Jason Hickel — Inequality metrics and the question of power

How should we measure inequality? There are two metrics that economists use: relative and absolute. In the past I have argued that the relative metric – which is by far the dominant approach, embodied in the standard Gini index, in the famous “elephant graph”, and inlogarithmic distribution graphs – is problematic in that it is aligned with the interests and perspectives of the rich, and effectively obscures real inequalities in the distribution of new income around the world. From the perspective of justice, and indeed from the perspective of the poor themselves, what really matters is the absolute gap between rich and poor, not relative rates of change.

But there is another question that we need to consider here, about the relationship between income and power. One of the main reasons we are concerned about inequality in the first place is that it allows rich people to exercise power over the lives of the poor. In political terms, they can use it to lobby policymakers, fund political campaigns, buy media outlets, set up think tanks, or even outright bribe government officials. In economic terms, they can use it to, say, push wages down (by lobbying to restrict labour unions, for example), and push house prices up (because the excess income of rich people ends up flowing to assets).

So which metric gives us more traction in thinking about the power dimension of inequality? Relative or absolute?...

Jason Hickel Blog
Inequality metrics and the question of power

Jason Hickel