I am grateful that Lane Kenworthy has addressed the issues I brought up in my original post because I think they are quite different than the normal discussions of inequality. He concedes my points, but doesn’t think they are relevant to the last century or at least the last thirty years.
But if he starts to go down that path, he will see that most of our current measures do not take these issues into account at all.
Kenworthy argues that gross measured income inequality is roughly the same as it was 100 years ago. Yet he also concedes that “inequality of material well-being is surely lower today.” How can my point therefore be irrelevant? The gross measured inequalities are utterly misleading. A world in which food of many kinds is vastly cheaper, better prepared, and less likely to contain harmful bacteria; in which clothing of a high quality is widely available cheaply; and in which people have access to basic medical care such as antibiotics, pain-killers, and basic surgery often unavailable to their ancestors, in addition to electronics like phones, washing machines, radio and television is one in which the true gap between rich and the poor is almost certainly lower (cf. the work of Stanley Lebergott). Moreover, a simple perusal of the life expectancy statistics will show that lifespans and infant mortality have improved for all groups in the last century but that they have improved more for the worst off than the richest (cf. Robert Fogel). Can there be any doubt that the ratio of a poor person’s expected lifespan to that of a rich one’s in the United States (all other things held constant) is higher today than it was 30-50 years ago? This is a major reduction in inequality not captured by any income measures whatsoever.
Even standard measures of consumption inequality overestimate inequality gaps because they don’t correct for quality and the utility of the goods that are consumed. [A good may fall so much in price that it is a trivial share of the budget but it is a large share in utility terms.] That this is true can be noted from the fact that even the so-called absolute measures of poverty do not take fixed, quality-adjusted consumption bundles into account.
Moreover, it requires at the minimum correcting for different prices faced by different classes of people. The likelihood that this issue is important can be seen by the work of Robert Gordon and others who have documented that when a different cost of living index is calculated for the rich and the poor, the inequality measures of the last few decades seriously flatten out. Moreover, all of these crude calculations don’t take the very differential regional cost differences into account, nor the cost differences even within the same city or state. Nor do they combine the information from the consumption measures which indicate that a large fraction of the poor consume far more than their income (even when official transfers are taken into account). Which is another way of saying that the real income measures for the left tail are simply wrong. I am confident that more detailed analysis on these lines would flatten measures even further, especially considering the point (noted by Elizabeth Anderson) that we all have diminishing marginal utility of income.
I would also argue against the inference that Anderson and others draw from Robert Frank that reducing positional races necessarily has no cost. This ignores the incentive effects to work. There are positive externalities to the rest of the population of the rich wishing to obtain more positional goods. If everyone with $10 million decided that they had enough and simply stopped working, those of us with much lesser wealth would be worse off. Of course, there are ways in which positional races can be harmful to all as well, but now that is an empirical question as to how gross remedies like taxation affect the incentives to work and to distort the system (like lobbying for favors).
Finally, I think that the concern with gross measures of inequality is itself positional and partially motivated by the relative performance of the United States when compared to other nations. If Europe were not perceived as less unequal in incomes and more generous in welfare than the United States, would we observe the same pressures to reduce income inequality as we do? Especially given the absolute progress that has been made in improving the lot of the poor.