality. Nobody cares.

To Will I say, some people seems to care, at least people writing New Zealand based economics blogs seem to care, but they don’t tells us why. The highlighted bits in the Wilkinson quote seems to me to make a couple nice points in that it seems to me that inequality is a useless measure of anything that matters and its not clear, to me at least, what exactly inequality causes.

So will those bloggers among you who are so fired up about the evils of inequality please explain why you are so agitated about it.

Thanks.


10 Responses to “But why does inequality matter?”

  • I wonder if it is a case of the “have nots” bleating about inequality, due to envy? Having said that, the issue of inequality is a large and vague one. I assume we are not talinking about it in the sense of discrimination, i.e. inequality of pay between the sexes for the same jobs, etc. I assume we are referring to situations where a few people are very rich, while the majority are poor to average in wealth. I read somewhere that 1% of Americans control 40% of the wealth. So I guess that is inequality. But isn’t it simply an inevitable consequence of capitalism? I reckon we should all be equally good looking too!! 🙂

  • No it is not envy. More basic than that.

    The concern is that unequal societies have poor records on measures like length of life, health in general, education, crime and so on and so forth. I suggest looking at this TED presentation to get a feel for the data. Interestingly, English speaking democracies do poorly. Hence the debate.

    Richard Wilkinson: How economic inequality harms societies

    • Note that Wilkinson’s work on inequality has been heavily criticised. See critiques by two of the authors here at Dismal Science. See also Australian economist and Labor MP Andrew Leigh. Wilkinson’s work simply does not stand up to scrutiny.

  • Hi Maurice,

    There are significant concerns with the Wilkinson results, and the interpretation of them. I have touched on these in my review of the Spirit Level and another article on some related work:

    http://www.tvhe.co.nz/2013/07/18/review-spirit-level/

    http://www.tvhe.co.nz/2014/02/03/are-we-all-confusing-status-competition-and-inequality-short-answer-yes/

    A read I would recommend (more than my blog posts) would be the Oxford Handbook of Economic Inequality. The first three chapters on methods and definitions, followed by specific chapters on whatever issue you are interested in. The handbook is written with plenty of links to the literature, but is perfectly accessible to people who haven’t had oodles of economics training.

    They discuss these trade-offs quite clearly, and in some chapter (eg health) they point out some of the issues associated with parts of the literature coming out of social epidemiology.

    I would note that the Handbook is written by a series of authors that are also very left wing – these guys are pro intervening with policies that will reduce income inequality, but there arguments (and the resulting policy suggestions) are more nuanced.

  • Eric and Matt.

    I would still encourage readers to look at what Wilkinson has to say. I have not made any comment on what I think should be done. Just answered an earlier question, “Why the fuss?”

    That economists debate what Wilkinson has say is no surprise. I am amazed at the habitual way non-market social and environmental costs are ignored in (at least) introductory economics texts.

    Thanks for the links. I will reread your blogs on the subject. l like having my ideas challenged, its good for me.

  • So, so, wrong. But not even as wrong as Paul’s piece is badly written. What is “Moral insidiousness?” to take one example. And if no-one cares about inequality why is he, Paul, still going on about it? Striking – that in/on a science blogs site – some correspondents can offer only thoughts about the desirability or otherwise of some aspects of society without any quantative analyis at all to underpin their arguments

  • Maurice. In a way the Spirit Level stuff is an answer to my question but as Eric and Matt note it is a bad answer, which is why I asked the question in the first place. Is there a better reason to worry about inequality than the Spirit Level?

  • “I am amazed at the habitual way non-market social and environmental costs are ignored in (at least) introductory economics texts.”

    Social and environmental costs took up about 1/6th of my 1st year of undergraduate economics, and a far larger part of policy work I’ve been involved in. They are placed fairly centrally in economics – some would argue we focus on those too heavily, skewing our view of the opportunity cost of policy!

    I personally wouldn’t recommend Wilkinson’s writing (in a relative sense, I would recommend everyone read everything they can albeit in a critical light) – even though I have sympathy for some of the concepts. There are a number of other writers out there (such as the authors of the Handbook) who manage to discuss these topics in a more nuanced way with fewer appeals to authority 🙂

    “Thanks for the links. I will reread your blogs on the subject. l like having my ideas challenged, its good for me.”

    It is good for all of us – I blog because I like having to defend the concepts I put forward! I recommend the Handbook before my posts – they are better writers, accessing a greater amount of knowledge on the issues. I don’t agree with everything in it, but I just think it is well put together!

  • But we need a system that works. Communism doesn’t seem to work. Capitalism does seem to work better, and there doesn’t seem to be any viable alternatives. Capitalism isn’t perfect, and inequality may be an inevitable result of it, but it is still arguably the best system. The inequality results in a small proportion of the population having much better access to healthcare etc. than the rest, but the rest still might have slightly better access to these things than would be the case under any other viable system.

  • It is not just the difference in wealth but also very much how it was obtained. I was well qualified and so well paid during most of my life and invested 10%- 20% of it but ended up with very little .
    Of the three people involved in investing on my behalf ,two were sacked and banned from the industry , the third , the main member of a large investment group admitted his errors and promised to do much better , but then halved my remaining funds before I grabed it and ran.
    My point is it is not how much those who have a lot actually have but how they amassed it Also their attitude to those less fortunate and perhaps more honest.
    That will do for now but I am a very cross and unhappy 81 year old. I conducted my life in as carring a manner as I could !**!!