Understanding Inequality Better, In Three Easy Steps

 

Pretty much all commentary on inequality is misjudged, and it's largely for three reasons; one is to do with overlooking the inevitable dynamic, two is in misunderstanding what should be measured, and three is in overlooking the scale of measurement. Let's take them in turn.

The inevitable dynamic is basically that in a free country, where people have the opportunity to contribute according to their skills, intelligence, industriousness and competence, wealth will be distributed unevenly. When measuring capital, wealth distributions follow a near-inevitable power law, whereby the top 10% percent are going to have a large proportion of the wealth, and the bottom 50% are going to have significantly less, despite substantially outnumbering the top 10%. I have lots of individual blog posts in my 'Inequality' tab that explain why in more detail.

Regarding the misunderstanding of what should be measured, if you only measure capital, then you have a distorted picture of inequality, because you are disregarding all the things already in place that make us more equal. Once you factor in the many goods and services provided by the state - the health service, social services, the state pension and the many public services - they add up to a lot of value that narrows the wealth gap. Because equality, you see, isn't just about capital, it's mostly about consumption. We also have to factor in the knock-on effects of all this economic growth, like having access to the entire world's knowledge, having more leisure time due to technological enhancements, and all the other concomitant benefits associated with human innovation.

Lastly, on top of overlooking the inevitable dynamic, and misunderstanding what should be measured, there is also the overlooking of the scale of measurement. Where you are in particular stages of life says a lot about your capital and assets, but it often creates a distorted view of a nation's inequality. Students are an obvious case in point - when graduating, they start life in debt, but most go on to earn substantial wages, retire with their own property, and across their life timescale go from negative wealth to reasonable wealth. This is also applies to many other workers, who start life on lower wages when they are young, and progress through their careers with higher wealth.

Insipid left-wing articles about inequality never factor in how to properly measure wealth and standards of living, they don't factor in the big picture where most people get better off with age, and they ignore the fact that in any economically free society, an uneven distribution of wealth is an inevitable outcome of a thriving society.

Given the foregoing, my three easy steps to thinking about inequality correctly are as follows:

Step 1 - Be precise in your language, and define ‘inequality’ properly. Are you talking about inequality of capital assets, consumption, or income? Do you mean inequality before the state has taken tax and passed on public sector benefits or after? And are you factoring in the many other social benefits that reduce inequality in other ways, due to increased standards of living?

Summary: Define before you complain.

Step 2 – Be clear on the economic and social dynamic that causes inequality. Skills, intelligence, industriousness and competence are the biggest causes of most kinds of inequality, and they are good things. Good things cause most inequality. Every time you buy a best-selling book, go to a music festival, shop on Amazon, do your shopping at Tesco, renew your Microsoft subscription, etc, you make the world a little more unequal. But you do these things because you are supporting other people’s prodigious skills, intelligence, industriousness and competence.

Summary: Understand how the world works before you complain.

Step 3 – Be aware of the big picture regarding where, why and when people’s individual life circumstances contribute to the distribution curves of the Gini coefficient, and how those contributions change over time.

Summary: Be mindful that (in)equality is dynamical, not static, before you complain.

Finally, some more insight to digest. Suppose Rich Roger has accumulated lots of capital through market transactions. He's done so by providing value to society. But it doesn't end there. Roger's accumulation of capital is going to be two other things; if he spends it, it creates a living for other people; and if he conserves his capital, then in spending less than he is saving he is leaving more goods and services available to everyone else (and at a slightly cheaper price).

Diversity is so often rightly celebrated in society - diversity of looks, talents, age, specialisations, interests, passions, culture, personalities, etc - and diversity in wealth, income and consumption are a fundamental part of, and result of, those other diversities we celebrate. I think we need to get out of the habit of using the loaded term 'income inequality' and simply call it 'diversity of assets', because that's what it really is, and society is all the better for it.

The Most Interesting Monsters Are The Ones In The Head

 

I love movies and TV drama, and I have a fairly broad and eclectic taste. But I’m usually much more interested in the psychology of inner demons than those created enemy artefacts found in sci-fi, disaster and adventure movies. Films where the heroes are battling against external monsters, aliens, dubious supernatural weidos or big dangerous animals are far less appealing to me than films that delve deeply into the characters’ minds and explore the deep challenges and rewards of being human. 

As Charles Darwin expressed so well, 'We stopped looking for monsters under our bed when we realised that they were inside us.' The monsters inside even the seemingly ordinary men and women usually strike me as far more scary and compelling and thrilling than just about any outside monster Hollywood has tried to create. Even the best films about external dangers, like Jaws, are really about the nature of being human.

Sunday Faith Series: Dawkins' Faulty Belief-O-Meter

In his 2006 book The God Delusion, Richard Dawkins produced his popularly received seven point scale – a 1-7 valuation of the strength of belief or disbelief in God. Here it is:

1.Strong Theist: I am 100% sure that there is a God

2.De-facto Theist: I cannot know for certain but I strongly believe in God and I live my life on the assumption that he is there.

3.Weak Theist: I am very uncertain, but I am inclined to believe in God.

4.Pure Agnostic: I don’t know about God’s existence or non-existence, so am undecided.

5.Weak Atheist: I do not know whether God exists but I’m inclined to be skeptical.

6.De-facto Atheist: I cannot know for certain but I think God is very improbable and I live my life under the assumption that he is not there.

7.Strong Atheist: I am 100% sure that there is no God.

In stating where on the scale he sits, Dawkins says “I count myself in category 6, but leaning towards 7. I am agnostic only to the extent that I am agnostic about fairies at the bottom of the garden.” In other words, Dawkins is fairly unequivocally an atheist with not much room for change. 

Alas, despite its popularity, Dawkins' 1-7 scale is so philosophically naïve it is all-but meaningless as an exercise. The main thing wrong with it is that as an indicator of strength of belief the model is entirely empty, because the strength of belief is inextricably linked to the quality of mental acuity put into that belief. In other words, anyone can tell you where his strength of belief sits on a made up scale of 1-7, but it is only worth taking seriously if he has a competent understanding of the subject and a good philosophical brain with which to reason.

Suppose someone calls themselves a 6 on Dawkins' scale, and when you ask them why they don't believe in God, they tell you that it's because they once asked Him to reveal Himself by writing 'God' in the sky with stars, and because He didn't, then that is grounds to not believe in Him. Obviously a relatively smart mind would simply object that that's a terrible reason to not believe God exists - in which case, calling your self a 6 on the scale means absolutely nothing to anyone with half a brain.

Theology and philosophy and probability theory are broad and complex subjects, and unless you are competent at all three, any high rating you give yourself on the atheistic part of the Dawkins scale is like calling yourself an excellent literary writer just because you happen to know a lot of words in the dictionary. Dawkins' attempt to construct a scalar model of belief and treat it as a unique metric for philosophical returns is about as narrow-minded and parochial as it gets. What the Dawkins model does is treat people as though they all see religious belief in the same way and with the same ability, and it treats the ‘God’ concept as though it is homogenous in thought structure, when it’s about the least homogenous concept around.

And if it still isn't clear why, then to show the absurdity of making a faux homogenous model, let me alter the concept to something Dawkins will understand; let’s replace the word ‘God’ with ‘evolution’, and ask a bunch of people in the Bible-belt in America where they stand on the 1-7 scale. If the polls are anything to go by, no doubt many fundies in America will say they are a 6 to 7 when it comes to evolution. That is to say, they are as sceptical about the fact of evolution as Richard Dawkins is about God. What do you think Richard Dawkins would say to them when they told him that they were a 6 or 7 when it comes to evolution? He would make the same criticism of them that I have made of him. He’d say with full justification that their comprehension of evolution is so bereft that their gradation is rendered inadequate by such a defective and inept understanding of the object of study. 

When the signs are reversed, that is precisely what is wrong with Dawkins’ own gradation. And by the way, it does not matter that evolution is amenable to scientific study and God is not, because we are only talking about how well the subjects are understood, not the empirical tractability or the final conclusions. Dawkins states that he thinks God does not exist - but his strawman caricatures are so clumsy that most Christians do not believe in the god (small g) that Dawkins denies. This is the principal point of this message, one which makes a good rule of thumb for future reference with another Knight-ism I like to employ;

The God one accepts or denies is only likely to be as intellectually tenable as the intellectual tenability of the person holding those ideas. 
JK