Sunday, 2 February 2014

But why does inequality matter? 2 (updated)

Brennan McDonald offers an answer to the question from my previous blog posting here. Brennan writes
  • Inequality is on the agenda because the media are writing about it
  • The media are writing about it because envy is as old as the hills and journalists earn rubbish wages so anyone on a higher income is a fair target for them
  • Most journalists’ eyes glaze over when they see numbers so clear discussion is not possible
  • So despite a lot of evidence to suggest that maybe income and wealth inequality in New Zealand isn’t as bad as it’s made out to be, that conclusion doesn’t get page views so emotive language rules how the discussion is framed
I fear that to a large degree he is right, but this just moves the problem back one stage, Why are the media talking about it? A some point I assume its because they think something bad is caused by inequality so I ask what is the something and what is the evidence that inequality caused that something?

Also I would like to think well of my fellow economists so I hope they have a better reason for worrying about inequality than envy and that their eyes don't glaze over at the sight of numbers and thus they can undertake a clear and rational discussion of the topic. Starting with why they are concerned with the topic at all.

Update: Matt Nolan writes Are we all confusing status competition and ‘inequality’: Short answer, yes


Tim Worstall said...

An entirely cynical answer to why inequality is in the news.

"The left" has lost on every other economic argument we've ever had about anything. Markets don't lead inevitably to monopoly, a planned economy is not more efficient than a market one, there really is a Laffer Curve and you've can't go around taxing people at marginal rates of 70%.

Etc, etc, etc.

Therefore the only game left in town is to whine about inequality. But they never, never, start talking about consumption inequality which is, if we're going to worry about inequality at all, the only one that matters.

Paul Walker said...

Tim. You raise a good point, if we are to talk about inequality we have to ask inequality of what? Consumption or income is a good place to start that debate.

John Small said...

I'm missing something here.

Tim: why is consumption inequality "the only one that matters"?

Paul: any ideas as to why I should be more concerned about consumption inequality?

Paul Walker said...

John. As to your first question, it is consumption that generates utility not income as such. As to the second, if the lower end of the consumption distribution is low then you may worry about that fact. But that is more of a Rawlsian argument than an inequality argument per sec.

John Small said...


So I'm allowed to worry if some people don't (have enough income to) consume enough, but I should ignore the income driver and not mention "inequality".

Is that right?