You’ve read about the floods, you’ve given to the flood relief appeal and now you need a break. So instead of talking about the distribution of water, let’s talk about the distribution of income. Thanks to Christopher Joye it’s been a hot topic over the past week.
People are getting too worked up about income inequality argues Christopher. In a piece for The Drum he writes:
I don’t think there is anything wrong at all with a rise in income inequality if one assumes that: (a) we have equality of opportunity; (b) we are committed to combating extreme poverty; and (c) we are vigilant in protecting those members of the community who are fundamentally and irreversibly disadvantaged through, say, mental or physical disabilities. In fact, I think we should be focussed on dealing with (a), (b) and (c) rather than drumming up hysterics about inequality. It turns out that Dr Leigh’s own research backs up this view.
Matt Cowgill isn’t convinced. At his blog We are all Dead he argues that inequality of opportunity is unsustainable without some limits on inequality of outcomes. He writes:
Over time, vast inequality of outcomes erodes equality of opportunity. Wealth, privilege and connections are handed down through generations. Last generation’s meritocrats … become this generation’s entrenched, quasi-aristocratic elite, able to secure their children’s place in the hierarchy by paying for them to attend expensive schools, or by buying them houses or providing start up capital for entrepreneurial ventures.
As Ilya at Beats and Pieces writes, Christopher responded by posting "an uncharacteristically angry-sounding response to Matt Cowgill’s analysis". In this response Christopher insisted that "if you have talent combined with patience and persistence, there are few real barriers to progress in contemporary Australia (again, there are clearly exceptions found amongst various minorities)."
… when you hear conservatives talk about how our goal should be equality of opportunity, not equality of outcomes, your first response should be that if they really believe in equality of opportunity, they must be in favor of radical changes in American society. For our society does not, in fact, produce anything like equal opportunity (in part because it produces such unequal outcomes).
According to Ilya, inequality of opportunity is the product of policy choices. In the US "the choices made over the last thirty years with regard to tax, health care, and education policies have produced rising inequality and, in parallel, eroding social mobility". And presumably that’s why Krugman’s post is relevant to the Australian situation. Our policy makers also have choices to make.
Alister questions whether equality of opportunity really exists in Australia. While he concedes that differences in socio-economic status among university entrants might not make much difference to their outcomes, he suggests that differences in family background make a big difference earlier in life. For example, do children in families where nobody has worked for three generations really have the same opportunity to get into university as those from more advantaged families? [update: see Alister’s comment below]
Christopher’s piece at the Drum was inspired by two reviews of Andrew Leigh’s new book Disconnected. Tone at Tone’s Random Thinks writes: "it seems Christopher Joye hasn’t actually read the book by Andrew Leigh, just two reviews of said book. I suppose next time I could just read the comments on one of Mr Joye’s articles, and then proceed to frame my own response – fair enough?"
Inequality has been a hot topic in the US media and blogosphere. Ilya has links.
Catherine Rampell at the New York Times Economix blog explains Why So Many Rich People Don’t Feel Very Rich. The reason is, "there is much greater inequality at the very top of the income scale than at the bottom or in the middle." When people in the middle look at those who are richer than they are, the gap isn’t all that large. But when the rich look at the incomes of the super-rich, the gap is huge. Daily Intel at the New York Magazine looks at how this applies to Brad Pitt (an actor worth an estimated $150 million):
… compared to Mayor Bloomberg, who is worth $18 billion at last count, Brad Pitt is pathetically poor. Poor poor poor. If he felt like it, Mayor Bloomberg could probably come up with an offer that would make Brad Pitt actually consider working as his personal butler for a year. How do you think that makes Brad Pitt feel? Not rich, that’s how.
Ezra Klein joins the debate, Brad DeLong redraws Rampell’s graph, and Paul Krugman argues that the widening gap between the rich and super-rich has produced "a society of winners as whiners, where people who are not only doing fine but doing much better relative to the median than they were a generation ago nonetheless feel left behind."
Note: I’ve just updated this post to include a few more links about Rampell’s post as well as correcting her name (I accidentally called her Charlotte Rampell).