Link of the Day: Wilkinson on Measuring Inequality

Primary version of this post at Barry Stocker’s Weblog, with picture of Will Wilkinson, not just the link!

Image is of Will Wilkinson

Will Wilkinon has recently published a paper on inequality which looks at the difficulties of working out how much inequality there is and how much it changes over time. It’s produced a lot of online reaction, and Wilkinson is getting ready for a comprehensive series of replies on his blog.

How does inequality in income relate to inequality in consumption of goods and services?

How do changing prices in different kinds of goods and services at different price levels affect inequality over time?

How much advantage is there in having the most expensive car or refrigerator compared with having a cheap one which coves the basic functions just as well?

How does economic inequality relate to inequality in person welfare or well-being or happiness?

How much inequality comes from immigrants who accept low paid employment because it makes them better of than working in their country of origin?

What effects does economic inequality have on equal justice, equality before the law and equality in the political process.

Should we worry about inequality if the poorest are better off compared with the poorest in the recent past?

The other thing to add is that Wilkinson writes from a free market libertarian position, and not surprisingly his answers minimise the negative effects of inequality. His position is that economic inequality is very high in America, but this is not a bad thing because it does not effect happiness equality of justice equality. He posted the paper at the Cato Institute where he is a fellow and which is a libertarian free-market foundation, where he is a fellow. I don’t think that makes his paper less interesting for the left inclined, or only if they are unable to deal with reading anything where they might find areas of disagreement. Wilkinson is a moderate libertarian, who thinks the state should be involved in delivering public goods and reducing poverty. Like egalitarian or left liberals, such as the political philosopher John Rawls about whom I have posted several times, he thinks protecting a minimum level for the poorest in society is an important political goal. Even those who do not find this convincing from a left point of view would benefit from reading the paper and thinking about what it is they accept and don’t accept and why. Certainly his discussion of how to define inequality should of interest to anyone who is interested in inequality and equality.

Here’s few points Wilkinson did not cover with regard to defining inequality, but which seem to me to be very much in the spirit of what he writes

The impact of changing incomes and investment values over time. The rich are the mostly likely to suffer a very big drop in either or both, when the economy declines. If we look at economic inequality over time, it is likely to be reduced by this consideration. A relatively free market economy, like that in America may be more prone to such fluctuations.

How much do higher income people consume instead of investing? This sort of comes into what Wilkinson says about the difference about income and consumption, but is not completely explicit.

How much is income inequality exaggerated by the low income university students have before getting well paid jobs? Similar concerns apply to the unemployed who may be between quite well paid jobs.

How much is consumption inequality affected by immigrant sending money to family members in home countries, which spreads income from rich to poor countries?

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