Monday, November 8, 2010
I am finding the spate of recent articles about the huge and growing inequality of wealth in the US pretty tedious. I suspect they are making some basic mistakes. They usually take the form of saying the wealthiest X percent of the US population owns Y percent of the wealth, where Y is a much bigger number than X. What I don't get is, why should I care about the relationship of X and Y?
Now I understand that wealth is partly a relative good. I know and I have felt first hand the irritation that arises when some neighbor displays wealth that is beyond my own. For example, a neighbor of mine recently took to flying in and out of his house by helicopter. Not only is this noisy and dangerous, but shows he had $350K (I googled it) to drop on is own helicopter that I certainly do not have. But, and this is a key point, once somebody becomes rich enough, they move out of my neighborhood and to Rancho Santa Fe or some such, and get out of my envious hair. It is only the wealth immediately around me that annoys me. And this means that as between unequal and even more unequal, I will be indifferent, if the people getting really, really rich are already so rich that I have no contact with them anyway. If the guys with 100 foot yachts get to trade up to 200 foot yachts, I don't care, because I had no contact with them to begin with. So I think it is only local inequalities that trouble us. But the gross measures of X versus Y make it seem that every little bit of global inequality is something to be rued. That's ridiculous.
Moreover, as much as I find it annoying that some other people are so much richer than I am, it is not as if I would pay very much to see them brought down a notch or two. If they suffer some bad fortune, I might enjoy that, but I certainly would not pay one thousand dollars of my own hard earned money so some fund manager in La Jolla would lose a million. I mean, I can spend that thousand dollars! This makes me doubt that people really care that much about inequality. We humans are an envious breed, but we mostly put our own wealth ahead of equality. And if I could be a few thousand dollars a year better off, at the cost, so to speak, of some guy who lives in some gated paradise I don't even drive by, becoming millions richer than he already is, well that is a sacrifice I am prepared to make. As long as he is not around to rub my face in the fact that while he's buying a new jet, I'm just buying a riding mower, I don't care.
Finally, why should anyone think that say twenty percent of the population owning twenty percent of the wealth has anything to recommend it morally at all? We know it has nothing to recommend it economically. Inequality of wealth is endemic to human societies, both capitalistic and socialist. Wealth has a highly skewed distribution that evidently arises from a rich getting richer dynamic that occurs in any social network, even collectivized ones. To get any degree of equality that impressed those who like to eyeball wealth distribution charts and pronounce them good would require a degree of intrusiveness and coercion that would shock even the most pious social democrat. This would be totally different if we lived in a more predatory world, such as ancient Rome, where wealth was often simply plunder, the result of a zero or negative sum game. But mostly we live in a very different world, where Peter is rich because he made Paul richer. Of course Paul is going to envy Peter, but given the choice, Paul will put up with it so he can get richer himself.
And what is this business of asking people what they would say would be the optimal degree of economic inequality? Oh, I don't know, maybe twenty percent of the people have forty or fifty-three percent of the wealth? And while we're at it, why don't we ask them what the optimal thrust to payload ratio is for a solid fuel booster placing an object in a geostationary orbit? As if their opinion is worth something, that is. People's intuitions on both questions are utterly without value except as curiosities. They only go to show how little most people know about each topic, an entirely rational ignorance on their part, as we don't design rockets by popular survey any more than we should consult the masses on what the global distribution of wealth ought to be. Who dreams these things up, anyway?
I also suspect that the skew of these inequality figures is driven by a very small number of fantastically rich people. But why on earth should I care whether Bill Gates has 10 or 50 billion dollars? Both figures are beyond my comprehension as personal wealth and make little difference to his life style. The only contact I have with Bill Gates is various Microsoft products, which may not inspire but mostly get the job done. The good he has done me greatly outweighs whatever evil flows from his being so much richer than I and everybody I know. I am much more afraid of economists worried about inequality than I am of people richer than I am. Instead of making rich people give up their property, maybe we should make economists worry about something else. As rights violations go, the latter is probably a bigger winner, utility wise.
If some worthy can make an argument that net human happiness would be greater were systems put in place to reduce inequality of wealth, that would be different. But I doubt very much any persuasive argument to this effect exists. All you would get would be a powerful, intrusive class of taxers, more than we endure already, that would worry the rich and make the rest of us more miserable too. The harm caused by the very rich is almost entirely statistical.