Inequality and poverty; history and counterfactuals

by Paul Segal on November 17, 2022

In 1979 Keith Joseph and Jonathan Sumption (he more recently of the UK’s Supreme Court) wrote:

A family is poor if it cannot afford to eat. It is not poor if it cannot afford endless smokes and it does not become poor by the mere fact that other people can afford them. A person who enjoys a standard of living equal to that of a medieval baron cannot be described as poor for the sole reason that he has chanced to be born into a society where the great majority can live like medieval kings. By any absolute standard there is very little poverty in Britain today.

There are a lot of things wrong with this passage, which informed Joseph’s policy advice to Margaret Thatcher when she was prime minister of the UK. But it raises important questions about counterfactuals in thinking about inequality, poverty, and well-being. 

Imagine the following dialogue (figures are about right for 2015):

Sandra, a domestic worker in Mexico, talking to her employer Jazmín:

I’ve been cleaning for you all my working life, but I think it’s time we discussed my salary. My cousin left for the USA and is now doing exactly the same job as me, cleaning someone’s house over there. But she gets paid 14 US dollars an hour. That’s equivalent to 280 pesos (or 140 pesos if we account for lower prices in Mexico). You’re paying me 25 pesos an hour. Why can’t you pay me what she gets paid?


Well, my cousin moved to Delhi, where she pays her domestic worker 40 rupees per hour – that’s equivalent to 12 pesos, half what you get. Why shouldn’t I pay you that?

Also, I’m in the top 5 percent of workers and I only get paid 100 pesos per hour. So I can’t afford to pay you anything like 140 pesos per hour, let alone 280.

Finally, your grandmother did the same job for my grandmother in 1967 and she got paid 3.5 pesos per hour. In today’s prices that’s exactly what I pay you, 25 pesos. Since you’re doing exactly the same job, why should I pay you more?


Ok, maybe 280 and even 140 pesos are too much. And if I can’t expect to be paid what I’d get in the USA, you can’t expect to pay what you’d pay in India.

But consider: in Switzerland the pay of a typical worker is equal to 35% of per-worker GDP; here in Mexico it’s just 21%. If you raise my pay to 35% of per-worker GDP then that’s 42 pesos.

Or how about this: in our own country average worker productivity and income has risen 64 percent since 1967, so there’s no reason you can’t give me that kind of raise, to 41 pesos per hour.


If you push this I can just find a youngster to do the job for 20 pesos.


Sure, but she might not be any good at the job, and worse, a stranger might steal things behind your back, like happened to your friend Francisca Fresa.

Where Joseph and Sumption wanted to compare the absolute living standards of the present day poor with the distant past, Sandra and Jazmín demonstrate there are a wide range of counterfactuals one can bring to the discussion – not just historical but also international, and couched in absolute terms or relative terms. If we want to compare today’s poor with some counterfactual, it’s not clear why we should privilege medieval Britain.

But for economists of inequality, all of these comparisons are rather beside the point. Our imperative is much simpler: if we can do better, we should.

The standard normative framework underlying measures of economic inequality is the Dalton-Atkinson approach. It asks two questions: A. How do we evaluate a distribution of income? B. What is the best feasible outcome based on that evaluation?

The normative question A is answered by choosing a social welfare function – some function of the income distribution that increases when anyone gains a peso, but by less the richer they are. As William Beveridge put it in 1935: “1 shilling in a poor man’s pocket usually buys more welfare than 1 shilling in a richer man’s pocket; it meets more urgent needs.” Taking money from a rich person might mean their holiday villa is slightly smaller; giving the same amount of money to a poor person might mean their children don’t go to bed hungry. That, surely, would be an improvement in social welfare, and in general it suggests that less inequality is better than more inequality, holding mean income constant.

There are various qualifications one might make. For instance, maybe it matters how people get their income, not just how much they get. But such concerns still have to be weighed against this welfare outcome. Perhaps the most familiar objection to simply minimizing inequality is via an answer to B: maybe too little inequality reduces incentives to work, so that equalisation doesn’t leave mean income constant but instead lowers it. Maybe the poor end up even poorer.

So here is where Sandra and Jazmín’s historical and international comparisons do help, but Joseph and Sumption’s don’t: they give us clues as to what is feasible, what trade-offs there might or might not be between equality and average income, and what policies help to achieve certain outcomes. 

In a previous post I pointed out that humanity is much better off than in the past. But I also pointed out that this is not a reason to be complacent. Inequality has risen in most countries in the last 40 years, but this is consistent with everyone being better off – certainly the poor are much less poor than in the past, and that is a very good thing. But what the Dalton-Atkinson approach highlights is that higher inequality means we could be doing so much better.

If you go to a clinic with HIV and they treat you with 1990s medicine, then that’s a catastrophic failure – it’s irrelevant to point out it’s better than 1980s medicine. Higher inequality means we are failing because we are further from today’s feasible best outcome.

On this approach, inequality isn’t exactly an indicator of well-being per se.* Instead it’s a measure of relative social failure. It tells us how much better we could be doing. As I sometimes put it: inequality represents a wasted opportunity for poverty reduction. Where inequality is high we could reduce poverty through inequality-reducing redistribution, and we are choosing not to.

So here are some key facts to help illuminate what is feasible:

  1. On average, rich countries have lower inequality and greater progressive redistribution than poor countries, and that’s been true for at least 70 years. So it can’t be the case that low inequality stops countries from getting rich.
  2. Most countries were more equal over 1950-1980 than since 1980, and also grew faster during the earlier, more equal, period. So it is implausible that higher inequality is good for growth.
  3. Countries with low levels of inequality achieve that with a combination of high minimum wages, strong (and enforced) labour rights, strong labour unions, and a progressive tax and benefit system. 
  4. Today’s large middle-income countries like China, India and Indonesia have far higher levels of extreme poverty than today’s rich countries had when they had similar levels of per capita GDP, because of their higher levels of inequality.

The only reasonable conclusion is that, at least down to real-world Scandi levels, the degree of inequality is not constrained by its impact on mean income or growth. In a rich country like the UK, food banks, homelessness, and children hungry at school would be easy to eliminate through progressive redistribution. In poorer countries, extreme poverty is a result of the acceptance of high inequality, not just of low national incomes. We could be doing much better. That we don’t do so is a political choice.


*There are other reasons to oppose economic inequality per se, such as its role in harmful social relations like domination and social hierarchies, and political inequalities. I’ll come back to these in another post.



reason 11.17.22 at 11:09 am

Several things that are important here that are often missed:
1. Money is often a poor guide for intertemporal and international comparisons. Relative prices vary a lot and sometimes what is available varies considerably in quality (and that can both improve and get worse over time.
2. If my income is sufficient to survive comfortably one year, but I starve or nearly starve the next, that is a vastly inferior outcome to surviving reliably every year. The body remembers. Averages hide a lot. It not always sufficient to be on average better off.


Mike 11.17.22 at 12:00 pm

A great article, by the standard of how much stupid argument it obviates. Thanks!


Mike 11.17.22 at 12:05 pm

Oh, and how could I have missed this,

The question for Keith Joseph and Jonathan Sumption is “would you be satisfied with a standard of living equal to that of a medieval baron today?” If not, why should anybody else?


bekabot 11.17.22 at 3:07 pm

“A family is poor if it cannot afford to eat.” (etc.)

It’s not hard to divine the nationality of this man, any more than it’s hard to figure out Alito’s nationality when reading his musings about abortion. (Which are the hardcore, adult-male version of pulling little girls’ pigtails and throwing food at them across the cafeteria.) A shorter or more complete justification of what George Orwell called “a lifetime of unemployment mitigated by endless cups of tea” I have never read.

“My dear good sir or madame, are you perhaps not aware that medieval kings, let alone medieval barons, could not afford tea or tobacco at all? That they did not even know what such things were? Yet these are the means of your common recreation. Why then should you complain?”

The internationally-accepted version I’ve heard most often throughout my adulthood (though by now it seems to be falling out of favor) is, “yes, but these days everybody has fantastic cell phones; deny it if you can”. The idea being, of course, that the person so addressed would not be able to controvert the existence of the cell phones, and that the argument would thus be brought to an end.


Seekonk 11.17.22 at 3:28 pm

In poor neighborhoods kids commit the crimes; in rich neighborhoods it’s the parents.


LFC 11.17.22 at 6:01 pm

Re point #4
I suspect, though can’t prove in this comment box, that extreme poverty in today’s middle-income countries has several causes, of which high inequality is only one, albeit a significant one. So reducing inequality in India, say, would likely reduce extreme poverty but, in the absence of other measures relating to health, sanitation, land ownership, housing in urban areas, farming techniques, education etc., would not eliminate it.


John Quiggin 11.17.22 at 6:04 pm

I’ve been reading The Chile Project, Sebastian Edwards which looks, from a fairly sympathetic viewpoint, at the downfall of neoliberalism in Chile. Edwards points to the fact that, the Chilean neoliberals assumed that as long as they could reduce poverty, inequality didn’t matter. In the end, Chileans weren’t willing to accept that.


Gareth Wilson 11.17.22 at 6:20 pm

There was an online argument a while back where the left-wingers were quoting all kinds of horrifying statistics about inequality and the right-winger finally asked what distribution of income or wealth they actually wanted. What Gini index would satisfy them? There was no consensus on the answer, and when this was mentioned on another left-wing forum there was no consensus either.


engels 11.17.22 at 7:11 pm

In a previous post I pointed out that humanity is much better off than in the past. But I also pointed out that this is not a reason to be complacent. Inequality has risen in most countries in the last 40 years, but this is consistent with everyone being better off – certainly the poor are much less poor than in the past, and that is a very good thing. But what the Dalton-Atkinson approach highlights is that higher inequality means we could be doing so much better.

If overall welfare is improving (according to your calculations), or improving at the bottom, but inequality is going up, I’m not sure if people have to agree that humanity is better off. What if they’d prefer lower welfare and less inequality?


GG 11.17.22 at 8:30 pm

Paul, I would have an easier time assessing your argument if I had a better understanding of how you conceptualize “poverty”. Specifically, how much is it a phenomenon of absolute well-being/capabilities and how much of it is attributable to standing relative to others?

Joseph/Sumption are simplistic (where they’re not plain wrong), but at the same time it seems obvious to me that reliable access to food/water/shelter (vs not) is qualitatively different than simply having less money than the person next to you. You can imagine a world where there’s still vast inequality in an economic sense, and yet everyone has the resources they need to make it all the way to the top of Maslow’s hierarchy.

I suppose that what I’m pointing to is that there’s a point (we’re not there yet, obviously) where giving the guy at the bottom another peso doesn’t meaningfully enhance his capabilities, even if he’s still “living in poverty” by some relative standard. Would the Dalton-Atkinson approach continue redistribution past this point and, if so, why?


PatinIowa 11.18.22 at 1:47 am

Here’s a thought: A quick glance suggests that in both the UK and the USA, rich people live substantially longer, substantially healthier lives than poor people do.

So the question isn’t standard of living. It’s this, “Do we want a society where some people get less life than others, if that’s a result of an unequal distribution of wealth/income/whatever?”

I don’t care about the Gini index per se. My metric for an equal society is one where everyone has the same chance to live a long and healthy life.

I have no idea how professional economists approach this. For example, I don’t know if they think the correlation is well-supported, or that there aren’t confounding factors, or whatever. I do know that there are many metrics I’d employ other than the economic ones.

Another example: go look at maternal mortality statistics in the US.


Concerned Doge 11.18.22 at 6:06 am

Adam Smith wrote, “By necessaries I understand, not only the commodities which are indispensably necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even of the lowest order, to be without….necessaries [include]…not only those things which nature, but those things which the established rules of decency have rendered necessary to the lowest rank of people.” Strictly speaking, of course, Smith was defining “necessaries,” not “poverty.” However, his concept of necessaries implies a definition of “poverty” that would be based not on an unchanging biological concept of subsistence but on whatever “the custom of the country” or “the established rules of decency” consider necessary. It is an irony of history that those today in Britain and America who aggressively identify themselves as disciples of Adam Smith are generally opposed to definitions of poverty that are consistent with their master’s definition of “necessaries.”


Gareth Wilson 11.18.22 at 6:55 am

“My metric for an equal society is one where everyone has the same chance to live a long and healthy life.”

The Whitehall study showed that public servants in 1960s Britain with more senior positions had longer, healthier lives. So limit inequality to the 1960s British public-sector pay rates, give everyone free healthcare, and you still haven’t reached your goal.


Paul Segal 11.18.22 at 9:48 am

LFC@6 and PatinIowa@11: Yes absolutely, there are multiple dimensions beyond income that matter, both instrumentally and in themselves. Almost all improve with higher incomes, or can be provided by the government using redistributive fiscal policy.

John Quiggin@7: An interesting feature of the Chilean protests is that they came after a period of falling inequality. I suggest in the conclusion to this paper that what changed was that a new generation had grown up under democracy, so they were less afraid of violent elite reaction than their parents. Since inequality was still extremely high despite having declined, they were both motivated and unafraid to protest against it (among other complaints).

Gareth Wilson@8: We don’t need consensus on the ideal level of inequality to have consensus that it is currently too high. If I want 15 and you want 20 but it is currently 30, then we agree we need to get it down by a lot.

Engels @9: It depends how you define ‘better off’. In material terms, in this example, yes they are better off. But as I mention in the footnote, there might be some worse social relations.

GG@10: Yes if the poorest person was materially very comfortable – which is clearly not the case in my own country the UK – then I wouldn’t be worried about poverty. But the argument about the costs of inequality still hold. Consider a comfortable household with a total disposable income of £60,000. If you take £10,000 from a billionaire and give it to them, then there is little doubt it will bring more joy to them than it will take away from him. In addition to this, there are social costs of inequality at any income level, like harmful social hierarchies, as I mention in the footnote.


Salem 11.18.22 at 10:41 am

“Yes if the poorest person was materially very comfortable – which is clearly not the case in my own country the UK – then I wouldn’t be worried about poverty.”

But this returns to Joseph & Sumption’s point, which is that they clearly are materially very comfortable compared to the lives of most people throughout human history. So it’s starting to become a bit circular.

I think Joseph & Sumption’s most interesting point, which hasn’t been discussed in this thread, is about intertemporal inequality. In this light, taking OP’s concerns at face value seems to imply that our focus should be redistributing from future generations to the present day. Ordinary people of 100 years time are likely to have a standard of living undreamed-of even to the very rich of today. Such redistribution from future to present is perfectly feasible. For example, we can invest less, in maintenance of existing infrastructure and creation of new, in new ideas and sources of wealth, etc. Basically, eat their seed corn.

We can also postpone dealing with costs – for example, rather than sacrificing now to keep the climate under control, we could let things slide, and leave the far more expensive tasks of mitigation and remedy to future, richer, generations. In this light, COP27 is highly regressive.

Indeed, because today’s elderly had a lower living standard for much of their lives, today’s wealthy pensioners should be primary targets of redistribution.

I’m trying to sell this as a reductio, but it seems more and more like the reality of modern British political economy. My own view is we are way too focused on (re)distribution, and insufficiently focused on growing the pie. I really don’t care about the direct effect on the GINI coefficient of today’s policies, I am way more interested in what they will enable us to do in the future, because the long term isn’t some distant land we never arrive at. Today is the long term of all our past decisions, and the reason we have terrible public services AND sky-high taxes AND terrible poverty is because our long term decisions have left us poor, and malign actors have used the language of redistribution to push private interests (triple lock! Planning!).


MisterMr 11.18.22 at 12:12 pm

This might be better addressed in the next post promised in the end note, however:

If I compare myself to Charlemagne, I can see that I have some advantages on him (e.g. cellphones, better sanitations and presumably longer life, I can visit Japan as a tourist if I want to etc.), but he had other bigger advantages: most of europe kneeled in fron of him, whereas I don’t have the same social position.

The advantages I have are in terms of consuption of stuff, whereas the disadvantages are in terms of interpersonal relations or status/social position.

Inequality in a capitalist society is not so much about the consumption of stuff, but is a social relation where somebody is at the top and can boss people at the bottom, even if that social relation is reified and disguised under the guise of patterns of income and consumption.
Then this hierarchical social structure based on different levels of income and wealth also causes cases of extreme poverty where people really have problems about consumption, but while this is really bad, this is a symptom not a cause.

The effect of increased inequality do show up as a loss of freedom/authonomy for people who have to work longer and longer hours, or are forced into part-time jobs that are very unsecure (while previously most people had standard hours) etc.

This is also the reason that unequality is quite untractable: because society ultimately need a way to coerce, at least partially, people into working (so for example when UBI plans come out they are perceived as unjust by many, becaouse people might get money without doing their “duty”).


GG 11.18.22 at 5:21 pm

Paul, thank you for the explanation. If inequality is an intrinsic evil then, as several people have mentioned above already, what Gini coefficient would you accept?

This is not a mere quibble; getting to a roughly equal distribution of resources would require a radical restructuring of society. This is especially true if your focus is not just material comfort but power relations as well. For example, the dissolution of the nuclear family might be necessary to prevent hoarding of social capital and its concomitant ills (which include material and social inequality). That’s a tough sell.


Dr. Hilarius 11.18.22 at 5:34 pm

“A house may be large or small; as long as the neighboring houses are likewise small, it satisfies all social requirement for a residence. But let there arise next to the little house a palace, and the little house shrinks to a hut. The little house now makes it clear that its inmate has no social position at all to maintain, or but a very insignificant one; and however high it may shoot up in the course of civilization, if the neighboring palace rises in equal or even in greater measure, the occupant of the relatively little house will always find himself more uncomfortable, more dissatisfied, more cramped within his four walls.“

-Marx, Wage Labor and Capital, 1847.


LFC 11.18.22 at 7:25 pm

Salem @15
There’s no implication at all in the OP that investment in infrastructure etc etc should be decreased.

Reducing inequality actually can help increase economic growth and innovation, not only in poor and middle-income countries but in affluent ones as well. (There’s a lot of research on this, which P. Segal is much more familiar with than I am.) And as the OP points out, the period of the so-called great compression also saw, for much of it, robust ec. growth.


Tom Hurka 11.18.22 at 8:09 pm

If the basis of the argument is the diminishing marginal utility of resources such as money, as in the paragraph about Beveridge, then it should be acknowledged that the welfare loss from inequality gets smaller the higher the level of resources is, i.e. having an income of $20K may be almost twice as good, in welfare terms, as having one of $10K, but having an income of $200K is much less than twice as good as having one of $100K. So in so far as the poor are less poor than in the past, the welfare loss from the same inequality — and yes, I know inequality has been increasing — is less than in the past.


BenK 11.18.22 at 10:29 pm

The big jump in logic is that the distinction between normalcy and poverty is not material sustenance but participation in local community. The key word that makes this true is local; and people can make themselves poor just by moving unwisely. Meanwhile, people who desire to find inequality everywhere just need to ‘think globally.’ They will also never solve any real problems, even the ones they create.


reason 11.18.22 at 11:06 pm

Mr. Mister
Yes I agree with most of that. But it gets me up in a Huff when people see UBI like that. These same people have no problem with the vast amounts of unearned income that many, many people receive – not least in bequests. Nor do these people understand that many people who are not in paid employment none-the-less have important roles in the community, or that the UBI unlike unemployment benefits does not prevent anybody for supplementing their income with paid employment and they are choosing to live in relative poverty (perhaps for their whole life). Misery wants company is the only explanation I can understand to this point of view. If they are in lowly-paid paid employment UBI will make them better off and give them more bargaining power with their employer.

The question to ask them is this “Is it a bigger problem that people who want to work can’t find suitable employment, or that some people who could work don’t? If the former is the bigger problem, does tackling the latter help or rather hinder the tackling the former?”

To get back to original topic – for those who just look at the Gini – my response is that I believe there should be incentives to work and that inevitably implies some inequality. But high inequality implies in general some very rich people, and I just don’t think their should be billionaires. Such concentrations of unaccountable (emphasis) power are not acceptable in a democracy.


MisterMr 11.19.22 at 7:20 am

@reason 22

I totally agree.


engels 11.19.22 at 10:40 am

Misery wants company is the only explanation I can understand to this point of view.

Ime a lot of opposition to UBI comes from well-off people in “nice” jobs who are psychologically attached to the idea that they are “forced” to work: a kind of marriage of Sartrean bad faith, Protestantism and pseudo-Marxism.


roger gathmann 11.19.22 at 2:20 pm

There are many reasons Keith Joseph is being stupid, some of which you get to. Another is, of course, that neither medieval king nor peasant could afford the medicine to cure pneumonia, or the operation to correct a cardiac condition, etc. So they were actually in terms of almost absolute equality as far as medical care goes – which means, mathematically, that no larger expenditure for medicine would make much of a difference for the king. Technological progress brings a different landscape of inequalities. The peasant who could just walk to the village can now, for instance, often not – as that peasant would have to traverse a highway. The cost of transport has gone up unequally. You can look around and find that is true everywhere in industrial society.


Paul Segal 11.19.22 at 4:39 pm

Salem@15 Nope, as I explained, the historical comparison is irrelevant, and it is clear that many people in the UK are very far from comfortable. They are in poverty on any definition that makes sense for today’s UK.

On intertemporal inequality and the climate: the future costs of allowing unmitigated climate change could very easily be much higher than the benefits of economic growth. And the costs of dramatically cutting our carbon emissions now would be quite low if countries can coordinate properly.

On growing the pie: the lack of growth in the UK over the last decade is due to disastrous Conservative ideology. Indeed the costs of Tory government have certainly been higher than those of the climate mitigation measures that are on the table.

MisterMr@18 Inequality is not at all intractable – there are many highly successful examples of inequality reduction. The problem is reaction by elites against progressive redistribution, or if you like, a lack of political will.

GG@17: Speaking for myself, I wouldn’t be working on inequality if all countries had Gini coefficients of around 20% (like Sweden circa 1980). That doesn’t mean that’s the optimal level, but at that level personally I would find other issues more pressing.

Tom Hurka@20: True, but as irrelevant as the comparison with medieval times.


engels 11.19.22 at 6:49 pm

Under capitalism inequality can be reduced by political action or workplace organising but it can never be eliminated, and any reduction can be reversed by political action by capitalists, as has been going on throughout the world since the 70s and in Britain since the Conservatives succeeded New Labour in 2010.


Thomas P 11.19.22 at 9:00 pm

While we may all be able to afford more items due to advances in production, but access to services is where inequality has more direct effects. If a lawyer earns 50 times more than a domestic worker, she won’t be able to afford one no matter what their absolute income is.


MisterMr 11.20.22 at 8:12 am

@Paul Segal 26

Inequality can and should be reduced but, as engels above says, it can’t be eliminated in a capitalist system, because the social hierarchies on which the stystem runs are based on economic inequality.

On the other hand, for example in a hunter gatherer system there are not this kind of hierarchies, so while there might be some random inequality in theory it could be eliminated.

Once we agree that the correct way for society to work is that I have to sell my labor to someone else (which will only work if that someone else has an higer income than me and if I risk serious consequences if I just avoid working) then we are accepting that at least some inequality has to exist, and there will be people who want more and people who want less.

On the other hand somebody has to work for society as we know it to go on.


Anon 11.20.22 at 10:54 pm

I covered very similar ground in an essay on what relative income effects represent once:

My view is that they’re materially and socially grounded in numerous ways, and thus that relative income effects and relative poverty really matter.


Paul Segal 11.21.22 at 4:33 pm

Anon@30: That’s a really nice post you’ve written. However, none of the reasons you give for caring about relative income, which you labelled A to M, accounts for the Atkinson-Dalton argument that inequality implies inefficiency in the production of aggregate social welfare.

Indeed, the A-D approach is not really a reason for someone on a low relative income to be upset about her own low relative income. On the A-D social welfare function approach, someone on low relative income is not made any worse off by having other people on higher incomes (though as you point out, there are lots of other reasons for them to care, beyond A-D). Instead, A-D provides a reason for a social planner to prefer lower inequality to higher inequality.

Put another way: you give reasons why a person’s well-being depends not just on her own income but on the incomes of others around her. In A-D, a person’s individual well-being does not depend on other people’s incomes; but aggregate social welfare does depend on the full distribution, and hence on inequality.

By the way, one reason I wrote this post is that while it’s the standard approach for economists, in my experience it’s surprisingly little-appreciated by philosophers these days.


Sebastian H 11.21.22 at 7:05 pm

“On the other hand, for example in a hunter gatherer system there are not this kind of hierarchies, so while there might be some random inequality in theory it could be eliminated.”

This is almost certainly wrong. Hunter/gatherer systems have much more strict hierarchies based around those who get more food, which to be fair is probably a more just hierarchy than our translation of it into money.

Hierarchies are almost certainly not eliminate-able so long as humans are involved. So I’m very wary of conceptualizing a process where we should aim toward eliminating them. But flip side, the power that hierarchies influence in our lives is certainly reducible, and aiming for that is probably a good idea.

Regarding the OP “The only reasonable conclusion is that, at least down to real-world Scandi levels, the degree of inequality is not constrained by its impact on mean income or growth.” I’m not sure that holds. It seems very probable that the success of the Scandinavian countries depends on having more open capitalist systems in their immediate vicinity (and in the case of Norway, selling oil into a capitalist system). But more than the UK? almost certainly.

I’d say that for the UK and US you could argue that their stingy social policies may hinder growth. It would be hard to make that argument for Germany or France.


KT2 11.22.22 at 1:00 am

GG, which Gini coefficient… “Countries with an aging population or with a baby boom experience an increasing pre-tax Gini coefficient even if real income distribution for working adults remains constant. Scholars have devised over a dozen variants of the Gini coefficient.”

And why use just Gini coefficients which “are simple, and this simplicity can lead to oversights and can confuse the comparison of different populations; for example, while both Bangladesh (per capita income of $1,693) and the Netherlands (per capita income of $42,183) had an income Gini coefficient of 0.31 in 2010,[56] the quality of life, economic opportunity and absolute income in these countries are very different, i.e. countries may have identical Gini coefficients, but differ greatly in wealth. Basic necessities may be available to all in a developed economy, while in an undeveloped economy with the same Gini coefficient, basic necessities may be unavailable to most or unequally available due to lower absolute wealth.”

Fix or accept Human Nature? Relative inequality may fix itself.

Me too.

“Feeling Down? Watching This Will Help”

“As the well-known primatologist Frans de Waal can be heard explaining in that clip — or with a bit more detail in the one that follows this paragraph — capuchin monkeys “get” unfairness. In the filmed experiment, one of the monkeys is originally quite satisfied with a cucumber reward for carrying out a task. But the animal quickly becomes piqued when a second monkey is given a vastly preferable grape reward for carrying out the exact same task.”


MisterMr 11.22.22 at 6:16 pm

@Sebastian H

Do you think that hunter gatherer societies have an equivalent to Elon Musk? I’d be surprised.


GG 11.23.22 at 1:39 am

KT2 @ 33: I said “Gini coefficient” mostly because other people (Gareth Wilson @ 8, for example) said it first, and because its a widely-understood first-approximation of how (un)equal a distribution is. It’s certainly not a hill I’m going to die on.

Qualitatively, the question is “How much inequality are we prepared to tolerate?”. I think that there’s a failure to appreciate the extent to which inequality is resilient to even massive disruptions in the status quo. For example, strongly suggests that the Cultural Revolution wasn’t enough to disperse accumulated social capital. This makes me skeptical of any framework that tries to minimize inequality without explicitly accounting for the costs of the associated social disruption.


TM 11.23.22 at 12:17 pm

Salem 15: “Ordinary people of 100 years time are likely to have a standard of living undreamed-of even to the very rich of today.”

There is no basis whatsoever for this assumption. The opposite is far more likely. The consumption growth of the last few hundred years has been the exception, not the rule, compared to the preceding millennia, and the current level of resource use and pollution is clearly unsustainable.

“My own view is we are way too focused on (re)distribution, and insufficiently focused on growing the pie. “ Next to zero percent of powerful people are talking about redistribution ever and almost 100% are talking about growth practically all the time. Well wouldn’t be the first time somebody is offering the most conventional of conventional wisdoms and calling it new thinking…


TM 11.23.22 at 12:33 pm

Sebastian 32: “Hunter/gatherer systems have much more strict hierarchies based around those who get more food”

What is the evidence for this claim and what is the level of inequality actually observed in actual hunter gatherer societies? There are obvious reasons why hunter gatherer societies simply cannot develop significant levels of inequality even if they were inclined to do so: they cannot store value at large scale and don’t have property ownership in any meaningful sense. Individuals cannot monopolize resources or “means of production” (horticultural land, fishing or hunting grounds) against the will of the community.


TM 11.23.22 at 1:09 pm

MisterMr 16: “If I compare myself to Charlemagne, I can see that I have some advantages on him (e.g. cellphones, better sanitations and presumably longer life, I can visit Japan as a tourist if I want to etc.), but he had other bigger advantages: most of europe kneeled in fron of him, whereas I don’t have the same social position.”

It is hardly the case that “most of Europe kneeled” in front of him or any other Holy Roman emperor. Mostly they couldn’t even get most of the nobility to do as they wished… but leaving that aside.

“The advantages I have are in terms of consuption of stuff, whereas the disadvantages are in terms of interpersonal relations or status/social position.”

I would stress the many huge advantages we (Western middle class people) have over the upper classes (including the highest levels) of earlier times (not just medieval but up to the 19th century) that go far beyond mere material consumption:
– Effective health care, much higher life expectancy, much lower child mortality (yes this depends on material conditions but isn’t mainly about consumption)
– Much better quality and diversity of food
– Opportunity to comfortably travel to far away places
– Much faster and more comfortable transportation infrastructure
– Incomparably better communications infrastructure
– Much better quality of education, access to vastly more knowledge and information
– More comfortable housing with sanitary installations, running hot water etc. (
– Privacy and personal freedom: We shouldn’t forget that even powerful rulers didn’t have much personal freedom. They had power over other people but couldn’t marry or be friends with who they wanted. They often couldn’t choose their religion (let alone their job…). They were subject to restrictive social conventions just like their inferiors, maybe more so. We have imcomparably more freedom to live our lives as we please. I really wouldn’t want to trade places with any of them.

I fully agree with the OP: our being better off than them is irrelevant to the problem of high inequality in our time. And of course many hundreds of millions today do suffer absolute poverty.


MisterMr 11.23.22 at 4:39 pm


I just read the abstract of the article but “Almost half a century after the revolutions, individuals whose grandparents belonged to the pre-revolution elite earn 16 percent more income and have completed more than 11 percent additional years of schooling than those from non-elite households.”

16% more earning in fact is quite a low difference, so I’d say the CR dispersed a lot of accumulated social capital (through a lot of violence), although not all of it.
Sometimes it seems to me people underperceive the level of income and wealth disparity we live in.


Thomas P 11.23.22 at 7:35 pm

Hunter gatherer soceities have an extreme diversity. Some are very egalitarian, others a lot more hierarchical. If you want to use them as examples, pick a specific group.


Sebastian H 11.23.22 at 11:22 pm

I’m not sure I understand what you’re trying to allude to with Musk. I definitely believe that hunter gatherer societies are generally set up that the hunter highest on the hierarchy can screw with the lives of people half way down the hierarchical ladder in very significant and potentially life ruining ways. Yes.

Do you believe otherwise? Did I miss the point you were trying to make?


Anon 11.24.22 at 2:45 am

“Anon@30: That’s a really nice post you’ve written. However, none of the reasons you give for caring about relative income, which you labelled A to M, accounts for the Atkinson-Dalton argument that inequality implies inefficiency in the production of aggregate social welfare.”

This is true, because it’s purely a post about relative income effects- a situation where your welfare depends not merely on your income, but also on reference incomes to which it is compared. The problem you refer to is real, but it is a kind of opportunity cost of the (mis)allocation of absolute incomes rather than a relative income effect.

The reason I tackle specifically relative incomes here is because I was concerned by claims like Keith Joseph and Jonathan Sumption’s argument above, that only the absolute standard should matter in assessing and addressing poverty. I take it that the key to undermining that argument is demonstrating that a person’s income remaining stable while others go up is not just a lost opportunity for things to get better them (though of course it is!) it’s also actually a substantive harm to them

I discuss what Lerner called distributive efficiency in other writings, especially in relation to Lerner’s equal ignorance theorem.


MisterMr 11.24.22 at 12:42 pm

@TM 38
I’m not really disagreeing, I have just a broader definition of consumption where “Much better quality of education, access to vastly more knowledge and information”, for example, is a form of consumption (that is not necessariously material).
The distinction I’m making is between consumption (at large) and interpersonal power.

For example, if I say “in the future everyone whill have 2 yachts” this isn’t impossible (depending on the evolution of technology), but if I say “In the future everyone will have two serfs” this is impossible, because then every serf would have two serfs and so on, that is impossible. This is because having many yacht is a matter of “consumption”, that might be increased through increased productivity, whereas the serfs are a matter of interpersonal power, that is zero sum and can’t pe increased through productivity.
I think that the main problems of inequality come from the “interpersonal power” thing, so it is an error to confuse this with a problem of consumption.

@Sebastian H 41
I meant more or less what TM says at 37, plus the fact that hunter gatherer societies generally have smaller groups so the social pyramid also will be smaller.
Please note that I’m referring to hunter gatherers specifically, not to say steppe nomads (who are pastoralists) which did have stuff like Khanates or other populations that from our point of view have low technology but are not really hunter gatherers.

@Thomas P 40
I always thought that hunter gatherers have quite flat societies, but I’m not an antropologist so I might be wrong; it is also possible that we mean something different with “hunter gatherer” or “hierarchy”. If you have an example of a hunter gatherer society with high hierarchies please share.


engels 11.24.22 at 2:06 pm

if I say “In the future everyone will have two serfs” this is impossible, because then every serf would have two serfs and so on

Sounds like an argument for population growth (any resemblance to the British model of constantly expanding low-paid workforce and ever-rising pensioner housing wealth is entirely coincidental…)


Sebastian H 11.25.22 at 7:52 pm

I think we may be talking about different concepts of hierarchy? My concept includes the idea that a high status person can mess with your life in very unpleasant ways, potentially up to getting you expelled from the group if you are low enough status (which in many primitive societies could easily mean death).

I think by describing it as ‘flat’ you mean there aren’t many hierarchical steps? I think my concept only requires two (high/low) or maybe three (high/middle/low)? And it doesn’t require very many people being high. Maybe as few as one. I’m not aware of any society that doesn’t have at least one very high status person.


J, not that one 11.27.22 at 3:11 pm

I suspect a lot of people who think they’d be happier in a small group society assume without largeness you don’t get social differentiation (except along whatever supposedly natural lines they believe in), and are envisioning without knowing it a kind of market in which their obvious talents could rise to the top without a lot of middlemen bound to the system on the one hand and gameplaying on the other.

45 suggests an alternate vision where a charismatic leader might be fine too under certain conditions.


MisterMr 11.27.22 at 3:31 pm

@Sebastian H

I think it is possible that hunter gatherer societies had the harsh form of hierarchy you mean, while also being flatter under my definition.
I don’t mean that hunter gatherer societies are generally preferable to capitalist societies, quite the opposite. But since we live in a capitalist societiy the problems we have to solve are those of a capitalist society, like hierarchical stratifications, or economic crises, or unemployment (all related from my point of view).
To make an analogy, perhaps diabetes is a first world problem, but we still have to cure it.


engels 11.27.22 at 8:12 pm

Has anyone here read The Dawn of Everything?


TM 11.28.22 at 11:34 am

Sebastian H: I suppose you didn’t respond to my request for evidence because there is none?


TM 11.28.22 at 12:49 pm

Re The Dawn of Everything:

“For G&W, the fact that our hunter-gatherer ancestors established an egalitarian lifestyle much earlier in Africa is of limited interest. They concede that extant hunter-gatherers such as the Hadza of Tanzania share their resources, but instead of admiring this, they complain that resistance to accumulation obstructs the emergence of ‘social complexity’, using this term where others might have spoken of ‘class’. The authors, it seems, are averse to the concept of social class.

So, hunter-gatherers obstruct complexity – i.e., prevent class society from arising – by resisting the accumulation of wealth. G&W invoke the authority of the hunter-gatherer specialist James Woodburn here. They conclude from his work that ‘the only way to maintain a truly egalitarian society is to eliminate the possibility of accumulating any sort of surplus at all’ (p. 128). This, they argue, rules out social complexity and – with it – the full richness of human cultural and intellectual life. Woodburn (1982, 2005) certainly did argue that deliberate resistance to accumulation underpins hunter-gatherer egalitarianism and represents a political choice consciously made. He observed that such egalitarianism was a feature only of non-storage hunter-gatherers, concluding that ‘immediate return’ was the original type of human economy. But Woodburn did not argue that such egalitarianism was lacking in complexity. In fact, he viewed the binary contrast between ‘simple’ and ‘complex’ social forms as damaging and misleading. For Woodburn, maintaining egalitarianism was a supremely sophisticated achievement – demanding far greater levels of political intelligence and complexity than simply allowing inequalities to arise. The Hadza, he explained, have the intelligence to realize how dangerous it would be to let anyone accumulate more wealth than they need.”

Very good and detailed critique.


TM 11.28.22 at 1:41 pm

Sebastian H: I suppose my request for evidence (@37) hasn’t been answered because there is no evidence?

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