The Economist 14Dec2019

14 The EconomistDecember 14th 2019

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Letters

The debate on inequality

Your briefing on inequality

went beyond official statistics

to look at some of the latest

academic research (“Measur-

ing the 1%”, November 30th).

You pitched this new work as a

repudiation of the perception

that income and wealth

inequality have grown over

recent decades. We see this

latest research, however, as

just another step in a lively

debate in America and

elsewhere.

In 2018, for example, 9,

British taxpayers received

£34bn ($45bn) in capital gains,

averaging nearly £4m each. Yet

this is excluded from official

income statistics, which only

capture sums covered by in-

come tax. Unlike many other

countries, Britain still relies

almost exclusively on survey

data for wealth, even though

we know this underestimates

the fortunes of the very rich.

In many ways, the current

debate in America is far ahead,

both in terms of data availabil-

ity and methodology. But it

would be a mistake to think

that advances there will fore-

shadow similar findings else-

where. Britain and America

have different tax systems,

which means that statistics

based on tax data will be

wrong, or incomplete, in dif-

ferent ways. We don’t yet know

the true position in Britain, but

our ongoing research provides

reasons to think that differ-

ences at the very top may yet be

larger, not smaller, than previ-

ously thought.

professor mike savage

Director

International Inequalities

Institute

London School of Economics

Note: A full list of signatories

to this letter is available in

digital editions.

Doubts about data on top

incomes have little relevance

to the evidence of the harmful

health and social effects of

inequality shown in hundreds

of studies during the past 40

years. Almost none of these

depend on trends in top

incomes. Many have compared

sub-national states and

regions cross-sectionally and

some have used the ratio of the

10th to the 90th percentile,

which excludes both the

richest and poorest 10%, or

Gini coefficients with top

incomes truncated. Even if

inequality has not increased as

much as some thought, the

evidence is clear that reducing

inequality would lower death

rates, strengthen social

cohesion and social mobility,

and decrease homicides,

incarceration and crime.

emeritus professor

richard wilkinson

Co-author of “The Spirit Level”

University of Nottingham

Medical School

Note: A full list of signatories

to this letter is available in

digital editions.

For all its merits, your article

had a serious shortcoming in

that it relied almost exclusively

on cross-section income data.

This neglects the impact of

investment in education on

measured income inequality.

Over the decades, the share of

adults in industrial countries

going to college has been

steadily rising. They are poor

by choice for several years, but

add to measured inequality.

Most of them will not, how-

ever, be permanently poor.

Therefore, the true devel-

opment of income inequality

can only be assessed using

lifetime income data, not

cross-section measurements

that contain transitory compo-

nents. Evidently, permanent

income, a concept pioneered

by Milton Friedman, not only

determines consumption but

should be used for measuring

lifetime income inequality.

peter zweifel

Professor of economics

emeritus

University of Zurich

In recent years it has become

commonplace to observe that

inequality has not grown over

the past decade. But this rather

misses the point, which is that

inequality between the top 1%

and the rest of the population

remains very high and there is

a widespread belief in society

that it is too high.

Why should this be so, if

inequality has not grown? The

answer is obvious. For most

people in America and Britain,

living standards over the past

decade have been drastically

squeezed, with average earn-

ings barely above what they

were in 2008. At the same time,

it is evident that the rich and

extremely rich continue to

enjoy consumption lifestyles

of a completely different order

to the rest of us. In this sense

they have not paid any real

price for the financial crisis, or

shared in the subsequent

austerity, at all.

It doesn’t matter whether

their income and wealth has

fallen a bit or not. The wide-

spread sense of injustice at the

relative burden faced by the

rich on the one hand and the

majority of people on the

other, is what has fuelled the

political backlash against the

elite, and the model of capi-

talism over which they now

preside. Politicians—and The

Economist—downplay this at

their peril.

professor michael jacobs

Sheffield Political Economy

Research Institute

University of Sheffield

As a past director for some

decades of the Survey of Con-

sumer Finances at the Federal

Reserve, I worried constantly

about how to provide the most

meaningful representation of

the full spectrum of wealth for

American households. Mea-

suring the top of the distribu-

tion is important, and much

effort still goes toward that

endeavour. I have much ad-

miration for Thomas Piketty,

Emmanuel Saez, Gabriel Zuc-

man and others for their seri-

ousness in trying to improve

wealth measurement and draw

out the possible social implica-

tions. But I worry that there is a

risk in the discussion else-

where of so fetishising the top

1% that we lose focus on the

issues affecting the vastly

larger part of the population.

For example, according to

the scf, the share of house-

holds with negative net worth

in America has gone from

about 7% in 1989 to 11% in 2016.

arthur kennickell

Washington, DC

We have just seen yet another

report about falling life expec-

tancy in America attributed to

deaths of despair and poverty,

including liver disease, over-

doses, obesity and diabetes.

Clearly means-tested transfers

have failed to deliver much to

their intended beneficiaries. If

your analysis was supposed to

dissuade us from thinking that

inequality is worsening, it

definitely failed for me.

jacqueline coolidge

Chevy Chase, Maryland

Those who complain about

rising inequality fail to see the

big picture. More people have

been lifted out of poverty over

the past 30 years than in the

entire history of human civili-

sation. This is entirely due to

capitalism. There was a time

when inequality in America

decreased dramatically. It was

called the Depression.

oliver reif

Seattle

Meetings of minds

Bartleby referred to Jeremy

Bentham and George Orwell

when describing his unease

with videoconferences (No-

vember 16th). David Foster

Wallace, a more recent prophet

of dystopia, provided us with

another cautionary tale of the

rise and fall of “videophony”.

In “Infinite Jest”, the vanity and

anxiety of videophone users

leads to the adoption of

“tableau”, sumptuous scenes

picturing very attractive actors

with expressions of intense,

focused interest. These images

are placed in front of the

videophone cameras, thus

freeing everyone to return to

the pre-video pleasures of

cuticle picking and tactile

facial-blemish scanning.

peter cook

Assistant professor of

psychology

New College of Florida

Sarasota, Florida