Measuring Inequality #
Thought-provoking piece Mark Gimien about the irrelevance of the much-touted Gini coefficient in capturing the inequalities of everyday life. His conclusion:
When economists talk about inequality, they are talking about something that can easily be captured in an equation about national income. When noneconomists talk about inequality, however, they have in mind not their neighbor’s wallet, which they can’t see, but their own, which they can. They are thinking of what they can and cannot afford, and also of the most visible extremes of wealth and poverty around them. That’s why India’s Gini index may be lower than our own, and yet it will be the rare person who will say that India is more equal in any sense that matters. When we talk about inequality, it’s not about resentment of the next door neighbors’ pool. It’s about gut issues: whether we feel poor, whether we feel that those around us are poor. That’s why it’s worth thinking about in the first place. Unfortunately, the usual way that economists talk about and measure inequality tells us next to nothing about it.