Income Inequality.

by arceofrancisco

On February 2nd, 2012 Robin Hanson, an Associate Professor of Economics at George Mason University, published a blog post entitled “Unequal Inequality.” Dr. Hanson’s post was quite insightful, and offered very useful information. His main point was that there are many forms of inequality that exist today and he inquired as to why American society cares about income the most. The seven forms of inequality he listed were:

  1. Inequality across species
  2. Inequality across the eras of human history
  3. Non-financial inequality, such as of popularity, respect, beauty, sex, kids
  4. Income inequality between the nations of a world
  5. Income inequality between the families of a nation
  6. Income inequality between the siblings of a family
  7. Income inequality between the days of a person’s life.

Hanson concludes by saying, “…we do not just have a generic aversion to inequality; our concern is very selective.  The best explanation I can think of is that our distant ancestors got into the habit of complaining about inequality of transferable assets with a tribe, as a way to coordinate a veiled threat to take those assets if they were not offered freely.  Such threats would have been far less effective regarding the other forms of inequality.”

So, simply, why do we care about income inequality? Because income is the proxy for happiness. Microeconomics has functioned on the fundamental precept that income can be used as a measurement for happiness, this is the standard metric of all Utility theory (In truth there is a hint of cynicism about the whole thing; economists assume human beings are glutinous and lazy, humans only want to work the minimum amount of hours we can while consuming the maximum amount of goods we can…yet, these assumptions make for some very useful derivations and, as it turns out, it tends to model human behavior okay.). Moreover, income is the mechanism that generates all of those things that make us happy. I am a firm believer that money does not make an individual happy, yet the things that money has the potential to bring do, in fact, yield happiness. As an anecdotal example consider Christmas, buying gifts for the children, and having a nice home cooked meal. These are, at least typically, not a trivial expense. Having a lovely, festive evening with the family offers so much happiness for the typical American family (theist or not) but without*  income to acquire gifts or a nice meal for family and friends, it is rather hard to share those events in the same spirit. This is not to say a family will be miserable without these material things, but it truly helps.

Income not only provides humans with the things that make us happy, but it provides us with security, good health (assuming people with higher income purchase insurance, which they do), and safety. Society cares about income inequality because many people in the lower income that live in housing projects or low socioeconomic areas lack these things that so many people take for granted. So, the simple answer to Dr. Hanson’s very good question is that income, typically, measures happiness, and we like happiness.

This topic is a very useful motivation for trying to understand why I (and why society) cares about income inequality and, even more, educational inequality. Indeed, education is the mechanism that can generate income, and income is the vector that begets happiness. This is the objective of this blog: to offer insight into income and education and how they vary across different ethnic groups. It is simply not enough to offer anecdotes and state that we need more equality, we have to understand why there is inequality.

Post Script:

*As an aside,  I think it’s worth mentioning that people in the upper income that are still, relatively, worse off than the top income group don’t suffer here. My statements here only apply to those suffering major economic disparities.