There is an interesting article in the last edition of The Economist on inequality and the Gini coefficient (the most famous measure of inequality).
The data: The Gini coefficient has gone up a lot - which means that inequality is rising - in some rich countries since the 1980s. For American households it climbed from 0.34 in the mid-1980s to 0.38 in the 2000s (in the 1990s the income of the richest fifth rose 27% while that of the poorest fifth went up only 10%). In China the Gini coefficient went up even more, from under 0.3 to over 0.4. But Brazil’s Gini coefficient has fallen more than five points since 2000. And inequality in the world as a whole is falling. Follow this link to read the piece, it is very interesting!
As we will be discussing this coming week, some people believe that (social/economic) equality is morally good. Some other people believe that there is nothing intrinsically good or bad with inequality from a moral standpoint.
Same discussion among economists. The new managing Director of the IMF, French Economist Dominique Strauss-Kahn, bemoaned “a large and growing chasm between rich and poor—especially within countries” and argued that inequitable distribution of wealth could “wear down the social fabric”. According to Strauss-Kahn, the data indicates that "more unequal countries have worse social indicators, a poorer human-development record, and higher degrees of economic insecurity and anxiety.”
Other economists such as Gary Becker disagree. Becker argues that there is good and bad inequality. Some types of inequality, he argues, have great social value. And other types of inequality reduce efficiency, productivity, and utility. He illustrates his point with examples of economic development and inequality in China. Follow this link to read his arguments for why there is good and bad inequality.
The discussion is excellent; I hope you have time to read the posts.
If so, the question is pretty straightforward: is inequality good or bad?
I actually agree with one of the arguments that say inequality is good. I think that without inequality, there would be no incentive for people to work. If everyone was making the same amount of money, then people wouldn't want to work hard because no matter what they do (or not do) they will still make the same amount as those working just as hard. I think that inequality is what motivates people and is what keeps the world turning.
ReplyDeleteI see why Ray agrees that inequality is good. I certainly agree inequality helps create motivation and competition amongst people. However, I don't know if I can agree to that argument overall. I personally think that inequality is good and bad. In terms of motivation and giving appreciation to people who work harder, sure inequality is good. However, in emerging markets, such as India and Russia to be specific, the inequality is immensely ruining their countries. Both India and Russia's Gini coefficient is very high. Most of the wealth in those countries come from a few men. Thus creating a corrupt political system where only the rich have power, and in turn make themselves richer and the poor poorer.
ReplyDeleteAll in all, I think I lean towards what Becker was pointing out: there IS both good AND bad inequality.
I hate to say that inequality is good, but I do agree with Ray. Just as the idea of communism didn't work out, neither will a society in which everyone is equal.
ReplyDeleteMoney is the key to motivation. Our country would not be half as successful if money was not there to inspire people.
Indeed, inequality is not simply in terms of race and gender, skill is another form of inequality. Some people are above others due to their ability to do their job very well. It seems only fair that those who excel should receive more compensation.
The United States has come a long way in terms of creating a society where everyone is equal, yet a society with complete and total equality will never happen.
Well, the question then is whether this is an issue for an yes/no answer. I mean, there might be something intermediate between a community of equals and a community where the income gap is so huge that a few are billionaires and many starve to death, as Gabriella mentions. In this sense, the Gini coefficient provides a good indication of relative equality (or inequality). And there is some negative correlation between Gini coefficient and average quality of life (in other words, citizens of relatively more equal countries live better lives than those who live in relatively unequal countries). I guess that is the reason why some people say that equality is good (even if they do not advocate communism!).
ReplyDeleteInequality benefits the rich, and equality benefits the poor. I believe Rawls' "veil of ignorance" is necessary in justifying the whether inequality is just. In theory it seems fair for an equal distribution of income. However, the opportunity to earn more motivates people to work harder. I believe inequality is right. An equal distribution of income would lead to a less progressive society. I believe that the a progressive society takes priority over the issue of poverty.
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