Sunday January 17, 2021
  • Venezuela
  • Mexico
  • Colombia
  • Chile
  • Brazil
  • Argentina
  • Podcast
Versión Español
PanAm Post
  • Home
  • Regions
    • South America
    • North America
    • Central America
    • Caribbean
  • Politics
  • Economics
  • Opinion
  • Podcast
  • Authors
  • Contact
No Result
View All Result
  • Home
  • Regions
    • South America
    • North America
    • Central America
    • Caribbean
  • Politics
  • Economics
  • Opinion
  • Podcast
  • Authors
  • Contact
No Result
View All Result
PanAm Post
No Result
View All Result

Home » Income Inequality is Not the Same as Poverty

Income Inequality is Not the Same as Poverty

José Azel by José Azel
July 19, 2018

0
0
SHARES
0
VIEWS
FacebookTwitterTelegramWhatsapp
Income inequality does not imply poverty (World Bank).

Over the years I have published a number of columns on inequality. Among these are “Fleeing Equality,” “Redistributive Injustice,” “The Rich Do Not Exist,” and others reproduced in my book “Reflections on Freedom.” Invariably, this topic brings me the most hateful correspondence. Undeterred, I will try again motivated, this time, by the excellent analysis presented by Steven Pinker in his latest book, “Enlightenment Now.”

Let’s begin by defining the terms as Voltaire demanded. I am defending only the inequality that results from legitimate creation of value in goods and services. The way in which inequality comes about matters. Those who get ahead as a result of government-granted privileges, unfair business practices, dishonesty, corruption, cronyism, etc., are engaging in illicit activities and must be prosecuted vigorously. What offends me is not inequality as such, but that inequality that results from illicit gains.

RelatedArticles

Netflix’s “Death to 2020” Illustrates the Problem with Power

Netflix’s “Death to 2020” Illustrates the Problem with Power

January 16, 2021
Political Trial Against Trump Conducted by Democrat Linked to Chinese Spy

Political Trial Against Trump Conducted by Democrat Linked to Chinese Spy

January 15, 2021

Let me borrow an example offered by Dr. Pinker. J. K. Rowling is the British novelist who created the Harry Potter series that sold more than 400 million copies. In her “rags to riches” life story, Rowling went from living on state benefits to being the world’s first billionaire author. She is one of the richest persons in the world, and has given away much of her fortune to charity.

We have voluntarily handed over to Ms. Rowling a portion of our capital for the pleasure of reading her books, or watching the Harry Potter films. We made her very rich, thus increasing inequality, and this has not made anyone worse off. The same can be said of the products produced by Bill Gates’ Microsoft, Steve Jobs’ Apple, and so many others who have enhanced our lives, and we in turn rewarded them financially.

Wealth is not, in the overused analogy, a fixed size pie that needs to be forcibly distributed to achieve some artificial equality. Global wealth, as measured by economic growth, is a pie that is ever increasing, and providing larger slices for everyone. Although granted, the slices may not be of the same size for all.

And here is the paradox. As Pinker notes, life “must have begun in a state of original equality, because when there is no wealth, everyone has equal shares of nothing.” It is only when wealth begins to be created that some will end up with more than others. When a society starts to create meaningful opportunities for wealth, some people are likely to take greater advantages of those opportunities.

“Whether by luck, skill, or effort,” gains will be disproportionate. Absent some artificial income redistribution scheme, “absolute” inequality is a mathematical necessity. I placed “absolute” in quotations to distinguish it from “relative” inequality. Absolute inequality is the difference between the richest and the poorest. As countries get richer, some individual will get richer than others, but everyone will be relatively better off. What is relevant is how much we earn or consume, not how high or low we rank in relation to others.

Income inequality is notoriously difficult to measure. One of our best inequality measuring tools is the Gini coefficient in several versions. The Gini ratio works something like this. A Gini coefficient of zero means perfect equality, for example, if everyone has the same income. A Gini coefficient of one means that one person gets all the income – perfect inequality. In practice, Gini values range from 0.25 for the most egalitarian countries, to 0.70 for those with a highly unequal distribution. Poor African nations show high inequality, whereas wealthy Scandinavian nations are the most egalitarian.

Measurements get more complicated when we consider social transfers such as food stamps, and other assistance for needy families. In the late 2000s, the United States Gini coefficient before social transfers was 0.486; after transfers inequality decreases to 0.378. Even more interesting, if we measure the Gini coefficient on what we consume, rather than on income, the recently reported increase in inequality disappears.

The Gini coefficients shows that inequality worldwide is declining, but we make an analytical and moral mistake when we focus narrowly on income inequality. What is really important is how well-off people are, not how they rank in relation to others.

Previous Post

How Trump and AMLO Can Lay the Foundation for A Successful US-Mexico Alliance

Next Post

Without Petro-state Backing, the Sao Paulo Forum and Regional Socialism Crumble

José Azel

José Azel

José Azel is a scholar and author. Dr. Azel‘s latest book is “Reflections on Freedom.”

Related Posts

Netflix’s “Death to 2020” Illustrates the Problem with Power
Analysis

Netflix’s “Death to 2020” Illustrates the Problem with Power

January 16, 2021
Political Trial Against Trump Conducted by Democrat Linked to Chinese Spy
Elections

Political Trial Against Trump Conducted by Democrat Linked to Chinese Spy

January 15, 2021
China Plans to Launch ‘Crypto-Yuan’ to Bolster Communist Regime’s Control
Asia

China Plans to Launch ‘Crypto-Yuan’ to Bolster Communist Regime’s Control

January 15, 2021
Purchase of Damaged Dollar Bills Is the Latest Unusual Business in Venezuela
Venezuela

Purchase of Damaged Dollar Bills Is the Latest Unusual Business in Venezuela

January 14, 2021
Purchase of Damaged Dollar Bills Is the Latest Unusual Business in Venezuela
News

CIA Declassifies UFO Files at Trump’s Request

January 14, 2021
Purchase of Damaged Dollar Bills Is the Latest Unusual Business in Venezuela
United States

Donald Trump Will Not Be Dismissed

January 14, 2021
Next Post
Without Petro-state Backing, the Sao Paulo Forum and Regional Socialism Crumble

Without Petro-state Backing, the Sao Paulo Forum and Regional Socialism Crumble

Discussion about this post

Subscribe free and never miss another breaking story

  • Venezuela
  • Mexico
  • Colombia
  • Chile
  • Brazil
  • Argentina
  • Podcast

© 2020 PanAm Post - Design & Develop by NEW DREAM GLOBAL CORP. - Privacy policy

No Result
View All Result
  • Home
  • Regions
    • South America
    • North America
    • Central America
    • Caribbean
  • Politics
  • Economics
  • Opinion
  • Podcast
  • Authors
  • Contact

© 2020 PanAm Post - Design & Develop by NEW DREAM GLOBAL CORP. - Privacy policy

We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. Privacy and Cookie Policy.