The difference in opinion is based on our choice of perspective. If you care about the only inequality that matters (consumption inequality) then you’d cheer that people had more income to increase their consumption. But those concerned with the relative measure of income and wealth would (correctly) note that what bothers them merely got worse. The poor are richer, sure, but the rich got richer too and that’s. . . unfair?
What this highlights is that modern discussions about income and wealth inequality are merely a socially acceptable way for people to express envy and disdain for others who have more than they do. That’s why the “solution” to inequality they champion is always—always—forced redistribution. If you take from those who have more, they will no longer have more than anyone else and we have no reason to envy them. Problem solved!
At least this is the old (and some would say tired) claim made by conservatives (like me). But as it becomes more difficult to make economically-savvy people care about relative inequality, we’re starting to see progressives change how they argue. They are now even beginning to connect the dots and admit the relation between envy and inequality.
Take, for instance, Robert H. Franks’ article entitled, “Why have American weddings gotten so ridiculously expensive? Blame inequality.”
From the title alone you may assume that this is yet another reality-skewing contrarian take favored by liberal web-magazines like Vox and Slate. And it is that (oh, yes, it is most definitely that). But it’s also a refreshing admission that inequality obsessives want the government to take wealth away from those who have it because otherwise people will spend their money in the wrong way.
Lest you think I’m presenting a strawman, let’s temporarily jump ahead to the Vox article’s conclusion:
We spend too much on houses and parties because as individuals we have no incentive to take account of how our spending affects others. The tax system offers a simple, unintrusive way to change our incentives. We could abandon the current progressive income tax in favor of a much more steeply progressive consumption tax.
[. . .]
So despite their higher incomes, the rich are now worse off on balance. Their higher spending on cars and houses has simply raised the bar that defines adequate in those categories, while the corresponding decline in the quality of public goods has had significant negative impact.
Wait, the rich are worse off because they have more money to spend? Yes, according to Franks: “People spend more when their friends and neighbors spend more.”
Here’s how it works. People at the top begin building bigger houses simply because they have more money. Perhaps it’s now the custom for them to have their daughters’ wedding receptions at home, so a ballroom is now part of what defines adequate living space. Those houses shift the frame of reference for the near-wealthy — who travel in the same social circles — so they, too, build bigger.
But as the near-wealthy begin adding granite countertops and vaulted ceilings, they shift the frames of reference that define adequate for upper-middle class families. And so they begin going into debt to keep pace. And so it goes, all the way down the income ladder. More spending by the people who can afford it at the top ultimately creates pressure for more spending by people who can’t afford it at the bottom.
The encouraging news is that the profoundly wasteful spending patterns caused by rising income inequality could easily be changed. But that’s unlikely to happen until our political conversation begins to focus on inequality’s practical consequences.
Franks uses 2500 words, several graphs, and a picture of two elks fighting to make a point that could be stated rather succinctly: We are envious of our neighbors, so we spend more to live like them. We could fix this problem by having government take away more of our money, thereby giving us less to spend trying to “keep up with the Jones.”
The problem with this argument is that if Franks is right (and I think he is in some respects), and people’s spending habits are driven by a desire to be like their neighbors, then we are merely shifting the envy curve and not doing anything to fix the underlying problem.
That would matter, of course, if the concern was actually about inequality. But as Franks’ article makes clear, the concern with inequality is mostly about trying to make people less envious by making some people poorer.
Envy is a sin, and you can’t fix sins with the tax code. You can adopt any form of progressive redistribution of wealth you want and it won’t change the human heart. You can use the government power to immiserate your neighbor, but it won’t make anyone better off.
Instead of trying to keep our friends from upgrading to the latest granite countertop we should learn how to be content whatever the circumstances (Philippians 4:11-13). Then, when we find how much we are saving from not giving in to conspicuous consumption, we could give our extra money to charity (or even to the government, if that’s your thing).
But to reword Franks’ conclusion, that’s unlikely to happen until our political conversation begins to focus on envy’s practical consequences.