Friday, April 14, 2017

Income Inequality Is a Nonsense Concept

I’m imagining someone comparing me to one of my peers and describing the difference in life outcomes as “income inequality.” This is essentially what is happening when someone discusses inequality as a statistical abstraction. It’s always in a tone of “See this! There are huge discrepancies and it’s a big mystery why they exist.” I usually don’t share this, but my gut reaction is usually something like, “You and I went to the same school at the same time as me. Any divergence between you and me is a result of our different choices. I graduated high school, went to college, picked a STEM major, finished grad school with good grades, and completed a series of grueling industry exams. For whatever reasons, you did something else.”

I respect other adults and I don’t want to second-guess anyone’s decisions. I assume that if someone picks a bullshit major in college or picks an easy career path that doesn’t require much technical knowledge or specialization, they have a good reason. This person is simply picking a different mix of leisure and income than I picked. Or this person chose not to “sacrifice” the best party years of their late teens and early twenties hunkered down studying in pursuit of a real career. Someone with similar options and advantages made a different series of trade-offs.

The “income inequality” framing misses all of this. It implicitly blames the high-earners for the low earnings of everyone else. It strongly implies a zero-sum worldview where the wealth of the wealthy derives from the poverty of the poor. It assumes away all the choices that people make that actually determine their future career path (and thus their annual income). The inequality framing pretends that there is some fixed basket of stuff that gets divided up based on some arbitrary statistical distribution, and that we (“We, as a society…” as so many of these conversations start) can simply change the shape of that distribution by fiat.

I want to say, “Hey, man, I’m sorry your life didn’t turn out the way you wanted. Maybe we could have talked about this stuff back when you switched from a math major to a P.E. major. I didn’t realize I was on the hook for your bad decisions. Had I known at the time, I would have insisted on some changes.” That’s not to say I want to dictate the terms of anyone’s career trajectory. I really don’t. Nor is this to say I don’t want to be on the hook for someone else’s bad luck. I quite willingly put myself on the hook for the bad luck of thousands of other people, and I will effectively pay them a huge sum if they have a crippling injury, house fire, early death, or devastating car accident. I do this through various intermediaries: my health, homeowners, life, and auto insurance policies. And I’m fine with offering some sort of charitable aid to people who have uninsured misfortunes happen to them. What I’m not fine with is being put on the hook for the predictable bad consequences of poor decision making, and then being told that those consequences are my fault. 

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