How Does This Fact Affect Judgments About Income Inequality?

by Don Boudreaux on February 8, 2014

in Everyday Life, Growth, Inequality, Innovation, Seen and Unseen, Standard of Living

I imagine asking the question that is the title of this post to a notable American “Progressive” – someone such as, say, Paul Krugman – who is so concerned about what growing income inequality is doing to the psyches of non-rich Americans that he or she never tires of battering the psyches of non-rich Americans with reminders of just how much income rich Americans earn, with assertions of how unfair and harmful it is for rich Americans to have so much monetary wealth, and with pleas that non-rich Americans express with greater force what must surely be seething anger at the fact that a few other people are richer than they are.

What would such a “Progressive” say about the fact that someone who in 1991 wanted to acquire all of the features available in today’s iPhone would have had to spend at least $3.56 million?  (And even then that very rich denizen of 23 years ago could not, for any sum of money, fit all of his or her devices into the small, lightweight, and convenient form of a 2014 iPhone.)  In other words, to acquire iPhone capabilities (if not iPhone convenience) in 1991 would cost then 8,900 times more than it cost today to buy the iPhone 5s 64GB – today’s top-of-the-line iPhone.  Only the super-rich of 1991 could have afforded these luxuries.

The difference in price between the 1991 concoction and today’s iPhone 5s 16GB – the iPhone that I have – is 17,800!  My real income is much higher today than it was in 1991 (I was then in law school), but it’s not remotely close to being 17,800 times higher (or even to being 8,900 times higher).

Communications/snap-photography/hand-held-computing/music-playing/and-on-and-on-and-on/-wise, the typical American’s (and other westerner’s) purchasing power, over a mere 23 years, was multiplied by at least 8,900!  The typical person today can do easily what only the fabulously wealthy (or fabulously politically powerful) could do in 1991.

Does this reality not make us more equal, consumption-wise, than we would otherwise be?  Yet how are such gains in consumption- (or living-standards-) equality measured?  With such huge gains in the consumption-ability of middle-income and even poor people, isn’t it at least plausible that the amount of $$$ (or £££, or €€€, or ¥¥¥) in someone’s bank account or brokerage portfolio is becoming less and less meaningful as a measure of that person’s genuine wealth compared to other people’s wealth?

(I thank Fred Dent and Janet Neilson for pointers to Bret Swanson’s essay.)

Be Sociable, Share!

Comments

comments

Add a Comment    Share Share    Print    Email

Previous post:

Next post: