When I talk to student groups about inequality, one of the first things I ask them to do is consider a mental experiment. Imagine a society in which, for example, the richest 20 percent of households earn an average of $60,000 per year and the poorest 20 percent of households earn an average of $10,000 per year. Imagine average household income overall is around $35,000 per year.Now imagine a different society in which the richest 20 percent of households earn $150,000 on average and the poorest 20 percent about $18,000. Suppose the overall average is about $54,000.If we compare these two societies, there’s no doubt that the first one is far more equal. The distance between rich and poor is much smaller. But if we ask which society is the more desirable one, or which one people would like to live in if they did not know if they’d be rich or poor, most people would pick the second, despite its higher degree of inequality. Not only is it richer on average, but it’s clear that it’s possible to become very rich and, perhaps most important, the poor in the second society are much better off than those in the first.(It’s worth noting that the second society roughly corresponds to the US of 2017.)That so many people’s intuition is that the second society is better suggests that perhaps what we really care about is something other than inequality per se. We care about upward mobility, or average income overall, or how well the least well off do.
The Unfairness of Equal Outcomes