Singular. I'm specifically excluding larger scale macro economic effects here (hence, my statement that "nothing else changes"). The point is to show that just because one person's earnings increase more than another person's over a given period of time does not mean that the second person is "worse off" as a result. I'm disproving Smash's assumption by presenting a simple case where his assumption fails. That's it.
No, you're not, because his assumption is in the context of macroeconomic analysis.
Wrong. That's my point. There is no macroeconomic analysis when someone simply says "Our economy is going in the wrong direction because the gap between rich and poor has grown".
A macroeconomic analysis would be something like what I asked him to provide: Show me that this actually makes things worse for "the poor", "the working class", "the middle class", etc. Show me in real terms. At each economic level, are the people within that percentile better or worse off today than at some point in the past where the income gap was smaller.
More importantly, in order to prove the assumption, you'd have to show that each of those groups are worse off at every point in history where that income gap was smaller. If this is not true, then the assumption that an increased gap is "bad" is false.
Currency isn't wealth. Wealth is not currency. Fiat currency is most especially not wealth.
Sure. But when someone talks about relative earnings, they are talking about currency. I'm more than happy to talk about other factors that measure real relative standard of living over time. But other people (like Smash) just want to talk about relative dollars and call it a day.
Stop conflating them and you'll understand this discussion better.
I'm not conflating them. I'm specifically arguing that relative dollars of wealth/income isn't how we should measure true economic status. How about targeting that argument at the folks making the simplistic "rich vs poor" arguments?
There are, and various arguements have been toss into the ring in this very thread. "The gap between the rich and poor has increased" is data analysis not a qualitative judgement.
Except it is almost always used as a blanket proof of something "wrong" with the US economy.
There are studies out that show the correlation between a Gini skew and various social Ills. If you are lazy you can look at wikipedia
I think there's a difference between measuring rates of various social ills and comparing them to rates of income inequality within given geographical areas at the same point in time, and making a broad claim about changes in income inequality over time. One does not lead logically to the other. Saying that areas in which income inequality are high have higher social problems than areas that have lower income inequality does not mean that if income inequality increases over the next 50 years, that the rate of social problems will be higher in 50 years than today.
I also happen to disagree with the simplistic conclusions arising from most of those studies. I think they tend to be examples of how to manipulate social statistics to support an argument you already want to support rather than allowing the stats to lead you to a conclusion. In the US, it's likely that the areas with the largest income inequality are not going to be the areas with the most rich people, but the areas with the most poor people. The correlation is more likely to be between poverty and social problems. A fact which no one is disputing. That this happens to also correlate to areas with high income inequality is simply a fact of math, not causation.
Let's not forget that when people usually talk about this, it's within the context of a gap growing over time. And usually with the assumption that because the rich are getting relatively richer, that this makes the poor relatively poorer. I don't think that assumption stands up to reality.
Edited, Nov 5th 2013 6:14pm by gbaji