Friday, 02.15.08

Let them eat delicious, cheap cake

by Chip Somodevilla / Getty Images

Economists debate how we should think about inequality. Should we focus on income, wealth, or consumption?

After W. Michael Cox and Richard Alm of the Federal Reserve Bank of Dallas published a short piece on inequality in the New York Times, economists led by Paul Krugman charged them of using misleading numbers to present a rosy picture of the lives of America's working poor. For Cox and Alm, the relevant inequalities are inequalities in consumption, and they note that inequality in consumption is far less extreme than inequality in income. By extension, the same is true of wealth. Say it's true, for the sake of argument, Cox and Alm are right: that in terms of consumption, today's poor are far better off than the poor of thirty years ago, and that they aren't that much worse off than the rich when it comes to the quantity and quality of their consumption. It remains true that wealth translates into political power and that political power allows some individuals to entrench their power, political, economic, and cultural. So even if it is silly to argue that poor Americans are among the wretched of the Earth, the real danger could be that the rich are becoming a cosseted, self-dealing elite that uses the state to insulate itself from robust competition.
— Reihan Salam

Filed Under: consumerism, economics, inequality, politics, poverty