Income Inequality
Contents
Discussion
It appears that even though an increasingly smaller number of billionaires owns as much wealth as the bottom 50% of the population, the Gini Index is improving. Does that mean that the Gini Index is fundamentally flawed? Not necessarily. It can mean that the 'size of the pie is inreasing.'
Let's take the top richest 1%. Examining the Gini Coefficient - it matters how much wealth they have. If a perfect distribution occurs below the 1% - then if the top 1% have 50% of the wealth, the Gini Index will be about 0.5. If the top 1% have 99% of the wealth - then the Gini Index will be about 0.99 - or near perfect inequality. The real determining factor for overall happiness is the size of the pie. If the 1% is ridiculously rich, and the 99% have 50% of the world's wealth - the 'size of the pie' is what really matters. So that if production is ample, a stable society could exist in this situation. But if the pie is really small and the 99% tries to share that small pie - rebellion might happen - such as the French revolution. So from the social security perspective - life can be very good even if there are ridiculously rich people, but the rest have plenty left.
Thus - surprisingly - the distribution of wealth at the very top of the pyramid does not appear to matter much for overall societal well-being. Whether there are 10 billionaires that have as much wealth as the bottom 50% - or there is 1000 billionaires that have as much wealth as the bottom 50% - does not appear to make much difference. As long as the bottom 50% have plenty of wealth left. It doesn't mean that having such extreme wealth disparity is desirable - but it also doesn't mean that such wealth disparity is absolutely evil - from the stand point of human well-being. Thus, we can shift focus to how to improve life for everyone - including the environment - rather than worrying about about the very existence of extreme wealth disparity.
The above discussion also explains the data below. It is not inconsistent that the Gini Index improves (falls in value) - at the same time as less and less billionaires have as much wealth as the bottom 50%.
(See graph at Open Source Leadership Summit Presentation)
Gini Coefficient is Decreasing (Inequality is decreasing) in Recent Years?
- Good paper by the World Bank showing that Gini has been improving since the 1990s - [1]
Number of Billionaires Is Increasing
Number of Billionaires Who Own as Much Wealth as the Bottom Half of the World
Links
- Gini Coefficient - Wikipedia [2]
- Milanovic, World Bank 2009 paper - [http://documents.worldbank.org/curated/en/389721468330911675/pdf/WPS5044.pdf
- Nice animated GIF of rising tide lifting everyone. The article talks about rising inequality. The article mentions doubling of middle class income. Overall tone of article is that things are going to shiite, but the Gini coefficient is improving. Thus, wealth inequality rising is indeed controversial - in that it tends to omit the fact that the pie is increasing for most people.[3]
