Income Inequality- Bogus Statistic, Real Issue

14 May
May 14, 2018

I was listening to the Reason podcast with Jonathan Rauch was being interviewed about his new book. Of course, I’m going to recommend that you listen to the whole thing. I found it very enlightening about the nature of happiness, particularly for those hitting middle age.

One item that came up during the interview dealt with how most people view income inequality. In my opinion, I’ve always considered income inequality a bullshit metric. Something used to gin up the masses and sell papers and clicks. IMHO, the far more important metric is how are the people doing year over year or over time. It’s not like the economy is a closed system. As long as people’s lives are consistently getting better, then why should it matter if some segments are increasing more than others?

This is not normal human psychology. People tend to base their happiness on how they are doing compared to others. It really is important to keep up with the Jonses. When people don’t think they are improving as fast as the rest of the world, unhappiness abounds. This becomes intensified with all the media streams blaring out conspicuous consumption of the various media whores – I mean, celebrities.

This unhappiness is what unrest is made of. Or at least, one thing that can contribute to a restless population. It also appears to contribute to the rise of populists – on both sides of the traditional political spectrum. Note the rise of Trunp and Sanders. Both of them tapped into the unhappiness of the population by promising the people to make their lives better. To either bring the people’s livelihoods up – or bring down those the people think are doing too much better.

I’m not going to pretend that there’s an easy solution. It’s a psychological issue, and nothing about psychology is easy. People are just too fucked up. IMHO, there are some things that should be done. We need to look at economic policies that help increase people’s standards of living. My personal hobby horses are free trade, low taxes, and limited regulations. I don’t see how trying to redistribute wealth by taxing the top earners would help grow the economy and increase standards of living.

Although I still think it’s a bullshit metric, I’m going to take a more careful look into income inequality – but more as a gauge of the populace. This may be one of the leading indicators of a real civil problem. One that might require me to make sure I’ve got enough ammo and storm shutters on my windows.

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