Saturday, December 17, 2011

Was there ever income equality?

The current intelligent-sounding term du jour appears to "income inequality," and the Occupy movement--no matter what is has or has not accomplished, otherwise--can certainly be credited with helping to drive the popularity of the term upwards. There's no doubt that income inequality carries some meaning and--as a metric--has its uses, but is it really that useful, is it really referencing an important idea that needs to be understood and actively addressed? Is it something that should be "corrected"?

For those who may not have heard of the concept, income inequality simply refers to the dispersal of income in a society, with regard to individual, and how--amazingly--this dispersal is not equal. Thus, some people have higher incomes than other people.Well, duh. Has there ever been a society where this was not the case, where there was income equality? I suppose it's possible that such equality might have existed in severely limited closed communities--like maybe some sort of anarcho-syndicalist commune--but in any historical nation, particularly those with market economies? Impossible.

Nonetheless, the analysis of income inequality seems to have become a very rich field of study. Take a look at the Wikipedia page on the term. That's some heavy stuff. Hardly simple talk for all to understand. The gini coefficient in particular requires more than a little background in mathematics and statistics in order to really get a full understanding. And I'm not really sure how useful Wikipedia is on something like this, with people who may or may not really understand this stuff haphazardly editing the page. But that's really neither here or nor there. The point is, just measuring income inequality is no simple feat. And understanding the how and why of such is equally difficult.

But regardless, allowing the income inequality was actually a problem to be solved, what is the "right" distribution? How much income inequality should a society have? Who makes that decision? And once decided, note that the only means of "correcting" the inequality is via punitive measures, punishments for phantom crimes, something that--apparently--large numbers of people have no problem with.

And there's the reality I mentioned above, that income equality is impossible in market economies.Not only that, it's income inequality that drove--and continues to drive--wealth creation. Capitalism--the current "dirty word" du jour--functions (meaning it creates wealth systemically) because of potential benefits from risk-taking endeavors. And--this is the kicker that some just can't seem to understand--the benefits over the long term create more wealth than what could have been lost. That's why, even in the current economy, potential to create wealth remains.

In an opinion piece at the New York Times, columnist Charles Blow demonstrates this lack of understanding perfectly.  He points to apparent delusion of the part of the American public who seem to wrongly feel that there isn't a problem, that they're not on the short end of the stick. He concludes with the following:
Yet another Gallup report issued Friday found that most Americans now say that the fact that some people in the U.S. are rich and others are poor does not represent a problem but is an acceptable part of our economic system. 
If denial is a river, it runs through doomed societies.
The denial is all his. And--unfortunately--he's far from alone in that regard.

Cheers, all.

1 comment:

  1. Heh. Actually, income equality, sort of, existed in the kibbutz. Now, eventually, the population started running away because they couldn't leave a better future to their kids and most of the kibbutzim that survived went to a more capitalistic approach. Another case of, sort of, income equality was in USSR. Of course, you always had people more equal than others but that usually didn't come from income per se. What some people keep forgetting (or don't know at all) is what impact that "equality" had on the motivation and productivity. To bring a country with the natural resources of USSR to the point where it was during the breakup is no mean feat. People who want to see what equality of outcome does to a system, don't have to go back as far as USSR or to that extreme. They just need to look at large government organizations, where your salary is not dependent on your performance, but on seniority, rank, but where more importantly, the managers don't have the means to reward the good (more than getting rid of the bad). This is one of the things that I and people like me really hated about the IDF. And this is an organization with a significant motivation and a sense of mission.

    ReplyDelete