Arnold Kling  

Will Wilkinson on Inequality

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As part of a long, interesting essay, He writes,


You can see leveling in quality across the price scale in almost every kind of consumer good.19 At the turn of the 20th century, only the mega-rich had refrigerators or cars. But refrigerators are now all but universal in the United States, even while refrigerator inequality continues to grow. The Sub-Zero PRO 48, which the manufacturer calls "a monument to food preservation," costs about $11,000, compared with a paltry $350 for the IKEA Energisk B18 W. The lived difference, however, is rather smaller than that between having fresh meat and milk and having none...

The general effect of the democratization of luxury is to increase demand among the wealthy for nonmanufacturable, inherently scarce "positional goods" whose signal of relative socioeconomic status will not be so swiftly diluted by broad mass-market diffusion.

I think that the main issue with inequality is not the gap between the rich and the poor. It is the gap between the earnings of top business leaders and the salaries of academics and journalists.


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CATEGORIES: Income Distribution



COMMENTS (24 to date)
JH writes:

I've never really understood why inequality is a problem. What seems to be important is that the bottom keeps getting better. Not that they keep getting better in relation to the top, but that they keep getting better in relation to the bottom of the past.

Patrick writes:

Excellent point, JH. This is why I always advocate innovative, free markets. While in the short term a poor person would be better off if we hand them a wad of cash, in the long term we're all better off with a vibrant economy.

Robbie writes:

JH,
I think the main reason that people view inequality as a problem is that they see the situation and assume that the bottom aren't getting better as fast as it potentially could.

In the short run this is clearly the case (a sudden wad of cash does make them better off) but obviously the long term effects of taking resources from those who have previously been the most productive and handing it to those who have been the least are very undesirable.

Sarge writes:

Theodore Dalrymple wrote an excellent essay entitle "What is Poverty" a few years ago. He included the following comments on inequality.

"What do we mean by poverty? Not what Dickens or Blake or Mayhew meant. Today, no one seriously expects to go hungry in England or to live without running water or medical care or even TV. Poverty has been redefined in industrial countries, so that anyone at the lower end of the income distribution is poor ex officio, as it were—poor by virtue of having less than the rich. And of course by this logic, the only way of eliminating poverty is by an egalitarian redistribution of wealth—even if the society as a whole were to become poorer as a result.

"Such redistribution was the goal of the welfare state. But it has not eliminated poverty, despite the vast sums expended, and despite the fact that the poor are now substantially richer—indeed are not, by traditional standards, poor at all. As long as the rich exist, so must the poor, as we now define them."

I'd suggest the essay to anyone who hasn't read it. It's very insightful.

spencer writes:

I suspect the main reason most people have trouble with inequality is that the big business leaders claim their high incomes are a product of the free market when virtually everyone realizes that the pay for top executives is a "fixed " game.

This is the same reason that people have no problem with sports or movie starts making the big bucks while they are disturbed by the earnings of big business CEOs.

It is the hypocrisy of big business and their defenders.

ThomasL writes:

Sarge,

If you haven't already, you may wish to read Tocqueville's paper, "Memoirs on Pauperism".

It has some similar lines, albeit at a much earlier date (think pipe tobacco instead of TVs).

Dave writes:

Argghh. At the beginning of the 20th century NO ONE had refrigerators. Even if you were, say, a wealthy theatrical family it was the iceman that cometh.

People don't relise how fortunate they are today technologically.

Greg writes:

I'm impressed by how awfully hard the paper is to read online due to its antiquated two-column format. They even carried that over to the HTML version! Highly frustrating. Perhaps printing is the new status good?

On a less trivial note, I get the impression from skimming the paper (see previous paragraph) that Wilkinson seems to squeeze about 5 pages of content into a 20-odd-page paper. Also frustrating. Anyway, most of the arguments in the paper seem highly sensible and also not very new, as other commenters have noted. Still, I suppose it's worthwhile to have them consolidated again.

Dr. Kling, I can't tell whether your last sentence is serious or tongue in cheek. Are you arguing that CEO salaries should be lower or that academic salaries should be higher? What about market prices? If anything, haven't academic salaries been subsidized by the government as well as the use of university education as an employment skills test? I would also argue that we currently face a huge glut of journalistic capacity as well. The internet is doing to journalism what mechanization did to agriculture - the sector is going to get much, much smaller.

Sorry for what turned out to be such a cranky comment, but there it is.

Matt writes:

"I think that the main issue with inequality is not the gap between the rich and the poor. It is the gap between the earnings of top business leaders and the salaries of academics and journalists."
I think this comment alone sums up about one third of this countries problems today. I might get it tattooed on my bicep.
I remember a critic saying that Keanu Reeves didn't deserve the huge salary he got for some movie. I wasn't thinking "what the hell, you've got a Matrix movie poster in your background."

Vichy F. writes:

"I've never really understood why inequality is a problem."
Pre-commercial hunter-gatherer ape morality, that's why. People are not 'made' for the market.

Monte writes:

Is it mere coincidence that a Wilkinson of a different persuasion recently co-authored a book with Kate Pickett entitled The Spirit Level: Why More Equal Societies Almost Always Do Better, allegedly containing “hard evidence” that income disparity is negatively correlated with the psychological well-being of a country? This descent into the maelstrom of inequality will surely reinvigorate the debate over whether government should seek to promote distributive justice at the expense of individual liberty.

Steve Sailer writes:

The worst problem with being poor in modern America is that you can't afford to get yourself and your children away from other poor people.

Sharper writes:

Greg,

His point isn't that there's anything wrong with the salary differential, but that the differential itself is a large contributing factor as to why journalists and academics jealously write about how bad it is that business leaders have high salaries instead of them.

Jesse writes:

Right. Anyone who listens to poor people in the press realizes that they have very strong feelings about the rivalries between businessmen and journalists.

Wait, what's that? Poor people don't have a voice in the press? Well, that just proves that they don't have any real problems.

mark writes:

"It is the gap between the earnings of top business leaders and the salaries of academics and journalists."

Exactly right. And it's no coincidence that so much of the mainstream media is now helping to sponsor subsidized health care - as their own industry declines.

8 writes:

There's always some anger at the $100 million retirement packages for inept CEOs, but I doubt there's all that much envy directed at a small business owner making $1 million and employing 20 people with good wages. Those people are often the backbone of the community.

The real envy comes from the lawyers and others who went through extra schooling and know they are of the same intelligence and capability as the investment bankers, but earn 1/10 or 1/20 or less of their salary. That they qualify as wealthy to 95% of Americans does not matter. And of course the journalists, who think they are as intelligent, earn 1/3 the salary of the lawyers, and are working at dying companies.

eccdogg writes:

Steve Sailer, very true.

Finding a safe place to live and raise your children is the biggest problem facing poor people.

That is what I and my wife would most worry about if we had a drastic fall in our incomes.

guthrie writes:

Jesse,

I think I could qualify as 'poor'... my income is certainly below what the State has decided is the 'poverty line'. More to the point, if I were to lose my job, we could probably survive for about a month before we defaulted on our rent, couldn't pay for groceries and what have you. That’s a rather thin edge to walk, if I may say so.

However, I am under no delusion that my status is 100% the result of my own decisions, i.e.: not to complete college, wanderlust, and a myriad of others that have contributed to where I find myself financially. There have been a few things that have happened *to* me, things beyond my control, but no more than might have happened to most people, including your top wage earners.

AND YET... my wife and I drive a 2001 model Saturn, maintain phone service with a land line and two cell phones, own a computer with internet access, 2 (yes 2) TV's, rent an apartment with central air and heat, we eat multiple times a day, and yes, have a fridge, stove, and microwave.

The apartment complex next door to me is a subsidized housing project. Almost every tenant has a car, window AC unit and the lights seem to come on every night.

I've had the privilege of being a short term missionary in Rwanda, Africa, where I witnessed real poverty. No food in many cases, to say nothing of electricity, clean, running water and many of the things those of us in this country who are classified as 'poor' take for granted.

Look closely at those who are called, or call themselves, poor. I warrant you that the vast majority of them have never experienced what a Rwandan has in terms of 'problems' or disadvantage. Whatever 'strong feelings' we might have are likely to have been engendered by those who use the media to exploit easily enflamed passions, usually to promote some ultimately self-serving agenda. Whatever ‘problems’ they have are more likely, by in large, the product of individual choices and decisions, not some kind of conspiracy.

So, no, I as an ‘official poor person’ do not get upset to hear about one or two guys who make a whole lot of dough. I just hope that when my time comes, when I have a product, service, or idea that I can bring to the market, something that the market will *value*, that my struggle will be dictated by the competition of that market, and not by some arbitrary State dictate to promote 'fairness' (doubtful, but one can dream, can’t one?!).

In short, I hope that I'll become one of those guys myself. And I can. All it takes is one good idea…

Kurbla writes:

First, individual progress is not enough. The smallest and the weakest kid in class is not satisfied with explanation that he grows just like other boys in his class do. He doesn't want to be just stronger - it means really little. He want to be stronger or at least equally strong as other kids. It is as natural as it is natural that we are born with 95% selfish motivation and 5% altruistic motivation. Sure, one's favourite economic model might be ruined by human biology, but then, problem is in model.

Second, free market is not the best for *everyone*. Evidence is very simple - there is more homeless, prisoners, crime victims, drug addicts, unemployed in USA than in Cuba. Maybe free market works best for average - but not for all. And as libertarians, you should care about bottom of the society. You cannot despise Stalin if you judge society on the base of averages only: both life expectation and living standard of average Russians dramatically improved during his rule. Destiny of those bellow average is what make him one of the greatest criminals.

Caligula writes:

Kurbla:

"You cannot despise Stalin if you judge society on the base of averages only: both life expectation and living standard of average Russians dramatically improved during his rule" is an outrageous lye. Both declined rather dramatically. Please mind some facts.

Captrade writes:

I don't have a problem with inequality:

My SUB Zero PRO 48 comes with: 100% health care coverage for me and my family; a 5 car garage (I have 6 cars including a Hummer which is American made); I have a tax lawyer and an accountant (I create American jobs), I will retire comfortable when I'm 60, we take 5 to 6 weeks for vacation every year and to some very nice garden sports including some in the U.S., I give to two charities each year - NY Opera and to the Ballet. The SUB Zero also comes with one full-time housekeeper, a gardener, a part-time cook and sugar plumb fairies dancing in my head. I would hire Americans but they don't want these jobs - so I hire legal guest workers. My SERP program was expanded last year (100% board approval) - so in my retirement, I'll be able to keep the house keeper, part-time cook, and the landscaper. Did I forget to disclose that my effective tax rate is much lower than what I paid in 1978. I keep more of MY own money so I can hire laborers and such.....I create jobs for none-Americans. The best thing of all - ALL 3 of my kids attended private schools and private colleges and I support school vouchures and cuts to public education and cuts to the Pell Grant progam. None of my kids will serve in the military or ship out to Afghanistan or Iraq - the volunteer army is best because we only send the grunts into danger - but they get the GI Bill and can go to College when they come home.

The refrigerator analogy is perfect - except the working stiff who's got an old Frigidaire no longer has health insurance or access to health care. They also no longer have access to Colleges Vs the levels of the past. If we look at key data - life at the bottom has not improved in the US since Vs the 1960's......infant mortality has risen, life expectancy is tracking negative for the bottom 50%, cancer and heart related death rates for the bottom 50% is at all-time highs.

But at least I have my Hummer.

What kind of Kool-Aid are drinking at the Cato Institute?

Mike writes:

It wasn't that long ago that most poor people were dying at an early age, contracted many diseases, couldn't read...

What more do they want? Ingrates.

Work will set you free!

austin writes:

This video from collegehumor makes the same point:

http://www.youtube.com/watch?v=JbTT5b-wDYs&feature=channel_page

Clint writes:

"I think that the main issue with inequality is not the gap between the rich and the poor. It is the gap between the earnings of top business leaders and the salaries of academics and journalists."

The salaries of academics and journalists are sufficient for survival -- unlike the earnings of some of the poor, who suffer through hunger, homelessness and have increased likelihood of early death.

The main issue is precisely the gap between the rich and the poor, in particular because it's not produced through fair competition.

I wrote an essay in response to the Wilkinson piece, here.

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