Tuesday, February 28, 2012

Income Doesn't Mean Inequality of Life

From Tyler Cowen:, who wrote a whole book about how income inequality is real, but wrote an article recently about how the implications are not that bad:
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.
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. 


  1. Anonymous9:12 PM

    I do not think that the problem of income inequality has anything to do with the amount of goods that a person can consume. Rather, I believe that the effects of income inequality go much further than that. The fact that income inequality is increasing hurts our democracy and our health. First, we could look at Larry Bartels of Princeton University who found that, "the richest third of the population is substantially better represented than their poorest counterparts. In fact the poorest third is not represented in the voting behavior of US Senators at all." To see just one example of this, we need only to look at taxes. The effective tax rate on the rich has dropped despite the fact that their incomes have grown. At the point where rich lobbyists like Abramoff have more power over senators then the people that elect them, i do not think that the implications of income inequality "are not that bad." There's also a growing amount of literature and empirical evidence that says that societies with high amounts of income inequality face earlier deaths for the people residing within them. While it could just be an example of correlation and not causation, psychologists theorize that it increases stress and decreases controllability which can significantly affect health. Let me know what you think.

  2. Interesting.

    Do you think the inequality of lifestyle (economically or politically) is less equal today than it was in 1776?

  3. Anonymous11:21 PM

    Oh i do not disagree with your point that inequality of life is much less than it was in the past. In fact when you measure the amount of inequality in terms of consumer purchasing power, the disparity between the 1% and the 99% becomes much less. I believe this is globalism at its best. In fact, an Economist article i was reading the other day said that US consumers have saved $780 billion from the import of Chinese goods over the past decade. However, with that said, my main problem with income inequality is its effects on democracy. Just because poor people can buy more doesn't solve the problem that Senators don't try to campaign to them or represent them in the Senate. This applies to the rest of the government as well. Also, an important distinction between 1776 and now is that there has never been so high an income inequality with such a low level of social mobility. A study by the Federal Reserve found that while it has become nearly impossible to move up the social ladder from the middle class, one-fourth of those born in the middle class dropped into either the lowest or second lowest quintile of incomes

  4. I agree, inequality of income can lead to a more important inequality of political influence. But we sure hear a lot populist/progressive rhetoric. Why?

    Loving the convo, so why are you staying so anonymous?

  5. Anonymous10:08 PM

    Sure there is, but i mean like if politicians were to just come out and say they are pandering to the rich it would obviously hurt them in terms of vote because the top 1% can never represent the majority. However, that majority can be gained using unlimited contributions from rich donors to Super-PACs, and that is one of the reasons that candidates campaign among the rich. I mean there's a bunch of sham governments all around the world that claim to be representing their people, but we can't just take their word for it. As the saying goes, "actions are louder than words." If the US government actually wanted to respond to the voters, we would see grassroot campaigns such as #OccupyWallStreet being effective. However, they aren't, and as i pointed out before, the effective tax rate on the rich has gone down. That means that poor people have to pay a higher precentage on taxes.

    Also now you know who I am, and I'm too lazy to put anything else in but anonymous, so I'll just keep it like this

  6. How do politicians gain these majority of voters with their money? Here's a quote from previous post on campaign donations:

    When a candidate doubled their spending, holding everything else constant, they only got an extra one percent of the popular vote. It’s the same if you cut your spending in half, you only lose one percent of the popular vote. So we’re talking about really large swings in campaign spending with almost trivial changes in the vote.

  7. Anonymous6:29 PM

    Hey Mr BROOKAAYYY! Despite the fact that the article is from 2012, the study was published in 1994. you knew that right? I want to look at the status quo, b/c the gini index, which measures income inequality, is at the highest it's ever been. More recent evidence from the New York Times said:

    "Since 2000, the average winner in contests for open House seats has outspent the average loser by at least $310,000, according to figures compiled by the nonpartisan Campaign Finance Institute. In races for open Senate seats, winners outspent losers, on average, in every year"

    Another study that analyzed House Elections from The Americans for Campaign Reform analyzed data from 1996-2006 and found that,

    "Less than 1% of challengers... spending $700,000 or less won elections, and 75% of non-incumbents spent less than $700,000"

    Now obviously large spenders want returns on their investments, and they do get these returns in terms of policy change! If you want to look to it logically, money buys elections because propaganda can be used to influence constituents. As a history teacher, you should know that propaganda has been used effectively several times in the past. In addition, poor people are less likely to vote in elections for many reasons but mainly b/c they are not campaigned to. As long as candidates can win the higher quintiles, they will win the election.

  8. But you're missing the entire point of that study. It's not just a simple comparison of winning dollars to losing dollars. After all, winning candidates are likely to get more money because people think they are going to win. The study seems to show that money doesn't buy elections, it follows them.


You are the reason why I do not write privately. I would love to hear your thoughts, whether you agree or not.