See
Your Neighbor's Fancy Car Should Make You Feel Better about Income Inequality by John Nye of Mercatus. Excerpt:
"Today while I was out running errands in my 5-year-old Honda Accord, I
passed a Tesla. If I were a different kind of guy, seeing Elon Musk's
latest creation whisk past me as I trundled along in my
middleclassmobile might have inspired a sense of personal envy, or even
some worry about the social implications of inequality in America.
But I'm an economist. And let's face it: In practical terms, the
difference between a $200,000 Tesla and my last car, a beat-up minivan
worth $2,000 at trade-in, is not all that large. They're both safe forms
of transportation that get you from point A to point B and, given legal limits and the reality of suburban traffic, most of the time they're driven at roughly the same speeds.
In that sense, measures of income inequality overstate the
differences within a developed country like the United States. The
products available to the masses are, in many cases, nearly as good as
those available only to the elite. Your garbageman's old Timex and your
podiatrist's brand new Rolex serve almost precisely the same function.
It wasn't always so. A century ago, a hungry rich person had access
to significantly more food and more choices than a poor one. Yet even
bluebloods would have been able to get their hands on less variety and
quality than one now finds at an average Midwestern all-you-can-eat
buffet. When Herbert Hoover promised "a chicken in every pot" in the
election of 1928, it was the sort of pledge that no one expected a
politician to actually keep. Today, each American consumes an average of
27 chickens a year, and obesity is a bigger problem than hunger.
The chasm between the very rich and the median citizen yawns wider
the further back you look. Three centuries ago, an aristocrat riding in a
cushioned carriage would have looked down at a peasant trudging
barefoot through the muck—a much more substantial difference than the
Honda-Tesla gap today.
So why the 21st century panic about the gap between the rich and
poor? At first glance, the numbers do look damning. Median family income
has grown by about 20 percent since the 1970s, while income for those
in the top 5 percent of households has grown by 75 percent or more,
according to the Center for Budget and Policy Priorities. Economists
Thomas Piketty and Emmanuel Saez looked at IRS data and concluded that
the share of total pre-tax, pre-transfer income going to the top 1
percent has risen to levels not seen since the 1920s. That suggests an
increase, not a decrease, in inequality.
But appearances can be deceiving. As the Brookings economist Gary
Burtless has pointed out, if you account for transfers such as
government housing assistance and employer-provided health insurance,
"Americans in the bottom one-fifth of the distribution saw their real
net incomes climb by almost 50 percent" since the late 1970s, while
"those in the middle fifth of the distribution saw their incomes grow 36
percent." It's worth remembering that anytime someone says the gap
between rich and poor is increasing, what he usually means is that rich
people are getting richer faster than poor people are getting richer—not that any group is becoming worse off overall.
Meanwhile, the difference between the lived experiences of Americans
at different income levels has actually been decreasing. Changes in the
quality of goods consumed by almost everyone mean we're a whole lot more
equal than the data superficially suggest.
What's more, the same behavior that sparks personal envy and
political angst—splashing out on fancy apartments, rare jewels, and
other truly scarce goods—may actually be a sign of the closing
gap between rich and poor in practical terms. When everyone is
wealthier, it becomes harder to demonstrate differences in wealth.
Better Off
Economic growth and the technological developments it fuels have been
spectacularly effective at making incredible products cheap enough to
be attainable for most families. As a result, Americans can routinely
enjoy luxuries of the sort they once might have assumed they'd have to
win the lottery to afford. The big-screen TV that a super-wealthy
denizen of Beverly Hills might have bragged about 30 years ago can't be
given away today on Craigslist; a low-end Android smartphone boasts many
times more computing power than the best supercomputers available only
to scientists in 1985. And while many Americans may never make it to
Africa, considering the wealth of programming available from places like
the National Geographic channel and Netflix, they hardly need to.
If you suddenly became a multi-millionaire, what would you do with
the money? Hire a chauffeur? Eat better food? Wear custom-designed
clothes? Many of those very outcomes could soon be available to us all,
assuming robust enough economic and technological advancement.
Imagine a world where self-driving luxury cars cost so little that
the average family thinks it's normal to buy a new one every year, where
fast-casual joints sell the equivalent of cuisine now served only at
five-star restaurants, and where bespoke suits are computer-fitted and
delivered by drone for the cost of a cheap three-pack of T-shirts today.
What's crazy about these possibilities is that they're just that:
possible.
Economic growth and technological development can do much to change
your material standard of living, and they have done much to reduce the
disparities in people's material well-being in the developed world. The
result is something that looks not like you coming into millions overnight but like almost everyone coming into millions."
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