Skip to content

Mind the Gap?

Much attention has been paid over the last week or so to An Anatomy of Economic Inequality in the UK, a government-sponsored study which has taken over ten years to produce:

The study contains a huge amount of data, much of it on the gaps between richer and poorer groups. It turns out, for example, that the richest 10% own about one hundred times as the poorest 10%. Many appear to think that such inequality is obviously, in itself, a bad thing — something any government, especially one with its roots in socialism, ought to be doing something about. But in fact this is far from obvious. Imagine that each person in the poorest group were earning £100,000 p.a., and each in the richest group £10,000,000. Such a result would be described as an economic and political miracle. Or imagine that the government sought to deal with the real gaps between rich and poor merely by 'levelling down' the income of the rich to that of the poor. Given the absence of any trickling down, and the effects on incentives, the outcome of such a policy might well be to make everyone, both existing rich and existing poor, even poorer than they are now. The fact that the gap would have disappeared seems irrelevant in a situation when all have been made worse off.

What these scenarios show is that sheer inequality in itself doesn't matter at all. What does matter, then? It is tempting to think that what egalitarians are really concerned about is not inequality in itself, but the absolute position of the worse off in society. So should we perhaps give up on equality as a political goal, and instead give priority to the worse off? This seems quite plausible when we consider the UK as it now is. But what about my imaginary case in which even the poorest are earning £100K? If people are already doing very well, the case for giving them priority is seriously weakened.

What we should focus on is those who are, absolutely speaking, badly off. We need to stipulate some reasonable threshold, and seek to give priority to those below this threshold, the priority increasing the further the individuals concerned fall below the threshold. Where should that threshold fall?

Money, like equality, is in itself worthless. It is valuable only to the extent that it can purchase something genuinely good in itself. From each individual's point of view, this is whatever makes their own life go better for them — that is, their own 'subjective well-being' or happiness. In recent years, strong evidence has been offered to suggest that, on the whole, increases in income do not correlate with increases in happiness. Of course, if you are extremely poor, an increase in income is likely to make you happier. But there comes a point where such increases tail off. Even if you win a lottery, if you are reasonably well off, your happiness is likely to increase only temporarily and then to return to what it was. Some economists argue that, in the UK as it is at present, increases in income above £15K p.a. are unlikely significantly to affect an individual's happiness.

So this gives us a reasonable political goal: to ensure that as many individuals as possible are earning over £15K p.a. Then the economic data about the wealth held, and income of, those above that threshold becomes significant — but only in so far as it enables us to calculate whether that political goal is affordable and feasible (given incentive and other effects). What matters, in other words, is preventing poverty, not removing the gap between the poorest and the richest.

Share on

5 Comment on this post

  1. By limiting your argument to a snapshot of income and wealth distribution today in the UK, you present a nice, coherent argument.
    But the AAEI report goes much further than this : what its evidence strongly suggests is that the current state of inequality exagerates and perpetuates future inequality – and not just in income but in the whole panoply of factors that make for human happiness, well-being, autonomy and dignity : life expectancy, access to culture, educational achievement, health, physical living conditions, employment, even vocabulary.
    One should not discuss “equality” as if it were something that concerns only income, nor as a transitory phenomenon.
    Whilst many would accept that high talent should be rewarded, and will thus accept the inequality between individuals based on talent, many will correctly continue to protest at the new forms of inheritance which severely distort opportunity for our children.
    It is one thing to accept that a media star or magnate has a right to earn millions : but does this justify his childrens’ disproportionate probability of doing so themselves ? It is perhaps indeed a recognition of this argument that helps explain the fact that when surveyed, most people begrudge less the earnings of the star than the magnate – the star is precisely a more temporary phenomenon.
    In short it seems to me that to ensure that as many individuals as possible are earning over £15K p.a is far from a reasonable political goal, as it fails completely to address the real issues of equality over time.

  2. If one is really for “equality”—alas! even the brightest are seduced by this doctrine nowadays!—the only proper stance is—…but what am I saying? The principle of “equality”: what a generalisation! What presumption! Here are my tenets: life itself is essentially agonistic and exploitative; any attempt to enforce “equality” is tantamount to—nay, it IS, a suspension of the very conditions of life itself. Contra every last Marxist-Leninist “exploitation” does not belong to capitalism—it belongs to the essence of what lives. Why then this lunatic desire for “equality”? What is that all about? Why this egalitarian (forgive me a vulgar word) urge to help the badly off? Ah! values! I wonder Professor Crisp, what is “equality” but a chimera, an abstract principle, a naivete—an inanity? Equality: “inequality to the unequal”! Why should we prevent poverty? Will “economic equality” generate another Rimbaud—another Hart Crane? Let us not mind the gap—intelligent men, Mr. Crisp, are succumbing to mediocre conceptions. Egalitarianism—the insidious belief in something impossible, the weak majority grabbing power to neutralise the strong few, a poison that ruins the natural “justice” of differentiation—of inequality, the decadent expression of an naive mentality, the resentful whine of the naturally inferior, the rancour of the down-trodden, the “badly off,”—in short, a doltish misconception. I shall wage war on egalitarians until my eyelids no longer wag—this kind of nonsense has been going on too long, and it has corrupted the minds of otherwise clever men. Long live the unequal!

  3. Even if it’s true that material inequality isn’t an intrinsic evil, I don’t think it follows that rough or approximate material equality is an inappropriate POLITICAL goal (although maybe it’s inappropriate for other reasons). This isn’t simply because if our our ETHICAL goal is to improve the absolute quality of life of as many people as possible, extreme material inequality will frustrate that goal. It is also because there’s pretty good evidence that, once a society reaches a certain level of material wealth, one of the best ways it has of improving the absolute quality of life of ALL of its citizens is to reduce material inequalities between them. (Note that if material inequalities tend to make the members of a society worse off in non-economic terms, once the society reaches a certain level of wealth, this would explain the evidence you cite, that increases in income don’t improve people’s welfare once they reach a certain level of wealth.) One reason for this may be that reducing these inequalities reduces obstacles to trust and community. Another reason may be that approximate material equality encourages people to focus on more productive ways of improving their lives than trying to earn as much money as the next person. If this is correct, I think it would be consonant with Mill’s defence of the stationary state.

  4. Thanks, Tim. This may well turn out to be right; but I think raising the level of the worst-off should *probably* be a priority, and that may require inequalities in income at least in the short-term to provide incentives. It would be very good if people changed their lives in the light of the facts you mention (and the evidence of positive psychology and economics that I mentioned), rather than because the state wouldn’t permit them to earn more than anyone else. Indeed I think that as things are that restriction in any single state would be unworkable.

Comments are closed.