Thursday, June 4, 2015

Chris Dillow — The problem of greater equality


Like GDP, Gini is only one indicator. Neither tells the full story of income and wealth distribution.
Inequality has fallen in the UK - which might be worrying.

This sounds like an odd thing to say. But it's the natural implication of what Ben Chu rightly says. He notes that whilst the Gini coefficient hasn't changed much since the early 90s, the share of income going to the top 1% has risen.

However, we can think of the Gini coefficient as a single measure of all inequalities: the gap between the top 1% and the second percentile, plus the gap between the second and third percentiles, and so on. For this reason, the same Gini coefficient can describe very different societies.

The Gini coefficient can therefore be stable if one inequality increases and another diminishes. As Ben says, inequality has risen in the sense that the top 1% has gotten relatively better off. But it follows, therefore, that some other inequality has fallen.
Stumbling and Mumbling
The problem of greater equality
Chris Dillow | Investors Chronicle

3 comments:

Roger Erickson said...

he means the problem with simplistic measures of inequality

Tom Hickey said...

Right, and those metrics are being brought forward to explain why there is no problem with inequality because trickle down is making everyone e better off. So move on, nothing to see here.

Magpie said...

One way to understand what Dillow seems to be saying is that although the 1% are getting more income (and this should increase inequality), the middle income groups are getting less, and becoming less differentiated from the lowest (which reduces inequality).

The second effect, if what Dillow says is right, seems to be greater than the first.