I think the Left in general believes that inequality is inherently immoral, but then they try to justify that normative belief by trying to prove that inequality is also the driving force in all or most of societies problems. As you show, there is not much evidence to back up their claims.
You haven’t mentioned Daniel Nettle’s critique, which I think is the most insightful. Nettle shows that many of the results presented in The Spirit Level can be understood as largely tautological, arising from Jensen’s inequality https://sphelps.net/jensens_inequality_spirit_level.html#try-it). The key issue is not inequality per se, but the combination of inequality with non-linear relationships between income (or status) and various outcomes.
Whenever the relationship between an independent variable (e.g. income) and a dependent variable (e.g. health, crime risk, stress, educational attainment) is non-linear, then it is not just the average level of income that matters for aggregate outcomes, but higher moments of the distribution, particularly variance. This logic is familiar from quantitative finance: when outcomes are concave in payoffs, a more volatile distribution produces worse average results even when the mean is unchanged.
For example, most people would prefer a guaranteed $1 million (zero variance) to a lottery paying $0 with probability 0.5 and $2 million with probability 0.5 (variance 1e12), despite identical expected value. The same aggregation logic applies at the societal level. If health, wellbeing, or social outcomes improve rapidly at low incomes but exhibit diminishing returns at higher incomes, then more unequal societies will mechanically exhibit worse average outcomes even if mean income is held constant. This arises simply from the mathematics of non-linear functions and aggregation, without requiring any additional assumptions about inequality generating psychological stress, status anxiety, or erosion of social trust. See https://sphelps.net/jensens_inequality_spirit_level.html#try-it for an interactive visualisation.
Importantly, Nettle does not argue that inequality is therefore unimportant. On straightforward utilitarian grounds, the same non-linearity provides a strong argument for greater equality. Because the relationship between income and welfare-relevant outcomes is concave, a transfer from a richer to a poorer individual increases aggregate utility: the marginal loss in welfare experienced by the rich person is smaller than the marginal gain experienced by the poorer person.
In other words, the case for redistribution does not rest on reducing inequality as such, but on the asymmetry of marginal effects. What matters is not that variance is lowered, but that gains at the bottom outweigh losses at the top when outcomes depend non-linearly on, e.g. income. What Nettle’s critique therefore challenges is not the policy direction implied by The Spirit Level, but the interpretation of its correlations and the causal story being told.
"Variance is a measure of dispersion, meaning it is a measure of how far a set of numbers are spread out from their average value. " https://en.wikipedia.org/wiki/Variance
So you’re saying that in societies with low variance at the low-income end and higher variance at the high-income end, inequality itself is less important as a predictor of aggregate utility than is the transfer of marginal utility from high-income to low? And conversely, in societies with high variance at the low-income end and low variance and the high-income end, it makes less sense to do redistribution because of the opposite relationship in marginal utility?
It’s nice to hear a social democrat with a measured take on inequality. Thanks.
Surely inequality has some good points. At least of what motivates the entrepreneurs we all depend on must be the desire to rise above the pack. At least a little of what disincentivizes productive work must be the lack of difference between after the ax and transfer income of those who work and those who don’t.
The worst thing about high inequality is probably political. Rich people want special treatment, less rich people want the rich to pay more for everybody else’s benefit, politicians want campaign money from the rich and votes from the less rich.
No matter what the government does to address it, whether effective or not, the stakes of the political class divide get higher.
And envy isn’t the biggest thing, but it’s in there. You probably know people, as I do, who would rather see the rich brought down even if it doesn’t help anybody else.
Inequality is an issue when a rich society refuses to take care of the poor, or hands an obsene percentage of its wealth to a few individuals who can then control the private and public sectors.
The more normal inequality like “how many times more does a doctor make than a waiter” is not necessarily a problem.
That's a pretty uncharitable description of how people get super wealthy in America, which is mainly by starting and scaling businesses. We don't tax rich people particularly lightly here by global standards, our lower end taxes are much more left tail.
The unequal economy of the USA enabled it to be come an economic powerhouse and the most productive economy in the world. Many poor people in the USA as measured by income live a higher standard of living than many middle and upper class people do in other countries.
What is this really about? Envy and greed but those are not emotions reserved for the upper class. I have seen siblings resent each other based on how well they did economically.
The truth is If people put unequal resources and effort into an education and business and then become unequally wealthy that is really a fair outcome.
When people say "fair" what they mean is I just want what you have but I don't want to do what you did for it.
That is not how the USA became the largest and strongest economy in the world.
It seem to me the importof the book,for all its flaws, was (or shoul have been) to support the idea that there was less trade off between increasing growth and decreaing inequality and thereby somewhat weaken the idea of supposedly inequality-decreasing policies that DO have growth/efficiency trade-offs.
I think the Left in general believes that inequality is inherently immoral, but then they try to justify that normative belief by trying to prove that inequality is also the driving force in all or most of societies problems. As you show, there is not much evidence to back up their claims.
You haven’t mentioned Daniel Nettle’s critique, which I think is the most insightful. Nettle shows that many of the results presented in The Spirit Level can be understood as largely tautological, arising from Jensen’s inequality https://sphelps.net/jensens_inequality_spirit_level.html#try-it). The key issue is not inequality per se, but the combination of inequality with non-linear relationships between income (or status) and various outcomes.
Whenever the relationship between an independent variable (e.g. income) and a dependent variable (e.g. health, crime risk, stress, educational attainment) is non-linear, then it is not just the average level of income that matters for aggregate outcomes, but higher moments of the distribution, particularly variance. This logic is familiar from quantitative finance: when outcomes are concave in payoffs, a more volatile distribution produces worse average results even when the mean is unchanged.
For example, most people would prefer a guaranteed $1 million (zero variance) to a lottery paying $0 with probability 0.5 and $2 million with probability 0.5 (variance 1e12), despite identical expected value. The same aggregation logic applies at the societal level. If health, wellbeing, or social outcomes improve rapidly at low incomes but exhibit diminishing returns at higher incomes, then more unequal societies will mechanically exhibit worse average outcomes even if mean income is held constant. This arises simply from the mathematics of non-linear functions and aggregation, without requiring any additional assumptions about inequality generating psychological stress, status anxiety, or erosion of social trust. See https://sphelps.net/jensens_inequality_spirit_level.html#try-it for an interactive visualisation.
Importantly, Nettle does not argue that inequality is therefore unimportant. On straightforward utilitarian grounds, the same non-linearity provides a strong argument for greater equality. Because the relationship between income and welfare-relevant outcomes is concave, a transfer from a richer to a poorer individual increases aggregate utility: the marginal loss in welfare experienced by the rich person is smaller than the marginal gain experienced by the poorer person.
In other words, the case for redistribution does not rest on reducing inequality as such, but on the asymmetry of marginal effects. What matters is not that variance is lowered, but that gains at the bottom outweigh losses at the top when outcomes depend non-linearly on, e.g. income. What Nettle’s critique therefore challenges is not the policy direction implied by The Spirit Level, but the interpretation of its correlations and the causal story being told.
https://www.researchgate.net/publication/315657327_Why_inequality_is_bad
https://www.danielnettle.org.uk/wp-content/uploads/2017/03/Why-inequality-is-bad-1.0.pdf
https://www.danielnettle.eu/category/hotte/
Great comment. Can you explain a little more what you mean by variance?
"Variance is a measure of dispersion, meaning it is a measure of how far a set of numbers are spread out from their average value. " https://en.wikipedia.org/wiki/Variance
So you’re saying that in societies with low variance at the low-income end and higher variance at the high-income end, inequality itself is less important as a predictor of aggregate utility than is the transfer of marginal utility from high-income to low? And conversely, in societies with high variance at the low-income end and low variance and the high-income end, it makes less sense to do redistribution because of the opposite relationship in marginal utility?
Not quite. See this interactive chart which will explain: https://sphelps.net/jensens_inequality_spirit_level.html#try-it
https://sphelps.substack.com/p/does-inequality-cause-harm-or-is
It’s nice to hear a social democrat with a measured take on inequality. Thanks.
Surely inequality has some good points. At least of what motivates the entrepreneurs we all depend on must be the desire to rise above the pack. At least a little of what disincentivizes productive work must be the lack of difference between after the ax and transfer income of those who work and those who don’t.
The worst thing about high inequality is probably political. Rich people want special treatment, less rich people want the rich to pay more for everybody else’s benefit, politicians want campaign money from the rich and votes from the less rich.
No matter what the government does to address it, whether effective or not, the stakes of the political class divide get higher.
And envy isn’t the biggest thing, but it’s in there. You probably know people, as I do, who would rather see the rich brought down even if it doesn’t help anybody else.
Inequality is an issue when a rich society refuses to take care of the poor, or hands an obsene percentage of its wealth to a few individuals who can then control the private and public sectors.
The more normal inequality like “how many times more does a doctor make than a waiter” is not necessarily a problem.
That's a pretty uncharitable description of how people get super wealthy in America, which is mainly by starting and scaling businesses. We don't tax rich people particularly lightly here by global standards, our lower end taxes are much more left tail.
The unequal economy of the USA enabled it to be come an economic powerhouse and the most productive economy in the world. Many poor people in the USA as measured by income live a higher standard of living than many middle and upper class people do in other countries.
What is this really about? Envy and greed but those are not emotions reserved for the upper class. I have seen siblings resent each other based on how well they did economically.
The truth is If people put unequal resources and effort into an education and business and then become unequally wealthy that is really a fair outcome.
When people say "fair" what they mean is I just want what you have but I don't want to do what you did for it.
That is not how the USA became the largest and strongest economy in the world.
It seem to me the importof the book,for all its flaws, was (or shoul have been) to support the idea that there was less trade off between increasing growth and decreaing inequality and thereby somewhat weaken the idea of supposedly inequality-decreasing policies that DO have growth/efficiency trade-offs.
EITC, yes; minimum wage, no. :)