I have two questions about inequality: 1) how much of the measured inequality changes in recent decades has been due to shifts to the top .1% from elsewhere in the top 10%? 2) what is the propensity to donate to charity as wealth increases?
This is apropos yesterdays story about Mark Zuckerburg, Carl Icahn, and others joining Bill Gates and Warren Buffet in their pledge to give half of their wealth to charities. Stories like this make me wonder whether higher inequality is, or is going to, lead to more charity, which by containing transfers and spending on poor families actually mitigates the measured inequality.
By also utilizing economies of scale and overcoming coordination problems, it seems possible at least that inequality like this could make poor families better off. This could be the case even if the initial inequality was a redistribution from the bottom 99.9% to the top 0.1%, rather than from the top 10% to the top 0.1%.
There may be data that prove this completely false, but it’s food for thought anyway.
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Friday ~ December 10th, 2010 at 10:06 am
Outlying Observations
Er, this assumes that the charities in question do transfer resources to the poorer majority, and not to Harvard Business School or the Met.. More to the point, I would worry less about inequality if there were greater inter-generational social and economic mobility (which, as I understand it, is declining..).
Friday ~ December 10th, 2010 at 12:37 pm
Hal
Pretty sure that when we start relying on the kindness of (super rich) strangers, then the wheels have completely come off the wagon.
Friday ~ December 10th, 2010 at 12:42 pm
Wonks Anonymous
I think Scott Sumner beat you to it.
Friday ~ December 10th, 2010 at 12:56 pm
DJAnyReason
Propensity to gift, here, is pretty explicitly set at 0.5. So, in order for this to be net distributive, the distributive impact of each gifted dollar has to be twice the anti-distributive impact of the process by which the wealth was concentrated in the first place. Considering issues on the distributive side such as those identified by Outlying Observations, this strikes me as at best highly unlikely. Furthermore, given that propensity to gift is <1, no matter what the ultimate outcome is more super-rich.
On the other hand, this idea does a good job of demonstrating the "specious proofs" justifying the inequalities of privilege Niebuhr talked about in Moral Man and Immoral Society.
Friday ~ December 10th, 2010 at 1:56 pm
MorallyBankrupt
A couple of months a go I posted a chart of real household income by quintile on my blog ( http://blog.morallybankrupt.org/2010/09/look-at-real-household-income-1967-2009.html ). Of course it is flawed because it can’t take into account the value of things like pensions / health insurance / etc, buuut it does give you a pretty good idea of who’s been the winner over all.
I think that really, really wealthy people donating away their wealth does have positive redistribution effects, but they are global effects, not national ones.So if group A is doing better in the US at the expense of group B and donating their excess income in a manner that benefits Group C in Bolivia, then yes, there was redistribution downwards, but group B is still SOL