Friday, December 6, 2013

Is Economic Inequality a Bad Thing?

It depends on how the scales of economic justice become imbalanced. There's more than one way for economic inequality to occur. And some of those ways are a lot more toxic than others. I suspect the good or the evil is not in the destination, but in the road we take to get there.

The Savior said the poor will be with us always. Simple mathematics bears him out. You are rich if you have one dollar more than I do and you are poor if you have less.

When in school I always liked to grade on a curve. I found it easier to learn a little bit more than average than to master 100% of the material.

Grading on an economic curve sorts us into "the rich" and "the poor."

This isn't Republican, Democrat, or Libertarian. It isn't Tea Party or Occupy Wall Street. It's just math. It's comparing two numbers--my wealth, your wealth--, so don't tell me you can't understand it. (I think you can understand multiplication and division, too. Can you double a number or divide it half? I promise not to do anything harder than that.)

I saw a TED talk recently by a woman named Chrystia Freeland wherein she described increased economic inequality and "The rise of the new global super-rich." She says the things you'd expect about the rich getting richer.

BUT the poor aren't getting poorer as The Economist says in Not Always With Us. Their headline appears to contradict the Savior.

Or maybe it doesn't.

I think the Savior, and Ms. Freeland are grading poverty on a curve, whereas The Economist and you'll see Bono are working with an absolute scale.

I asked my wife how much it costs to eat for a day. We guessed about $5, then rounded it up to $2,000 a year. At some level, without enough money, you starve to death. And that's what Bono has in mind with his TED talk The Good News On Poverty.

For sake of argument, let's assume $2,000 is what you need to not-starve.

Let's suppose you're John Doe with only $2,000 to your name. You may not vacation on the Riviera, but you'll feed yourself. However, Forbes magazine says Bill Gates has $67B. The difference is not chicken feed: $66,999,997,000.

Let's suppose the ghost of Milton Friedman waves a magic wand and make everyone richer. And I don't mean inflation, I mean real wealth. The magic wand takes all debts and makes them half as big, and all savings twice as big and all the prices are the same as before.

Consider John Doe: he now has $4,000 and he can move up from Ramen Noodles to Macaroni & Cheese with a MacDonalds hamburg on Sunday. He's not yet puttin' on the Ritz, but he's got more money for a better life.

The bad news is that Bill Gates is now worth $134B. And the difference between John and Bill has more than doubled to $133,999,997,000. If you're grading on a curve, that's very bad news, but John's happy, and Bill is happy, too.

It gives both Bono and Chrystia Freeland topics for happy and unhappy TED talks, respectively.

Now, let's consider an alternate parallel universe. Like the one where Spock has a beard. And the ghost of Karl Marx shows up with his own magic wand to make everyone poorer. Everyone's wealth is cut in half and prices don't go down to compensate. Now, let's look at Bill Gates and John Doe.

Bill "only" has $34.5B and has to adjust to the straightened means the Koch brothers now enjoy.

But John starves to death. He can go to his grave enjoying the thought that he's only $34,499,998,000 poorer than the Microsoft billionaire. Bono won't be happy because a lot more people like him will starve to death, but Chrystia Freeland can cite the dramatic decline of economic inequality.

This is just math. It just requires a feel for the way in which numbers move when they are multiplied and what kinds of stats do or don't make sense.

Frankly, I'd rather live in a world where nobody starves to death.

But what if that is a world where poor get ahead, but the rich get much farther ahead?

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