We’ve Been Measuring Inequality Wrong

I highly disagree about the conclusion that spending inequality is more important to look at than wealth inequality. Wealth indicates security and lack of economic precariousness, spending does not. If you're middle income and in chronic debt because you have a disabled child and care for your aging parents, you might look just fine if you look at spending. However, your hardship will likely be clearly reflected in your lack of wealth.

The fact that they chose spending rather than wealth makes me wonder why it was chosen. The authors claim that spending inequality is the correct measure, but then provide zero research-based justification for this decision.

Reading the paper, they claim in regards to wealth and related forms of inequality, "none measures inequality in living standards, which should be the ultimate concern when assessing economic fairness". Well, that's a fine presumption, but perhaps we're more concerned by the increasingly capability of the top 0.1% of the wealth of this country (ie, the vast majority of it, as much as 80-90%) to buy our political process and start us down a feedback loop of no return.

Point being, these economists seem to bring in an awful lot of political and moral prejudgments into this study (as is their profession's frequent wont).

There are lots of problems with this article.

The basic assumption--that "spending power" is more important than "wealth" or "income"--is questionable, but the authors don't really spend any time defending it. The reason the richest 1 percent spent a lower percentage of their income is because they don't have to, and because they are able to re-invest their money (not counted as spending) in making themselves more money. The poorest 20% do not have that luxury.

The arguments about how high taxes disincentivize work assume that income == work. But that's not correct. Productivity growth has been tremendous over the last two decades, and workers have been producing more and more, but that hasn't been translating into income gains, except for those in the top 2 or 3 percent, which is precisely what the income inequality gap reveals, which is apparently why the authors of this study chose to use a different standard.

"Facts and figures are hard things. They upset prior views and demand attention." Say the people who came up with an alternative model of measuring inequality because the simpler model upsets their preferred policy, and would rather ignore the problematic numbers by creating new ones.

> Remarkably, this debate has taken place based on partial and inappropriate indicators of U.S. inequality. . . . First, spending inequality – what we should really care about – is far smaller than wealth inequality.

No one really care about the exact level of inequality. They care about the trend (that inequality is much higher then it used to be). If they showed that that trend was different then what everyone thought that would be interesting, but just showing that this measure reports a different level is not so interesting.

> Another key finding is that U.S. fiscal policy acts as a serious disincentive to work longer hours or harder for more pay.

And yet they work longer hours than most of civilised countries an sometimes work two jobs. Either they are really stubborn or the research or the conclusions from it have some flaws.

The emphasis on lifetime spending power in this paper is odd, since most people wouldn't choose to starve through their 20s and 30s in return for the ability to spend more on luxuries towards the end of their lives. I suspect they are also assuming that young people today will end up with the same spending power as today's seniors, which is a pretty questionable scenario.

Overall the article leaves the impression of authors with a conclusion in mind and a determination to find data which matches

Each parameter (declared or hidden) that they inject in their calculation is carefully designed to decrease the inequality. No wonder they obtain a measurement with less inequality. Anyway, they did not really need all to go to such great lengths to get this result, since they do really care about it and their conclusion is mostly unrelated to it.

Economists... Economic science... It would be more honest not to disguise oneself under scientific methods, and that should be renamed "economic politics" (and while we are at it, let's rename sociology to "politics" and philosophy to "religion", everything will be clearer).

Lots of hate here so far. I agree more explanation of their premise would go a long way towards convincing skeptics. However, I think this is an interesting perspective and deserves better conversation. Fiscal policy is progressive and has a dramatic impact on individual finances. Contrary to popular belief not everyone in the 1% pays the capital gains rate.

I never understood why cutting taxes creates more jobs. Before the full force of globalization "trickle down economy" made some sense as the investments would go locally (factories etc.) but at the current point in time it does not.

We have a distribution of wealth in the world that looks like a hockey stick and we actually need something like a bell curve.

The reason the wealthy spend less of their income is they have more than they need, and they put the rest into investment, which increases their own wealth.

In fact, that is the basic conservative argument as to why the government should let the rich keep their income. The idea is that investment by the wealthy increases total size of the national economy, which in turn leads to everyone's income going up.

The problem is that this process hasn't been working for about three or four decades. The rich keep investing their money and getting richer, but income for most other people is stagnant or going down.

The authors claim that the progressive tax system provides a disincentive to work. So what they are saying is, on the one hand, things are just great, and on the other hand, things are just terrible because people are voluntarily not working.

Also, if the wealthy are not working, how come they keep getting wealthier? And furthermore, why is it that studies show that Americans work more hours than people in other industrialized countries?

The nice thing is that these sorts of propaganda attempts are failing because people know from their own experience that income is stagnating.

Oh, and here is another thing. The authors say we need to take into account future income.

So on the one hand conservatives say Social Security is going to collapse in 15 or 20 years and no one will get anything, and on the other hand they say everyone is going to retire to a life of wealth and luxury.

Speaking of which, I wonder how many young or middle age conservative voters would consider it a good deal to sign away their future SSA income for one cent on the dollar.

Did they really introduce a new bogus metric without even defining it, much less justify its use? Never heard of "spending inequality" until this article came along.

Url changed from https://newrepublic.com/article/131517/weve-measuring-inequa..., which points to this.