Quote of the Day: Kolm on inequality
One of the forefathers of modern income inequality analysis, Serge-Christophe Kolm, started one of his most famous papers (REPEC) in the following way:
Many people consider the reduction of economic inequalites as a basic aim of society. Such ideas are, however, largely nonoperational, sterile, and even meaningless, as long as what is called inequality is not stated with precision. This is so because, as well appear below, different measures of inequality give widely different, and even opposite, results. Such policy which diminishes some apparently reasonable measure increases other ones.
This is no small point. While it is nice for us to bang on about “reducing inequalities”, it is nothing more than empty platitudes if we aren’t willing to discuss the trade-offs associated with individual policies.
Also, let’s not forget this quote:
Few concepts are as meaninglessly used as that of inequality.
But this is not because he thinks analysing issues of social justice don’t matter – in fact it is the complete opposite! He believes that multi-dimensional ethical issues deserve careful and specific analysis, rather than being thrown into one broad, and close to meaningless, term.
Like exchange rates, productivity, GDP, and inflation, inequality is a broad macro(social/economic) term that can be used as a touch stone to go on to think about other real issues. But it should not be allowed to become more important than these issues, and an understanding of the trade-offs that do exist when we go to make policy choices.
Was this meant to wind us up – which it easily could do until people realise that this guy wrote his stuff in the 1970’s or there-abouts, So he certainly was not writing with an awareness of present day issues.
Nope, it is still as relevant today as it was then – he is saying “say what the issue is instead of hiding behind aggregates”, if that is a lesson people are ignoring today then more fool them.
Relevant to who? Most issues of concern in the world can have several levels of interpretation. Something like “crime rates” can be understood at a technical level using precise and closely defined technical descriptions – but only understood by a few people. At a level that communicates with a broad and diverse audience you need language that stands the ‘public square test’. And I would think that inequality was one of those terms that has pretty effective communicative power, and is far from meaningless today bearing in mind that the usage of the term ‘inequality’ has risen hugely since the 1960s
Inequality is way, way, too vague. Everyone agree that we should, as a society, co-operate to reduce inequality – where everyone disagrees is what this inequality actually constitutes.
It is empty to say “lets lower inequality” – as Kolm notes, even if we restrict ourselves to only income inequality, and ignore many of the complications that come from individual differences, we can construct reasonable sounding indices of inequality that show opposite results.
You’ll note that this critique is not only of “inequality”, but of “productivity” and to a lesser extent “GDP”. Output based fetishism is as much a way to obfuscate costs/benefits as it is a form of communication – and this is something we should be aware of!
Generally I find that data hunts in packs, so I would be interested in examples of inequality measures that show opposite results. Having said that, for those concerned about inequality I would think it sensible to have several (techinical) measures of inequality so that any policy changes they make can be evaluated broadly
We sort of need to know what “inequality” means before we can say much. Hopefully within the next month I will have a long, long, long document up that will talk about inequality measures – and the things they represent. I’m guessing it might hit 50 pages – so I’ll try to write a summary in a blog post.
People care, justifiably, about injustice. We need a correspondence from this to other measures before we can discuss an “equity”-“efficiency” trade-off. I’ve always found it sort of abhorrent how the e-e trade-off has just been boiled down to “GDP”vs”GDP dispersion”!
That’s the word we have been missing! Injustice!
Justice BEFORE equality.
The inequality fetishists treat all inequality as an injustice, and then whine whenever anyone says the two aren’t equivalent.
Indeed, the problem is that the two sound so similar – I blame the English language 😉