Michael Perelman's post reminds me of a point that I've been meaning to   
make regarding the relevance of income inequality to the well-being of   
the poor.  I held it back from my response to Warren's last post in   
which he queried whether inequality didn't matter.  
  
My point is that analysts and governments should worry about absolute   
poverty rather than inequality of incomes.  As I argued yesterday, "what   
we call income distribution is simply another name for the relative   
contributions of different members of a society to total income   
production.  There is no one out there handing different individuals or   
groups their shares of 'national income'."  Thus, inequality may well   
increase with economic growth, but the poor would get better fed,   
clothed, housed, educated, and also purchase higher quality health,   
entertainment, and other services.  
  
The data I cited yesterday has Sri Lanka showing the best index of   
equality (34.4); better than that of the US (40.8).  But it is a   
no-brainer to ask the poor in which of these countries they would rather   
live.  Indeed, several former Soviet Bloc countries have better indexes   
of equality than the US, UK, or Canada.  But where would the poor in   
those countries rather leave if they had the freedom to move around?  
  
It is natural for people who have less to be envious or jealous of those   
who have more.  And that's why Adam Smith included in his list of the   
legitimate functions of government, in order to promote economic growth,   
the protection of private property.  He writes:  
  
"It is only under the shelter of the civil magistrate that the owner of   
the valuable property, which is acquired by the labour of many years, or   
perhaps of successive generations, can sleep a single night in security.   
  He is at all times surrounded by unknown enemies, whom, though he   
never provoked, he can never appease, and from whose injustice he can be   
protected only by the powerful arm of the civil magistrate continually   
held up to chastise it."  
  
Thus, I think egalitarians or redistributionists (not meant as   
"name-calling," but simply identifying a category of analysts!) play too   
much on emotions with their concerns over inequality.  They should   
rather think of ways to remove the obstacles in the way of the poor from   
earning higher incomes, without hindering the income-earning   
capabilities of the more industrious.  Even David Ricardo and Thomas   
Malthus were in agreement on this point when addressing the Poor Laws of   
England.  Ricardo acutely observed that these laws were not going to   
make the poor rich, but make the rich poor.  
  
I'd like to recommend to Michael Perelman that he spend some time   
pondering the absolute vs relative poverty issue in his forthcoming   
book, parts of which he has shared with us.  
  
James Ahiakpor