Inequality

Misleading Inequality Report Is Nothing to Fear

No, the richest 1 percent will not soon have as much wealth as the rest of us.

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There's a good chance you saw the "wealthiest 1 percent will soon own more than the rest of the world population combined" story floating around the Internet the past few days. Fortunately, there are a multitude of reasons to be both highly skeptical and unconcerned about the article's claims.

Oxfam, the U.K.-based organization that published this research, is largely regurgitating a similar eyebrow-raising claim it made last year: that the world's 85 wealthiest people have the same wealth as the bottom 3.5 billion people combined, an assertion that's been solidly refuted by financial reporter Felix Salmon among many others.

There are three issues with Oxfam's methodology: 

  1. Oxfam accounts for people's debts, meaning that the poorest two billion people—57.1 percent of that bottom half—have negative net worths. Many of these world's "poorest" are people from the most wealthy portions of the world who are simply underwater on mortgages, student loans, or credit card debt. When you add these two billion (often very large) negative numbers to the remaining 1.5 billion positive-wealth people in the bottom half, you get a relatively small figure—$1.7 trillion.
  2. Oxfam takes this $1.7 trillion figure and simply counts down the list of Forbes' wealthiest people until they hit that total, but the organization attributes wealth entirely to individuals, when the multibillionaires of the world presumably have many family dependents. They're not, in other words, spending all their money on just themselves.
  3. Oxfam has then taken recent trends of rising wealth for the top 1 percent and extrapolated those recent high growth rates into the future, which is a large assumption given the likelihood of the U.S. Fed's quantitative easing (Q.E.) soon unwinding.

Is inequality an issue? Sure. A dollar in the hands of a poor person has greater utility than a dollar in the hands of a very wealthy one, so wealth inequality means we have something less than the maximum possible amount of worldwide utility/happiness.

But studies like Oxfam's that solely focus on the division of the pie always entirely ignore how much the pie has grown over the last few decades—leading to bigger slices for just about everyone and creating a rising tide that floats the vast majority of boats.

Here is the share of the world's population in poverty as defined by the World Bank:

via Sean Mulholland

 

The rate more than halved from 1990 (43 percent) to 2010 (21 percent), and, The Economist notes, "Almost all of the fall in the poverty rate should be attributed to economic growth." Some well-known economists, such as Columbia University's Jeffery Sachs, believe we can even end extreme poverty by 2025.

Inequality analyses like Oxfam's also ignore the fact that the top 1 percent isn't some static, unchanging body, but a relatively dynamic one, with many individuals moving in and out. Here, for example, is a chart I made with data taken from the U.S. Treasury Department by the Stonehill College economist Sean Mulholland showing how Americans in different wealth quintiles shifted from 1996 to 2005:

U.S. Income Shifts

As far as the ever-demonized "1 percent," Mulholland says, only 40.4 percent of Americans in that highest percentile in 1996 were still in the top 1 percent in 2005. Additionally, children of families at all income levels are expected to exceed their parents' family income:

Generational Growth

Most income inequality reports focus only on the most negative interpretation of the data, creating a narrative that the world's economic situation is spiraling toward a dystopian hell. People then use that misperception to justify wide-reaching government redistribution policies. Stepping back to look at the more meaningful figures, though, makes it clear that those fears are largely misplaced.

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  1. …always entirely ignore how much the pie has grown over the last few decades?leading to bigger slices for just about everyone and creating a rising tide that floats the vast majority of boats.

    That’s not at all provocative enough to warrant inclusion in any analysis of wealth inequality.

  2. Proof that no matter how wealthy markets make us all, no matter how many are lifted out of poverty, no matter how much success we have the progs will continue screeching for socialism. They don’t care about the poor, they only care about power.

    The inequality schtick is good forever no matter how good things get. They can always claim that since one person has more, even slightly more, than another that they are justified in seizing all wealth. They really are evil.

    1. Naturally the political elites (under any system) don’t count when looking at income inequality because they are selflessly serving the rest of us.

  3. A dollar in the hands of a poor person has greater utility than a dollar in the hands of a very wealthy one,

    Sort of. I’d say it has more immediate utility, but less long term utility. A very wealthy person is most likely better at growing that dollar so that it provides more utility to more people in the future than it could have for any one person today. Regardless, if the wealthy person earned that dollar then it is his to do with as he chooses, utility be damned.

    1. Well said.

      A rich person’s dollar is much more likely to be used in building other wealth builders, and that benefits us all greatly.

      A poor person’s dollar is more likely to be used buying a low-level good or service such as food or beer, which benefits us all, but only marginally.

      The author’s original assumption, which you quoted, is 180 degrees out of phase with reality. What’s really bothers me is that it’s simply thrown out casually, as if it were accepted fact.

    2. Exactly. The once-poor who managed to climb out of poverty are the ones who understand the importance of the long term. Even though their resources of time and money are limited, they know that the only way out is to use those resources to develop better job skills–even though for them it is a long slog since they can only do a bit at a time.

  4. the “wealthiest 1 percent will soon own more than the rest of the world population combined”

    Yeah? So?

    More relevantly, how do I get in on this action?

    1. Get into Government

  5. A dollar in the hands of a poor person has greater utility than a dollar in the hands of a very wealthy one

    Then we should be finding out how this poor person can earn that dollar and many more, which will help them in the future about a gajillion times more than will taking that dollar from someone else and handing it to them.

  6. Wealth is not money.

  7. A dollar in the hands of a poor person has greater utility than a dollar in the hands of a very wealthy one, so wealth inequality means we have something less than the maximum possible amount of worldwide utility/happiness.

    Sez you.

    Maybe the Ministry of Plenty should be in charge of regulating the utility of a marginal dollar.

    1. I’ve been writing for very left-leaning publications for so long… I should have known, that of all the very points I bring up in this post, *this* would be the one commenters take issue with.

      1. This point is the crux of the matter, though. What is the best way to determine a thing’s value/utility?

  8. I’ll just toss this out, because it has been a while.

    THE GRASSHOPPER IS NOT THE HERO OF THAT FUCKING PARABLE.

    1. Mr Keynes would beg to differ.

  9. A very wealthy person is most likely better at growing that dollar so that it provides more utility to more people in the future than it could have for any one person today.

    NEEDZ MOAR AGGREGATED DEMANDZES

    Just ask Krugabe.

    1. If only I had a Nobel, maybe someone would listen to me…

  10. Libertarian socialism has the answer for a more just distribution of society’s wealth. Participatory economics (parecon)

    Second, parecon has remuneration for the duration, intensity, and onerousness of socially valued labor. You can’t produce what people don’t want and be remunerated for that. For what is desired and for what does meet needs and develop potentials, however, you work and you are remunerated such that if you work longer, you work harder, or you work under worse conditions, you make more.

    This approach turns out to not only be fair, but also to properly incentivize activity and, as well, to properly discern and communicate levels of desire for economic inputs and outputs needed for purposes of decision making. The parecon approach contrasts with remunerating property, power, or output ? none of which occur in a parecon and all of which generate unjust income differentials, distorted information, and perverted motivations.

    1. cont:

      Fourth, parecon also needs a means of allocation. The problem to overcome is that both markets and central planning, the two familiar options, are inadequate to allocating consistently with classlessness and self-management. They each by their dictates for behavior and motives, undercut the benefits and even the lasting presence of workers and consumers self-managing councils, equitable remuneration, and balanced job complexes. If we accept that it is so, for a minute, we are left with a problem. How does participatory economics arrive at inputs and outputs of economic activity that is consistent with self management and doesn’t introduce class division?

      Parecon’s answer is called participatory planning. The heart of this approach is pretty simple, almost too simple, at first hearing, to seem viable. Workers and consumers councils via their nested relations propose their desires for consumption and production. They assess the proposals of others and moderate their own, in accord with new rounds of information. In essence, they cooperatively negotiate inputs and outputs in light of needs and potentials and in accord with equitable remuneration. Indeed, the parecon claim is that this is not only possible, but truly efficient at meeting needs and developing potentials, and that it conveys self-managing say, as well.

      1. So all the anti wow folks will get to tell me that I can’t have my game and computer because they are busybodies who think I should spend my time doing what they like to do instead. Yeah, sounds like a world I want to live in.

        1. Yeah, sounds like a world I want to live in.
          Living together in a just society calls for compromise by all participants.

          Many libertarians reject this approach because they feel that any structure limiting their work and consumption options is coercive. These “from each to each” advocates believe a person should be free to consult his or her own inner self, pick any work level and type that he or she prefers, and then collect any products that he or she wants, without having to balance work and consumption. They claim that restricting the unlimited option to do whatever work we prefer for however long we want and take whatever social product we choose, is coercive…

          1. cont:

            To assess this coercion claim, would the “from each to each” advocate deem a rule that you cannot kill your neighbor coercive? Or would this advocate consider this aim something everyone should abide of their own accord, so that if someone wouldn’t abide it on their own, then limiting their options would be proper? Assuming the latter it true, then why call an institutional arrangement that gives you no means to consume more than your share of work or special health or other circumstances warrant, coercive? The no murder rule and the no gluttony rule both produce conditions that society deems desirable. If the rules constrain someone rather than simply facilitating the desirable outcomes we all should seek, it will only be because that person should be constrained.

            1. Then gamboling ensued?

          2. That’s not at all what libertarians think. That is nearly the opposite of what libertarians think. Libertarians are all about people balancing work and consumption as each individual sees fit.

      2. The heart of this approach is pretty simple, almost too simple, at first hearing, to seem viable. Workers and consumers councils via their nested relations propose their desires for consumption and production. They assess the proposals of others and moderate their own, in accord with new rounds of information. In essence, they cooperatively negotiate inputs and outputs in light of needs and potentials and in accord with equitable remuneration.

        …That doesn’t sound simple at all.

        But then I’ve read Mises.

        1. Shorter version

          “Inputs and outputs are determined by a council of angels.”

          1. I love the idea that we’re to discuss what we want and what we’re willing to produce, and modulate our wants and our willingness to work according to what everyone else says in these meetings. How would this not immediately break out into warfare?

            1. The New Soviet Man…

              1. The White Indian.

            2. How would this not immediately break out into warfare?

              FTL:

              Just like the pareconist thinks there is a downside to adopting “from each to each” because of its built in lack of accurate information leading to poor and unjust choices that would be disastrous, so the “from each to each” advocate thinks there is a down side to having pareconish structures constrain choices due to a tendency for all constraints to pervert our natures, alienate us, and grow steadily more intrusive and coercive as time passes…

              Parecon’s institutions instead not only get the allocative tasks accomplished justly, they also facilitate desirable personal and social commitments and habits ? and, indeed, were conceived with precisely that in mind. Thus, not only are parecon’s institutions desirable as an immediate means to the particular end of fair allocation, they also propel worthy wider ends by being “schools” of desirable behavior. Engaging in balanced job complexes, equitable remuneration, participatory planning, and self managed councils, produces social ties, solidarity, empowerment, and diversity.

              1. Communism by any other name…

                1. No, it is not communism. It takes where communism fails and substitutes a system which not only works but is also more just than capitalism.

                  The former empowered group, called the coordinator class, operates above the latter disempowered group, called the working class…In twentieth-century socialism, while owners no longer exist, the coordinator class not only still exists; it becomes the new ruling class. For this reason, advocates of parecon tend to call twentieth-century socialism coordinatorism…

                  Balanced job complexes are that new way, in a parecon. Each worker has a similar job situation vis-?-vis empowerment effects. In other words, each worker does some empowering tasks, and some disempowering tasks, where the combination into the whole job complex, on average, is similar in its overall empowerment effects as each other person’s job complex. As a result, there is no structural pressure producing a more empowered coordinator class above a disempowered working class. There are just economic actors, all comparably empowered, together engaged in self managing economic life.

                  1. Communism by any other name.

                    Also, there is no central planning. Everything is decided upon equitably.

                    Workers and consumers councils via their nested relations propose their desires for consumption and production. They assess the proposals of others and moderate their own, in accord with new rounds of information. In essence, they cooperatively negotiate inputs and outputs in light of needs and potentials and in accord with equitable remuneration.

                    1. they cooperatively negotiate inputs and outputs in light of needs and potentials and in accord with equitable remuneration.

                      I see. Sounds pretty cool except for that little thing called human nature.
                      How do you plan to reshape people into the New Soviet Man?

                    2. I see. Sounds pretty cool except for that little thing called human nature. How do you plan to reshape people into the New Soviet Man?

                      This is not Soviet.

                      I agree that where we end up should be a matter of choice and not circumstance. That’s why in Parecon we give folks (including our libertarian friends) what they claim to want. We create an institution that doesn’t reward for circumstances beyond your control, but rather only for choice. By rewarding for effort and sacrifice, we are all put at the same starting point.

                      Unlike capitalists, you’re rewarded for the work you do, not the work you own. Unlike in a competition, you get paid according to your individual effort and sacrifice, not how your work matches up to that of someone else. Unlike in a market system, the fruit of your labor is your own and not up for bid. We all have the same chance at getting what we want. We all get exactly what we deserve.

                    3. cont

                      Admittedly, this is not as easy as I’m making it sound. The most obvious problem is how to measure for effort and sacrifice. But this is where the cooking comes in. Since there is no magic textbook for new institutions, in the beginning some of this will be a matter of trial and error.

                      From peer review and gauging performance over time to scientific methods and the honor system, as time goes by we’ll get a better feel for what works and what doesn’t. Moreover, without the selfishness of competition, we’d have incentive to share our discoveries and could benefit from the diversity of experiments throughout the workforce.

                    4. Moreover, without the selfishness of competition, we’d have incentive to share our discoveries and could benefit from the diversity of experiments throughout the workforce.

                      Like I said, how do you plan to cure humans of human nature?

              2. So… just assume there won’t be any conflicts. Nice. Bonus points for simultaneously having “solidarity” and “diversity.” We’re diverse as one!

                Two questions about this society populated by the New Soviet Parecon Man:

                1) How do we get there? Do we have to purge the mass of individuals who simply would not put up with this bullshit?

                2) How do you keep in line those who think differently? Those who don’t develop or appreciate these social ties? Someone who just has different ideas? More importantly, how do these social ties extend beyond the immediate community, much less globally? Do Bostonians feel solidarity with New Yorkers, even if NYers are lazy slobs who don’t want to use their resources that aggressively or in a way that some Bostonians would prefer?

                1. Two questions about this society populated by the New Soviet Parecon Man

                  2)

                  In a Parecon, everyone has a say to the degree to which decisions affect them. So if an item of consumption is going to pollute a certain residential area, then the residents of that area deserve an input. Such input could range anywhere from smaller councils directly affected by pollution to agencies that represent the greater public in relation to climate change all the way to specialists on particular plants and wildlife.

                  Consequently, if cars are polluting and less energy efficient, it would reflect in higher prices. If trains and buses would lessen pollution and energy worries, this would reflect in their prices as well.

                  The point is that consumption in a Participatory Economy will not be just a matter of one’s own self-interest. It will be a matter of equity and solidarity. When our choices impact the lives of others, we should expect and respect the input of others in such decision-making.

                  1. When our choices impact the lives of others, we should expect and respect the input of others in such decision-making.

                    The New Soviet Man…

                  2. So I just assume there is nothing in this manifesto about what to do if some people say they’re fed up and don’t want to go along, or else you would repost it. That didn’t raise any flags for you when you first read it?

                    And thanks for ignoring the first question. I’ll be sure to submit myself to the nearest death camp when the time comes.

      3. Indeed, the parecon claim is that this is not only possible, but truly efficient at meeting needs and developing potentials, and that it conveys self-managing say, as well.

        Do they also claim that unicorn farts are the power source of the future?

        1. So what pathways would it involve? Well, there are so many things we could talk about. But, as just a few examples ? it could inspire and enlighten us to seek full employment with shorter workday and workweek. It could inspire and enlighten us to seek massive, even gigantic, cuts in military spending, alongside major enlargements of social spending. It could inspire and enlighten us to promote massive allotments to education for all, to health care for all. It could inspire and enlighten us to promote changes toward participation within firms, and in broader macro-economic life. And that’s just the beginning, and only for the economy. Vision for politics, culture, and kinship could inform changes in those spheres as well.

          I’m not seeing the libertarian part.

          1. “At this point of the twenty-first century, only a relatively few people…fail to see that capitalism is now a gigantic holocaust of injustice.”

            -Michael Albert, from inside his opaque bubble

      4. Workers and consumers councils via their nested relations propose their desires for consumption and production. They assess the proposals of others and moderate their own, in accord with new rounds of information. In essence, they cooperatively negotiate inputs and outputs in light of needs and potentials and in accord with equitable remuneration.

        Have you ever heard of a company called 20th Century Motors?

    2. I find your ideas intriguing and would like to subscribe to your newsletter.

  11. The author’s original assumption, which you quoted, is 180 degrees out of phase with reality. What’s really bothers me is that it’s simply thrown out casually, as if it were accepted fact.

    I’m certain that “comparative utility” assertion is accepted as fact in about 98.4% of higher education economics classrooms in America.

    I do not propose to make a habit of ragging on him, but: Jim Pagels is the winter 2015 Burton C. Gray Memorial Intern at Reason..

    Throw off your shackles, Jim. Challenge those assumptions.

    1. I actually put a lot of thought into that marginal utility sentence before writing it, as I know it’s a disputed topic in libertarian circles.

      And yes, while I agree that a dollar in the hands of the wealthy is more like to go toward investment and long-term growth rather than short-term goods and services, I think you can certainly make a case that a house for a homeless person increases world happiness more than a 5th house for an extremely wealthy person.

      I’m not 100% certain on this topic, and probably should have discussed that point further in the post.

      1. Where did the dollar come from? Did the homeless person earn it, or was it snatched from the hand of a rich person to be given to the homeless person?
        I’m assuming the latter.
        Let’s say the rich person kept the dollar, and used it along with many more to pay the homeless person to build that fifth house.
        Now the rich person has another house, and the homeless person can buy or rent one of his own. Everyone is richer.
        Or you can keep breaking windows.

      2. Ah, see that’s part of the issue. Utility is ill defined in your article. Short term vs long term. Happiness vs concrete increase in lifestyle. Public vs personal. Utility needs a lot of qualifiers before it can be used in a debate.

      3. I’m not 100% certain on this topic, and probably should have discussed that point further in the post

        If you added further discussion of everything that needed further discussion you would still be writing while your editor yelled obscenities at you. I’m just nitpicking at one of my pet peeves.

        I think you can certainly make a case that …

        I agree that the case can be made, but I don’t buy it. For one thing, many homeless people are homeless specifically because they cannot manage a household. What good is it to give a homeless person a house if they then run it into the ground, driving its utility towards zero? In the end I prefer to let the market arbitrate utility (i.e. value).

      4. I actually think you’re making your case worse here, since you also make the typical argument that inequality does not tell you if the pie has grown and if everyone is generally wealthier. So there could be even greater inequality, but without any (unwilling) homeless. It’d be a lot harder to justify the assumed utility of that dollar.

        Maybe assuming away all unwilling homelessness is just intellectual wankery, but so it pretending to compare utility between persons or thinking that utility could be added up to find the maximum “worldwide utility.”

      5. … you can certainly make a case that a house for a homeless person increases world happiness more than a 5th house for an extremely wealthy person.

        You can make any such case that you want, because happiness or utility is ineluctably subjective and hence immeasurable among persons.

  12. You can’t produce what people don’t want and be remunerated for that.

    Five hundred years of Political Science would like a word with you.

    1. We aren’t making payments. We’re rendering protection money.

    2. You can’t produce what people don’t want and be remunerated for that.

      A quick read of David Thompson’s blog would suggest artists disagree most strenuously with this assertion.

  13. The parecon approach contrasts with remunerating property, power, or output ? none of which occur in a parecon and all of which generate unjust income differentials, distorted information, and perverted motivations.

    And, once more, the Labor Theory of Value rears its ugly malodorous ragged decomposing (but never vanquished) head.

  14. I’m not 100% certain on this topic, and probably should have discussed that point further in the post.

    I appreciate the response. To be honest, I (working from the other direction) am less inclined to blindly accept the magical multiplicative properties of an “invested” dollar than some people, but I do believe the long term economic benefits of well-directed* investment outweigh short term consumption.

    *ASSUME A CAN OPENER

    1. I don’t think you have to limit it to “well-directed” investment. Just limit it to the sum of all investment within a free market framework. Some investments will fail, but more will succeed. History has shown this to be true on long enough time scales.

  15. I read several articles on this topic when Oxfam released this (facially/farcically preposterous) “bombshell”. Yours is most assuredly not the worst, Jim.

  16. It seems I’m a bit late to the party on this comment: “A dollar in the hands of a poor person has greater utility than a dollar in the hands of a very wealthy one”. Oh, well.

    Aside from the quibbles about whether this is true (short-term vs. long-term utility, etc.) and the fact that utilitarianism is ridiculous on its face, this all reminds me of a great Simpsons line:

    Monty Burns: A dollar for eternal happiness? I think I’d be happier with the dollar.

  17. What is the best way to determine a thing’s value/utility?

    We could allow that to be determined by the person who currently owns it, but where’s the fun in that?

    1. Can we all agree that threading your posts has high utility?

    2. But where would that leave all the ethicists? They need to be able to prescribe how you should live your life!

  18. Can we all agree that threading your posts has high utility?

    No.

  19. It takes where communism fails and substitutes a system which not only works but is also more just than capitalism.

    The Workers’ Collective as ant farm. Where do I sign up?

    1. The board missed a prime You know who else….? opportunity. I am disappoint.

  20. that the world’s 85 wealthiest people have the same wealth as the bottom 3.5 billion people combined

    Define “wealth”.

  21. The ability to move from the poorest-class to the middle-class or from the middle-class to the upper-class has never existed due to anything but crime or accident. The middle-class is starting to realize this. The facts are hard-work has not resulted in changing class membership. Yes; There are many more middle-class millionaires now but this “wealthy group” of middle-class millionaires is not remotely close to the top and will never be. http://TheEndofPornbyWire.org/

  22. The definition of wealth used is abysmal, and I’m surprised few people have mentioned this.

    A poor or working class person’s “wealth” is mostly stored in the form of benefits he will be paid by his employer (pensions, healthcare, etc.) or by the state (food stamps, free education, medicaid, social security, etc.), and one might even include the expected value of his insurance policies for that year. In all these owed liabilities an benefits, there is likely hundreds of thousands of dollars of wealth, from his own work and from the taxpayers. All of this should be counted, and if it were, the wealth distribution would be far more egalitarian.

    1. Continued: Here’s what’s ironic: the favored leftist measures of ‘wealth’ like oxfam’s, that ignore the bulk of poor people’s implicit wealth, is what the progs use to justify things like: mandatory sick leave, tax credit-incentives for employer-provided health care, expanded pensions, expanded welfare programs, expanded social security benefits, medicaid, etc. And the irony: all of these measures serve to drive *up* ‘wealth’ inequality by leftist standards: employers forced to coaxed into giving more benefits give said benefits at the expense of lower wages; higher min wage means more unemployed people on the government dole; the welfare-type benefits reduces incentives to work, reducing the amount earned (and therefore possessed) by the poor, and medicaid and social security and social insurance in general, as well as state-subsidized education, disincentivize saving in poor and working class people, because the less you have to worry about paying possible medical bills, retirement, kids’ education (because the taxpayers are assumed to pick up the tab), the more you spend and the less you save. This is empirically verified.

      In other words, the very policies leftists endorse as the fix for ‘income inequality’ is a driving force behind rising ‘income inequality.’ Leftists creating problems so they can say we need them to fix them. What a surprise.

  23. So, with the possible exception of the third element, Oxfam’s methodology is sound. A negative net worth is just that. And simply because the 80 wealthiest people in the world may CHOOSE to spend some of their wealth on relatives, doesn’t make the wealth any less theirs. Suppose someone in the bottom tier had positive wealth -but supported a family of 10. Would you then argue that their wealth should be divided by 10?

    If anything, you’ve made the claims seem more valid – not less.

    Talking about how some people move in or out of the top 1% at any given time seems to be an effort to obfuscate and distract. Presumably, no matter how many move in or out of the top 1%, there still IS a top 1% and they still control an enormous amount of wealth effectively indistinguishable from the 1% of last year.

    1. A negative net worth is just that.

      If you owe $200k because you attended Harvard medical school, you are in a completely different situation than if you owe $200k because you bought a Ferrari and drove it into a wall.

      Oxfam’s methodology is nonsense. If you want to determine actual net worth, you need to take into accounted future earnings.

    2. Suppose someone in the bottom tier had positive wealth -but supported a family of 10. Would you then argue that their wealth should be divided by 10?

      Under Oxfam’s methodology, if the entire world consisted of such families, Oxfam would conclude that 10% of the world’s population are hoarding all the wealth while 90% live in complete poverty, when, in reality, everybody lives in exactly the same household with exactly the same resources.

      It turns out that “dividing by 10” isn’t enough. So, the answer is that not only does Oxfam have to account for such effects to get meaningful results, they have to do so in a better way than merely apportioning the wealth to dependents.

  24. Is inequality an issue? Sure. A dollar in the hands of a poor person has greater utility than a dollar in the hands of a very wealthy one, so wealth inequality means we have something less than the maximum possible amount of worldwide utility/happiness.

    Utility to who? As far as society is concerned, the greatest utility of money is in the hands of people who invest it most productively, and that’s usually wealthier people, because they got wealthy by making good investment decisions and foregoing consumption.

    If you redistribute money to the poor, it ends up with consumer spending, which is not productive. If you redistributed all money to consumer spending, you’d end up with no investment and no growth at all.

    As an individual, a poor person places a greater value on an extra dollar than a rich person, but that that preference, while sometimes referred to as “utility”, doesn’t denote any kind of objective utility.

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