Inequality

Figure 19.12

In a comment to the post CORE – The Economy, Raghuram quoted from the book:

In November 2016, we asked students beginning economics at Humboldt University in Berlin, ‘What is the most pressing issue that economists today should address?’ Their replies are shown in the word cloud in Figure 19.12, in which the size of the word or phrase indicates the frequency with which that term was mentioned. Students in other universities around the world gave similar answers.

Inequality is, by far, the main problem that students think economics should address.

Click on the image above in case you wish to read the chapter on “Inequality” but it is not necessary for this post. Continue reading

Rising Equality

I can justifiably claim that equality is rising in the world. Meaning, the world used to be less equal than it is today, and that in the future it will become more equal than today. The reason that claim appears to contradict reality is that I have not specified the dimension for the comparison implicit in any measure of equality. When it comes to comparisons of material wellbeing, there are three distinct dimensions — consumption, income, and wealth.

My claim is that consumption equality is increasing, not wealth or income.

Here’s a trivial case that illustrates what I mean. Warren Buffet’s income and wealth is six orders of magnitude greater than mine. Meaning his wealth is measured in units of “000,000,000” and mine is measured in units of “000.” Billions as opposed to thousands. Similarly his income per year is measured in billions and mine in thousands. Certainly, compared to Buffet in terms of wealth and income, I am dirt poor. But I am not dirt poor compared to Buffet in consumption. Continue reading