Wednesday, May 21, 2008

This Freakonomics post -- which postulates that the ever-widening gap between the rich and poor is a myth -- is quite frankly, ridiculous.

When people talk about inequality, they tend to focus exclusively on the income part of the equation. According to all our measures, the gap in income between the rich and the poor has been growing. What Broda and Romalis quite convincingly demonstrate, however, is that the prices of goods that poor people tend to consume have fallen sharply relative to the prices of goods that rich people consume. Consequently, when you measure the true buying power of the rich and the poor, inequality grew only one-third as fast as economists previously thought it did — or maybe didn’t grow at all.

The post goes on to state that the poor have that which cannot be named to thank for this glorious world where economic gaps are shortened or even eliminated by the fact cheap crap is so cheap, while the rich still have inflation to contend with when buying yachts or country club memberships.


Then there are the comments! Going by the relative insanity of the post's premise, I suppose this could be valid:

I was watching a youtube video of Warren Buffet speaking to a group of university students. He said to them that really there’s not much difference between what they can consume and what he does, except for the fact that he can travel more.

I think the real gap between the middle-class and the uber rich is really not all that much. It’s a nicer house, car, more travel and financial security. But many of what I regard as the most important items are the same: mobile phones, computers, internet speed, roads and time don’t really have that much variation anymore.

Warren Buffet drinks the same coke I do, watches the same movie and tv shows and only has 24hrs in a day. Except for a jet and some fancy friends there’s probably never been a time in the world where the standard of living of the median before of America is so close to that of the richest person.

A stunted worldview which, to me, is in part the sad, sad result of tech-libertarianism. Something I see every day here in the Bay, and a rant for another day.

More important and true, but still not quite hitting the mark for me:

I am beginning to fear that quality is becoming synonymous with luxury. While the rich can afford quality goods that will last a long time and retain resale value, the poor are doing little better than “renting” goods, which quickly wear out and require replacement, or buying good that exact a high external cost on their health or time. In either case the long term advantage will be to the wealthy who can continue to invest in their future, while the poor will continue to have all of their income drained away.

Somebody needs to do a study on the effect of diminished quality of the new globalized goods and see if there really are positive benefits or if we as a nation have found another way to extract a short term savings at a high long term cost.

Yes, the fact that Joe Schmoe can buy 20 pairs of crappy plastic shoes for the price of one pair of Italian leather loafers does not negate the fact that those loafers will most likely last longer than the combined lifespan of those 20 pairs of crappy plastic shoes. Nevermind how buying this cheap crap directly correlates to a warped conspicuous consumption, poverty-style, as well as commodity fetishism -- the latter being what I see as the hallmark of our increasingly ignorant, unapologetically selfish society.

But, while I do care about the steaming dump load that is cheap goods, even cheaper expectations, and the resulting cheapening of life that is defining the existence of a large portion of our world, this isn't my biggest issue with this post. The reason why I find this post so sad is thus: today I had a conversation with some friends about caring for our aging parents. We all have parents in different economic strata -- anywhere from "under" class to "capitalist" class. The only one of us not worried about how to take care of Mom and Dad is the friend with capitalist class parents. Also ironic and telling, given the subject matter of my post -- this friend majored in economics.

Healthcare. Quality, access, ability to pay. That is the vast in-equalizer, and it is a crime to write any paper or conduct any study on the gap between the rich and poor and come to any sort of conclusion that would care to be taken seriously without presenting that crucial factor.

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Blogger Trevor said...

Thanks for this post A! Wow--I am impressed with the leaps and twists logic must make in order for the idea that the super-wealthy and the poor are practically the same to even make sense. "the stars are just like us!" Nice extrapolation re: sustainability as well. Smart stuff here as usual.

May 21, 2008 at 6:18:00 PM PDT  

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