Inequality...whatevah!

Brian Doherty | September 22, 2006

Occasional Reason contributor Will Wilkinson has some sharp and interesting thoughts on income inequality (a week or so ago, but unfortunately an eternally relevant topic of debate) over on his blog. His main point: what's the big deal? Some excerpts:

Nominal [income] inequality is confused with material inequality--differences in material living conditions. But while nominal inequality is increasing, material inequality continues to decrease. As market competition pushes prices down, goods at the bottom of the price range more and more closely approximate goods at the top of the price range....Food is probably the most striking example of material equalization. If you compare the diets of the top and bottom quintiles 100 years ago with the diets of the top and bottom quintiles now, you'll see that we have become immensely more equal, not less. My favorite pair of jeans, which I bought at Wal-Mart for $16, is a close substitute for jeans that cost 5 times more.
.........
If you think money translates into political power, and that inequalities in political power are objectionable, then you're right! Inequalities in political power are objectionable. People with political power can oppress people in a way that people with just money can't. Libertarianism (used to be called "liberalism") is, by the way, the egalitarian political philosophy that says that inequalities in political power should be minimized. And libertarianism tells you how to get money out of politics: take political power off the auction block by restricting political power to narrow limits.

There's a lot more interesting stuff in that post (and on the Wilkinblog in general, always a fascinating, though rarely light, read), including thoughts on why public education should be the real bugbear of those who worry about inequality in modern America, and why the wealthier are seeking more and more differentiation in aesthetic and inherently scarce status-marking goods "in an egalitarian world where even the modestly remunerated can have most everything."

Comments

|9.22.06 @ 12:02PM|#

Good reading.

But it's a bit confusing when he mentions the diets of the top and bottom quintile and then as an example he chooses something other than food.

I think the point was best made in a National Lampoon Radio Hour bit: "Yes, it's true! Rich men's socks DO cost $300. And sometimes even more!"

|9.22.06 @ 12:07PM|#

My favorite pair of jeans, which I bought at Wal-Mart for $16, is a close substitute for jeans that cost 5 times more.

Ok, this is patently false.

Wal-Mart jeans *suck*. At least, the women's ones do.

|9.22.06 @ 12:13PM|#

One point of contention:

There isn't any political power UNLESS there is inequality.

I wish the relative material quality we all have would lessen the desire for political power, but it seems like the opposite is happening. The ridiculous arguments our society makes in seemingly innocuous activities like cigarette smoking are the result of the desire to have inequality in political power.

|9.22.06 @ 12:19PM|#

Smacky,

I think, however, jeans production cost has come down, so as long as you are a patient shopper, you can find high quality clothes for affordable prices. After all, the profit margin on a $500 suit is obviously enough that stores can afford to routinely put them on sale for $150-$200 without suffering financial troubles. Those with more money will pay for the convenience of waiting, while those of us with less will pay with patience to have the same quality.

I think money buys convenience more than quality alot of times.

|9.22.06 @ 12:21PM|#

Smacky- The Wally world jeans I'm wearing right now are pretty damn comfy. I've owned a lot of high-end clothes, and if anything, they seem less durable than the cheap stuff.

|9.22.06 @ 12:22PM|#

that should be "Those with more money will pay for the convenience of NOT waiting"

|9.22.06 @ 12:35PM|#

Number 6,

I don't doubt that your WM jeans are comfortable. I don't know anything about Walmart men's jeans; they may be acceptable or even good for all I know. But I can definately say that Walmart women's jeans are crap, style-wise. Not enough color choices, for one thing. Also (and this is the real problem, as I see it): I bought a pair a few months ago, just to give them a chance, and the "low-rise" jeans I bought were: low in the back part of the waistline, and higher in the front part of the waistline = retarded-looking!

|9.22.06 @ 12:37PM|#

Number6,

Brand name doesn't always equal high quality anyway. GAP jeans are manufactured in Taiwan along with Wally World jeans and not necessarily better stiched, mostly better marketed. However, Carhart jeans are more expensive, but have very good stitching and heavier material and are generally considered extremely durable by the industry. Honestly, i think most expensive products are marketing, with a few niche quality products, generally not as well known.

|9.22.06 @ 1:00PM|#

After all, the profit margin on a $500 suit is obviously enough that stores can afford to routinely put them on sale for $150-$200 without suffering financial troubles.

That is not the way retail works. They cannot afford to "routinely" put $500 products on sale for 60-70% off. Those are clearance prices. They must sell a majority of the items at full retail or very close to it to stay afloat, then the remainders need to be moved out to make room for new product. Clearance items are sold at a net loss.

|9.22.06 @ 1:05PM|#

I think money buys convenience more than quality alot of times.

This is a subset of the larger effect that is going on, and chimes with Wilkinson's point: Producers are getting better at discriminatory pricing -- at determining what something is worth to the consumer and then charging them accordingly.

Now instead of cost+20% being charged to everybody, where possible cost+50% is being charged to those who can afford it and cost+5% is being charged to those who can't. This results in more product being produced and sold, increasing the tangible benefits for the less wealthy and increasing the intangible benefits for the more wealthy.

|9.22.06 @ 1:09PM|#

Clearance items are sold at a net loss.

If you recognize sitting on the rack as a cost, with a "rent" that rises dramatically as the next fashion season approaches, you better model the actual situation.

Since the same thing happens season after season at store after store, it's hard to imagine it is, in toto, an economic loss for the merchant.

|9.22.06 @ 1:17PM|#

highnumber,

I find it hard to believe that stores are losing money on every sale good they sell, because of the number of sales there are in a year. They might not be meeting their overall margins to overcome advertising, space rental, and employee support costs, but I have a feeling they're still eating their bulk purchase cost. Just like cars and electronics, you lose money overall, but you still beat your base cost.

|9.22.06 @ 1:28PM|#

Walmart women's jeans would still look great on a J-lo butt. Any women's jeans, no matter how pricey, look like crap on a long flat butt with short legs, especially 20 pounds or so overweight.

|9.22.06 @ 1:41PM|#

Walmart women's jeans would still look great on a J-lo butt.

J-Ho,

That's not true. I *have* a J-lo butt, pre-surgery.

|9.22.06 @ 1:44PM|#

I think the point that is getting lost here is that necessities are now so cheap (when measured in hours of work needed to earn the money to pay for them) that comfort, fashion and taste are more important factors in determining what we purchase.

The average standard of living of the bottom quintile in North America is vastly higher than the upper quintile of two centuries ago.

The wealthy may have more toys and more desirable goods than I do, but the gap in our relative standard of living has narrowed significantly. I will probably never have an oceanfront estate, but I can afford a clean, comfortable room.

|9.22.06 @ 3:02PM|#

Dammit smacky, what have I told you about pictures being worth a large number of words.

And not teasing the poor libertarian nerds that you virtually hang out with? :)

As for jeans, I've heard the same thing from other females about cheap jeans, not just walmart jeans.

Paul|9.22.06 @ 3:24PM|#

Smacky- The Wally world jeans I'm wearing right now are pretty damn comfy. I've owned a lot of high-end clothes, and if anything, they seem less durable than the cheap stuff.

Number6, you done stepped in it now. I am the husband of a bona-fide Fashionista, fashion diva, and several other words which end in 'a'.

There's a golden rule in the hard core world of fashion: It's more important to look good than it is to feel good.

Let me break it down further. My wife has very clear cut philosophies about fashion/looking good/feeling good. Comfort never trumps appearance. Ever. The more uncomfortable the shoes, the better they look. A true Score(tm) in the eyes of the hard-core followers of fashion: A shoe which looks uncomfortable, but isn't.

So just a tip, when you open a conversation talking about how 'comfortable' your couture is, you're probably going to receive what my wife calls (while snapping her fingers to-and-fro) a "fashion citation".

|9.22.06 @ 3:25PM|#

material inequality continues to decrease

This is, of course, almost entirely dependent on access to cheap foreign labor & cheap ways to transport the stuff back here - both of which are temporary conditions in the long run.

Paul|9.22.06 @ 3:26PM|#

That's not true. I *have* a J-lo butt, pre-surgery.

Now you're just trying to get us to look.

|9.22.06 @ 3:27PM|#

The only real problem with this logic is the legal system. The rich definitely get better treatment in court than the poor. Walmart can't sell Johnny Cochran.

|9.23.06 @ 12:17AM|#

The only real problem with this logic is the legal system. The rich definitely get better treatment in court than the poor. Walmart can't sell Johnny Cochran.

Some might add the political system. Walmart doesn't sell Abramoff either.

|9.23.06 @ 1:15AM|#

I should add that I recognize Wilkonson's point that a limited government will provide limited opportunity to exercise disproportionate political influence. Yet, even within "narrow limits" political power is still a matter of life and death, so it can not be dismissed as a minor issue.

Also, if libertarianism is the only way to reconcile income inequality with political equality, social conservatives are left in a bind. In order to pursue their social agenda they may be willing to give up income inequality or political equality. Tying in a libertarian government philosophy may be appealing here but it makes it a tougher sell with many others.

|9.23.06 @ 3:12PM|#

"I will probably never have an oceanfront estate, but I can afford a clean, comfortable room."

Housing would appear to be a counterexample to his point. In my region, a $2000 monthly housing payment will get you a McMansion. A $1200 monthly housing payment will get you a decent, not great, 2 bedroom apartment, a 2 bedroom condo, or a 1 bedroom loft. A $700 monthly housing payment will get you a shithole in a lously neighborhood.

And since housing is such an important and major cost that people have to pay, someone with a quarter the income of the McMansion owner who lives in an apartment that is one quarter as valuable will have trouble coming up with even one quarter of the wealtheir person's food budget.

|9.23.06 @ 9:07PM|#

Joe

My point was that I (and 85% of North Americans now living) can afford housing that is clean and decent, while 200 years ago everyone in the bottom 95% of the income scale shared a room with several other people, used an outhouse and did not have access to clean water. And NOBODY had a proper sewers or running water.

What you refer to as a "shithole" was luxury 200 years ago.

|9.24.06 @ 6:22PM|#

The problem with this general line of argument is that even the minarchist state has too much stuff to sell. If the government's de facto auction block lets the rich shift police protection from poor neighborhoods to rich neighborhoods and set up rules that make it hard for poor people to beat the rich in court, this sets up a situation where the poor will be seriously oppressed because they have no way to enforce their legal rights. The police will too busy protecting the rich, and the poor won't be able to sue. In fact, this is substantially true now. The only solution to this problem is to cut income inequality.