Thursday, 10 September 2009

why measure inequality

i also received by email this paper on inequality, written by sophie elliot. the paper has received much positive feedback. it's quite academic in focus, but well worth a read. some excerpts:

The concept of equality is multifaceted; the literature on theories of equality is immense and the application of these theories is complex. Nevertheless, the great philosophical and legal minds of our time recognize that a comprehensive investigation of equality, and its measurement, is vital in the quest for justice. In this essay, I consider some of the major theories of equality as defined by various players in the literature, each of whom attempts to answer the question, 'What type of equality will promote equity in society?'


The equality of relative success requires that people are equal in the degree to which they fulfil their goals. However this is a problematic formulation. Imagine two people with identical qualifications, jobs, incomes, assets and families, but differing in that the standards of the first are as low as the standards of the second are high. The first believes he has achieved the perfect life: he wants for nothing and is happy. The second believes herself to be a failure, feeling that she has added little value to the world. The disparity between these two individuals is a difference in their beliefs, not a difference in their lives. Does anyone really believe the 'failure' deserves more resources than the 'success'?


But how should a social decision maker decide who is disadvantaged? Perhaps a `normal life' is not something that can be pinpointed, but instead a distribution of capabilities, where a disadvantaged person is below some sub-average threshold of this distribution. Dworkin notes that no transfer would be capable of compensating completely for certain disabilities. Consider, for example, how much you would be willing to pay to avoid full body paralysis. For many of us, the answer is, 'everything I have'. This suggests there may be no upper bound on compensation, and thus no way to ensure that handicapped people, through resource redistribution, have the same opportunities as able people.


Sugden argues that the pure equality of opportunity theory does not protect people against advantages or disadvantages arising from luck in the form of unanticipated market outcomes. Surprise outcomes spring from various sources: risk-taking entrepreneurs who introduce new products to markets, not knowing ex ante how successful the available technology will be in production or what people will be willing to pay; industry- and firm-specific risk that is born by workers who make the gamble of changing jobs; the choice faced by a high-school graduate of whether to obtain specific training in a field that suits his talents, sacrificing time and money with no guarantee of employment at the conclusion of years of effort.

i also liked this bit in the "afterword":

Economics is a moral science, and economists need to understand the consequences of different concepts of equality. Many of the ambiguities and disagreements about economic policy stem, not from differing views about how the economy works, but from differences about the underlying values.


SimonD said...

Thank you for highlighting this paper. It was very illuminating and well worth the read.

Ari said...

It's a great paper.

Unfortunately for me, it just feels like it highlights how sad a loss Sophie was and how even the most intelligent and engaged of women can fall for men who would do them harm :(