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HappySqurriel on 15 April 2011
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Rath said:
HappySqurriel said:

Honestly, income disparity is a poor way to measure fair outcomes in an economy. Supposing the purchasing power per dollar is the same in both scenarios which is a more desireable outcome:

  • A "poor" household earns $25,000 per year, a typical (mean or median) household earns $100,000 per year, and a "rich" household earns $400,000 per year.
  • A "poor" household earns $15,000 per year, a typical (mean or median) household earns $30,000 per year, and a "rich" household earns $60,000 per year.

    • While the households in scenario 1 are all better off than their equlivalents in scenario 2, the focus on more equitable distribution would lead people to choose scenario 2.

     

    We should be discussing how we can grow the economy to ensure that the standard of living of everyone within the economy improves as much as is possible; not discussing how to create an economy where the realitive reward of success is minimized.


    Or a middle ground. Why do people only assume that one of two extremes can be chosen.

    Clearly income disparity should not be the only measure, or even the most important measure. Far more important are things like the standard of living for the lower income groups.

    The problem with income disparity though is that its effect is to reduce the standard of living of the low income groups by concentrating the wealth in the high income group - wealth within a society is a finite resource and a pool of it in one place does mean that there has to be an lack of it elsewhere.

    Wealth is not a finite resource, and the amount of wealth in the world has been growing throughout history ensuring that everyone ("rich" and "poor" alike) are seeing increases in their standard of living. If you look at the standard of living of most people on a 40 year interval, you will see that the standard of living of (pretty much) everyone is increasing significantly on this timeline. It really wasn’t that long ago when being "poor" actually meant that someone only owned 1 set of (more or less tattered) clothes, lived in a one room house with their (fairly large) family, and ate an inadequate level of inadequate food. Times have changed and being "poor" in most western cultures means that you’re unable to buy enough luxuries to satisfy yourself; the reason for this is the economy has grown to the extent that even poor people own cellphones and have cable TV.

    There is no middle ground; the choice is between growing "the Pie" so that everyone gets a larger piece or redistributing "the Pie" for equality sake resulting in one or more (probably all) people getting a smaller piece of the pie ...

     

    What a dollar (or any level of wealth) really represents is control of a very small portion of the economy enabling you to produce whatever you want to suit whatever needs you have. People who demonstrate good stewardship of the portion of the economy they control will see their portion of economic control grow by their wealth increasing. When you redistribute wealth, you’re taking economic control from those who have demonstrated the best stewardship of the economy and giving that control to the worst stewards of the economy.