Monday, 18 April 2005

There's inequality and then there's inequality

I hadn’t really paid much attention to this Sunday Times piece by an American expat living in Oslo comparing Scandinavia with the United States, but this post from Brett Marston made me curious. Marston asks:

How can the New York Times get away with publishing a Week in Review piece on income in Norway and not even mention income distribution (except disparagingly), the GINI index, or the effect of income inequality on aggregate statistics?

Well, the first potential response is that it is, after all, an opinion piece, and the writer has the choice of what evidence to marshall or respond to. But I do think Marston has a point… at least to an extent.

Income inequality, of course, does bias some statistics like the mean income; comparisons of median income would be more helpful, since it is unbiased by outliers. My suspicion, however, is that median U.S. income is substantially higher than median Norwegian income, regardless.

I also think a focus on inequality (and the Gini coefficient, which is a measure of inequality) might be worthwhile… but what does inequality mean in this context. Is the poorest Norwegian better off than the poorest American? If so, that might be a problem. However, by most consumption measures, a large share of poor Americans are only “poor” relative to other Americans (consider that even many of the poorest Americans have cellular phones and cable TV, not to mention $100 tennis shoes), although certainly there are poor Americans who fall through the cracks—as, for that matter, there are poor Norwegians in the same situation.

Certainly income inequality can be viewed as a problem—consider, for example, the well-known problem of relative deprivation. I’m not sure the solution to that problem is to force rich people to have less money so poorer people feel better about themselves, which seems to be the implicit solution to the problem: giving the money the rich have to the poor, while a nice concept, probably wouldn’t materially help the poor that much—and they’d still be poor relative to everyone else, so relative deprivation would kick in again.

In other words, I don’t know that income inequality is prima facie bad; certainly, poverty is bad, and that is something most societies could do better at solving, the United States included. But I think a focus on inequality over objective conditions probably is counterproductive.

Update: Jason Kuznicki has nicer things to say about the piece, and also discusses the rather silly “constitution in exlie” piece that has all the lawprofs and law students atwitter.


Any views expressed in these comments are solely those of their authors; they do not reflect the views of the authors of Signifying Nothing, unless attributed to one of us.
[Permalink] 1. BILL SMITH wrote @ Tue, 19 Apr 2005, 9:10 am CDT:

(consider that even many of the poorest Americans have cellular phones and cable TV, not to mention $100 tennis shoes),

Either you are joking or you do not personally know any poor people. Most poor people are not the mother of six with six kids living off the society not claiming thier sons drug money(the streotypical media case). They are sinlge people going to college, single mothers or dads working two minimuim wage jobs rasing two kids, ECT…. Do you even know what the poverty line?

[Permalink] 2. Anthony Skaggs wrote @ Tue, 19 Apr 2005, 4:15 pm CDT:

Bawer has made a cottage industry of bashing his adopted homeland Norway for being vastly successful at implementing social-democratic policies. Along with such achievements, Norway has made it possible for gays and lesbians to marry one another, a right denied Bruce Bawer in the land of his birth. Bawer complains about the high cost of pizza (true) and the rickety old wrecks that Norwegians supposedly drive around in (not true). He tries to paint a picture of American Southern-style poverty in Norway, but he’s only kidding himself. Obviously he’s not too familiar with the trailer parks and shotgun houses dotting towns and neighborhoods all over the US. He doesn’t mention that Americans are the world’s biggest users of credit cards and finance their oversized SUV‘s and every other silly gadget through debt. He doesn’t mention that high taxes provide free education THROUGH college in NOrway, and that public transportation in Oslo is excellent and not rickety. He also doesn’t mention that hospital care, doctor’s visits, daycare, nursing home care is all FREE or very inexpensive. He neglects to mention that more than 1/3 of Norwegians have country homes, while in the US the percent is under 2%, and a certain number of Americans have no homes at all. He also doesn’t mention that Norwegians aren’t stupid and live in a democracy – they seem to like their social welfare state, in spite of Bawer’s vain efforts to teach them the error oftheir ways. And how many Norwegians do you know who’ve emigrated to the United States because they want to live in a country where states have amended their constitution to OUTLAW gay marriages? Bawer is a lifelong contrarian,a full-time pain in the butt, and I’m sure Norwegians would like nothing more than to see the back of him one day. Considering his first gay partnership broke up, I think eventually he’ll be single again and persona non grata in his current homeland of convenience.


Chris, Skaggs and Smith,

Norway has a per capita GDP roughly the same as the U.S. when adjusted for purchasing power (about $37,800) and their GINI index is about 25, where ours is closer to 45 (zero would mean perfect income equality). Even so, it’s not that impressive.

The bulk of their economy is tied to natural resources, specifically oil, and is not quite a one-trick pony, but close. The reason they can afford such a generous welfare state is because of oil and that will run out or be replaced eventually. With a much more diverse economy— that consistently exhibits stronger growth— I would say we have a far better future in front of us.

Furthermore, a lot of this will come down to normative arguments like those by Smith and Skaggs. The bottom line is we’ll continue to pursue policies in keeping with our traditions, they’ll do the same. If either ends up demonstrably worse off it’ll be their own fault.


As for the distribution of income, it’s an issue (one I hope to learn more about in coming years) but suffice it to say that, unless you are talking about an extreme GINI indexof 80 or 90, it shouldn’t be an impediment to growth. For instance, how well would any industry do if only 10% of the population could afford to buy their goods?

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