[R]ecessions can make many, or even most people materially better off, because wages are sticky downward and prices are much less so. Most of what recessions do is deepen the gap between the haves and the have-nots. Those who have a job may experience declining costs and actually improve their purchasing power. But the number of the unemployed rises, the length of the time required to find a new job stretches out, and the net decrease in their welfare far outstrips the moderate increase in the purchasing power of most consumers.
I agree with the gist of Megan’s message here. But about that gap between the haves and the have-nots… My sense is that income inequality as measured by, say, the gap between the median of the bottom decile and the median of the top decile, has fallen sharply due to super-huge finance-related losses at the top. I’m pretty sure this big tumble at the pinnacle swamps the small gains in real wages for those with steady jobs. So the gap between the haves and the have nots may have narrowed overall, despite rapidly climbing unemployment. But who cares?! Maybe now some egalitarians will grasp the irrelevance of Gini-style measures. The fact that inequality tends to decline during recessions isn’t some kind of silver lining of recessions. In recessions, lots of people suddenly become have-nots, and that’s a serious problem whether or not the have-a-lots are more than proportionally slammed. Once the economy, and income inequality, starts to pick up again, the real problem will the same as ever: the opportunity and welfare of the have-nots, not some silly, meaningless ratio.
It depends on your definition of haves and have-nots. I think the difference between Bill Gates and his secretary is not very interesting. But I think the difference between the employed and the unemployed is major during a slow job market.
I agree. But I'm still more worried about the fact that people are unemployed and doing badly than the difference in how the unemployed are doing relative to the unemployed. Why is the difference interesting?
Right. As I posted on her site, the difference between the haves and have-nots within a class, or field, or qualifications, or even somewhat within a specific level of education, is increasing. But the difference between the rich generally speaking and the poor is decreasing.
As an attempt to try to see the other side, I suppose that the difference is interesting to people because it can highlight the effect of luck in one's success. You can do all the right things, but if you graduate in the wrong year as opposed to a different one, you can be much worse off. To some people, that's significant. (Yes, you've discussed the issue extensively before.)
Right on Will. I think many people are confused about inequality. They think that since envy and relative status are generally important to us, maybe even hardwired into human nature in some sense, that we should worry about it. But, if it is people's well-being you are worried about, then inequality per se does not matter.
Simply because many people are naturally jealous does not mean that morality requires an egalitarian society. It might be that morality requires us to actively check our envy since we are all better off under a system that allows some to get quite rich relative to others (since “the economy” is not a zero-sum game).
It depends on your definition of haves and have-nots. I think the difference between Bill Gates and his secretary is not very interesting. But I think the difference between the employed and the unemployed is major during a slow job market.
I agree. But I'm still more worried about the fact that people are unemployed and doing badly than the difference in how the unemployed are doing relative to the employed. Why is the difference interesting?
Right. As I posted on her site, the difference between the haves and have-nots within a class, or field, or qualifications, or even somewhat within a specific level of education, is increasing. But the difference between the rich generally speaking and the poor is decreasing.
As an attempt to try to see the other side, I suppose that the difference is interesting to people because it can highlight the effect of luck in one's success. You can do all the right things, but if you graduate in the wrong year as opposed to a different one, you can be much worse off. To some people, that's significant. (Yes, you've discussed the issue extensively before.)
Right on Will. I think many people are confused about inequality. They think that since envy and relative status are generally important to us, maybe even hardwired into human nature in some sense, that we should worry about it. But, if it is people's well-being you are worried about, then inequality per se does not matter.
Simply because many people are naturally jealous does not mean that morality requires an egalitarian society. It might be that morality requires us to actively check our envy since we are all better off under a system that allows some to get quite rich relative to others (since “the economy” is not a zero-sum game).