6 ms·
Have there been any efforts to quantify what level of inequality is reasonable? For instance, the GINI coefficient ranges between 0 and 1, where 0 means everyo
by tunesmith 7y ago
Have there been any efforts to quantify what level of inequality is reasonable?
For instance, the GINI coefficient ranges between 0 and 1, where 0 means everyone has the same amount, and 1 means one person at the top has everything. Depending on how it's measured, the US is somewhere between 0.4 and 0.5.
You don't want to be at either extreme, so some level of inequality is desirable. Is there an appropriate amount of inequality that is generally accepted? Has anyone tried to identify the appropriate target level?
- jlongr 7y agoWhy shouldn't the coefficient be zero? I'm curious what your reasoning is.
- tunesmith 7y agoI'm more reflecting the general consensus. That's communism, which is generally seen as a failed economic system, and difficult to practically enforce. Although maybe that all changes in a post-scarcity economy, like is Star Trek technically communist? Should the goal actually be GINI-0?
- endtime 7y agoStar Trek isn't communist; capitalism and communism are both approaches to the allocation of resources. Neither really applies in a post-scarcity society.
- pbhjpbhj 7y agoWhich Star Trek is post-scarcity. They all [within the Federation] have trading and limitations of resources, no? They're entirely egalitarian either, perhaps that's why you say they're not communist, see for example the luxuries that a captain has that crew do not and the preferences (larger quarters) that accrue with seniority.
- bena 7y agoNext Generation is post-scarcity. Replicators make fighting over a slice of pizza pointless. Just replicate another slice. It's both a story-telling crutch and obstacle. It's a crutch in that they never have to explain how they provide for the entire crew while out in space. They just transform energy into matter. It's an obstacle as they can't really tell a story that involves a limited resource unless they explain why it can't be simply replicated. Now, sometimes, they say just that. But it's always something they have to acknowledge. And we have to bow to the fact that Star Trek is entirely fiction. We don't really know how a post-scarcity society will function. So we will wind up still projecting contemporary mores on them. So the captain gets a special office and larger quarters. DS9 has replicators, but they're also trying to be the "wild west frontier" Star Trek, so they're not available to everyone and there are non-Federation societies present. And those societies aren't post-scarcity, so money exists. (And then there are the societies that are both technically post-scarcity, yet still materialistic which is just weird) Voyager has replicators on the ship, but their solution is to remove the ship from the Federation and handwave the fact that for the most part, starships don't require fuel in a traditional sense. I think the fuel for starships would be antimatter, but it's never an issue on the show unless it needs to be.
- thrower123 7y agoStar Trek is also almost entirely set on the decks of a warship or a military outpost, so the economics are very artificial.
- jlongr 7y agoI think a system where one persons gets literally all the wealth would also be difficult to enforce or sustain. However, without getting bogged down in the details of the implementation, I think GINI-1 would result in a society where no one has incentive to work because one person gets all of the benefit of that work. Whereas with GINI-0 everyone benefits from their work, and anyone who produces more value than most others is still incentivized to work because they will still see a marginal gain in wealth, albeit reduced from what they would normally earn in a higher inequality system since it is somehow redistributed equally to everyone. Perhaps the goal is not GINI-0 but as close as possible to it.
- sokoloff 7y agoHow much extra effort would you personally put in if I guaranteed that you got your “fair share” which just happened to be 4/350,000,000 assuming you had a family of four? If you worked really hard to create an extra $1,000,000 in value, where shall we send your family literally the additional penny?
- mamon 7y agoAnd that's exactly why perfect GINI score is not 0, but around 0.25 - it balances those two goals: ensuring that everyone has their needs met and still has motivation to put in extra effort.
- Enginerrrd 7y agoThe biggest thing is that's not a very natural distribution for a parameter like wealth. You'd have a VERY hard time trying to maintain that given innate differences between individuals in terms of expense of effort and the like. There will always be ways to try to gain additional "wealth" that doesn't meet whatever definition you try to use to equate everything.
- everdrive 7y agoPeople grumble that luck has a lot to do with success. And that might seem unfair, but there's no removing it. Good luck trying to get people to avoid arranging themselves into a bell curve. Combined with what you'd outlined, differences in individuals / differences in efforts / and luck seem impossible to ever fully equalize. How can anyone hope to normalize these differences?
- james_s_tayler 7y agoExactly. The central limit theorem wins every time.
- bhupy 7y agoBecause one point of view is that the difference between the poorest and the richest is less important than ensuring that the minimum standard of living of the poorest is livable/acceptable. In society A, let's say that the gap between the poor and the rich was high, but the poor had their basic needs being met. In society B, let's say that the gap between the poor and the rich is 0, but the standard of living of everyone is worse than the poorest in society A. In this case, most would agree that society A is better off despite having a non-zero Gini coefficient. Obviously we want a society where everyone is equal AND their standard of living is as high as it could possibly be, but wars have been fought over figuring out how best to organize society to achieve that.
- Simon_says 7y ago> Obviously we want a society where everyone is equal ... Oh, this is not obvious at all!
- adamsb6 7y agoThat would require a whole lot of violence.
- gojomo 7y agoAnd not just once, to initially achieve exactly-equal distribution. Due to the natural variety in persons' behavior, skills, and preferences, some will build or collect a different mix of things. Those things will then get valued as "wealth" or "income" of different magnitudes that violate the `gini=0` constraint. So, you'd need constant additional violence to re-level the holdings against peoples' individual actions.
- stronglikedan 7y agoBecause some people are naturally lazier than others, and, while the most lazy still deserve a bare minimum social support system, they definitely don't deserve the same amount as the least lazy.
- jlongr 7y agoDoes the dollar amount of additional wealth given to the least-lazy person matter? Or is it only significant that they earn some marginal amount more than the second least-lazy person?
- jonfw 7y agoThe larger the correlation between effort and reward, the more motivation. A more marginal reward would result in more marginal motivation. A significant reward would provide significant motivation.
- notahacker 7y agoIf the least lazy person earns some marginal amount more than the second least lazy person, the Gini coefficient isn't zero. And if the laziest [or unluckiest] person is reliant to some degree on receiving byproducts of the less lazy people's output, then they might be better off in absolute terms from that non-zero Gini coefficient incentivising the less lazy people to work harder. [the magnitude of the amount likely matters in real world situations too. The answer to whether you'd consider working as hard as people in your company who are less lazy than you probably depends on whether you're being offered an extra dollar or extra million dollars to do so]
- Ididntdothis 7y agoDo we know what the number was in the 1950s? Back then housing was more affordable relative to income and CEO salaries were lower compared to the average.
- tunesmith 7y agoI think it was high 30's back then, and now it's mid-40s. Different sources measure it differently, but generally it's gone up. Mid-30's is like Denmarkish.
- Ididntdothis 7y agoSeems mid 30s is a good number then. High achievers still get plenty of reward but whatever tide lifts them will also lift the rest of the country.
- Enginerrrd 7y agoI believe the original 80/20 pareto principle was one of the first quantified observations of exactly the phenomenon of wealth distribution. So the natural stable distribution of that dynamic system is certainly some type of power law, aka Pareto Distribution. It will almost certainly always trend towards such a distribution given its historical efficacy. The question then is, at what alpha value do we achieve some desired outcome? I like this line of thinking, and I'd like to see GINI index or the Pareto distribution alpha value tested as a predictive economic indicator for things like growth.
- lmilcin 7y agoI don't like GINI because it does not show the most important parameter. It is possible for two countries to have same GINI but one have people who can't satisfy their basic needs (food, shelter, medical care) and the other where all people are given access to basics. I would prefer a measure that describes general level of satisfiability of peoples' basic needs, the measure of peoples' suffering. Are people suffering or not? Having measure of envy for much wealthier class seems less concerning to me.
- WaxProlix 7y agoThat's a little bit like saying you don't like air temperature as a measure because it doesn't show humidity, which is also important. Sure, overall GDP per capita + GINI might make sense as a measure of overall/median/average/something standard of living, but GINI isn't a standard of living measure, just one component of that. Edit: I think parent edited their post to add a few more clarifying statements, so this post makes less sense now. Even with the new added bits I still disagree; having one class that owns everything, even if the rest of the country has their basic needs met, could describe a system of principled slaveholders. Wanting a more-or-less equal distribution of money/power doesn't necessarily boil down to envy over wealth.
- lmilcin 7y agoThis is obviously wrong. You can have uniformly poor country (theoretically) that has very good GINI. Look at the table: https://en.wikipedia.org/wiki/List_of_countries_by_income_equality https://en.wikipedia.org/wiki/List_of_countries_by_income_eq... You have Ukraine which has fantastic GINI of 25%, much better than 41% of US. Other countries that have GINI in neighborhood of US? Senegal, Madagascar, Angola? What kind of measure is that?
- WaxProlix 7y agoI think I may have worded that poorly, since it sounds like you're agreeing with me. GINI is a measure of relative distribution, but doesn't necessarily have anything to say about overall wealth. I was responding to someone who seemed to be saying that GINI is bad because it only measures one thing, which seems a lot like saying the centiliter is bad because it measures volume and not temperature, when sometimes you want to know both volume and temperature.
- colechristensen 7y agoDoes anybody do a sort of power law fit for wealth distribution? i.e. (yearly income | total assets | net worth | passive income) vs. population percentile? I can't seem to quickly find raw data to make an example.
- turc1656 7y agoNot sure if this answers your question, but I heard someone talking about inequality following Price's law, which is also what all sorts of creative and scalable endeavors seem to follow.
- colechristensen 7y agoWhat I'm driving at is measuring inequality by a power-law kind of model comparing with the value of the exponent.
- zjaffee 7y agoThe least unequal countries from the time they started measuring GINI have had a value between 0.250 and 0.300, including the likes of the Soviet Union which was on the upper end of that range, and many former eastern block countries alongside Scandinavian countries who are currently at the lower end of that range. Note that these values are after taxes and transfers. I think the goal, especially within an economy modeled loosely around capitalist principals, should be to have a low GINI prior to taxes and transfers, something South Korea can claim to have one of the lowest in the world at around 0.350 and they've had some of the fastest economic growth on earth over the last couple decades, in addition to having one of the most highly educated populations on earth, especially among young people. They also invest the highest percentage of their GDP on R&D. Switzerland, Norway, and Denmark also still have one of the lowest levels of inequality before taxes and transfers at around 0.400. As such you have created a much more stable society, where you do not divide society into groups who either are deeply concerned about inequality or feel as if they are being taxed too much.
- tunesmith 7y agoProbably the most on-point answer in this subthread, thanks!
- jonfw 7y agoGINI coefficient should not be used as a target measure at all. It's entirely irrelevant. If you want a target measure for the economy, let's do it this way. GDP per capita should be as big a number as possible. Wealth distribution should be correlated with productivity. A measure of productivity should be some combination of output, competence, and effort.
- QuesnayJr 7y agoRawls argued that whenever inequality would allow the worst off to be better off in absolute terms, then it was okay. He gave a thought experiment argument for this that he called the original position: https://en.wikipedia.org/wiki/Original_position https://en.wikipedia.org/wiki/Original_position
- malandrew 7y agoFurthermore, inequality is only a problem if your culture doesn't condemn envy. There's a reason that the ten commandments includes commandments about not coveting what your neighbor has. It's a quick recipe for toxic relations and creates a circumstance where Rawls' Original Position is politically undesirable. Basically, if everyone controls their envy, the good kind of inequality that improve the worst off in absolute terms only really happens if you are tolerant of inequality by condemning acts of envy. One could argue that at least two Judeo-Christian values have lead to the stability and prosperousness of the Western World. Not envying your neighbor is one. The second is forgiveness, which prevents society from getting trapped into feuds with one another indefinitely and wasting resources on perpetuating conflict.