Inequality can sometimes be a reflection of some social ills. But it can be a reflection of social progress too, and some purported cures for it are much worse than the disease.
Ryan Bourne —
When the Pope tweeted in 2014 that “Inequality is the root of social evil,” his stock rose with egalitarians. Former US president Barack Obama had described inequality as “the defining challenge of our time”. Jeremy Corbyn has since risen, demanding an economic policy to tackle Britain’s “grotesque inequality”. The assumption underpinning these views is that a concentrated distribution of income or wealth has negative economic and social consequences.
The idea that more inequality is a bad thing and less inequality a good thing permeates public debate. It is the moral foundation of Corbyn’s call for extensive government redistribution of income and wealth.
But according to Nobel Prize-winning economist Angus Deaton, worrying about whether inequality causes problems, such as slower growth or impaired democracies, looks at things through the wrong end of the telescope. “Inequality is not so much a cause of economic, political, and social processes as a consequence,” he concludes.
Inequality can sometimes be a reflection of some social ills. But it can be a reflection of social progress too, and some purported cures for it are much worse than the disease.
This makes sense. A given distribution of income or wealth does not fall manna from heaven, nor is it pre-determined by government. It is a reflection of millions of interactions, trades, decisions, inheritances and policies. A Gini coefficient, or a statistic of the income or wealth share for the top 1pc, is aggregate information, but tells us nothing about how it has arisen. Whether we consider the overall result “fair” or “unfair” depends, as Deaton acknowledges, on its causes.
High levels of inequality, as seen in countries such as South Africa, can be indicative of historical injustices. They can result from prejudice and oppression, past and present. They can arise from government capture by special interest groups, cronyism and corruption. Poor education, family breakdown, racial discrimination, long-term unemployment and social immobility might all lead to a concentration of income at the top.
On the other hand, there are some causes of inequality that are benign, such as lotteries, and others which are positively beneficial, such as technological advances, entrepreneurialism and free trade. Bill Gates and Steve Jobs got rich by providing services that enhanced our lives. In South Africa again, income inequality actually rose further post apartheid, because talented black people had opportunities opened to them for the first time. Few would suggest this was undesirable.
The Chinese Gini coefficient has risen from 0.16 in 1980 to 0.55 in 2014 — a sign of rising inequality — but this has gone hand in hand with huge poverty reduction as the country liberalized markets. In contrast, Britain saw a modest fall in inequality after a catastrophic financial crash in 2008. In Britain, greater equality was a symptom of a problem. In China, greater inequality was a symptom of success. It would take an extreme relativist to argue that Britain had become better and China had become worse.
Low levels of inequality can result from other undesirable trends too. In a magisterial work, Walter Scheidel’s book The Great Leveller shows that large reductions in economic inequality have only been achieved through pandemics, mass mobilization war, violent revolution and state failure. The Black Death in Europe wiped out a quarter of the population, leading to a shortage of labor relative to land, and a compression of incomes between laborers and landowners.
The Soviet Union, after the nationalization of banks, forcible redistribution of land, the gulags et al, had a Gini coefficient of just 0.26 by the Eighties — an egalitarian’s dream. In Japan, the top 1pc’s income share fell from 9.2pc to 1.9pc between 1938 and 1945, while the wealth of the largest 1pc of estates fell by 90pc. It should seem obvious that the price of lower inequality in all these cases — whether death, destruction or severe restrictions on freedom — were intolerably high.
The point here is not to say more inequality is a “good thing,” but that it cannot be generalized that less inequality is better. Corbyn’s position, that implies “reducing inequality” is desirable, seemingly countenances policies that by other metrics might be extremely harmful. We should bear this in mind when talking about the government “curbing inequality”. Affecting a distribution inevitably means interfering with human action. We could lower inequality (at least temporarily) by deporting or exterminating rich people. But would this benefit those who remained? It is difficult to see how.
Deaton is right to say then that current political trends are not so much a reflection of inequality, but perceived unfairness. He concludes: “Some of the processes that generate inequality are widely seen as fair. But others are deeply and obviously unfair, and have become a legitimate source of anger and disaffection.” No doubt there are steps the Government could take to make the economy fairer, which might also lower inequality. Liberalizing planning laws to allow more houses to be built, for example, would almost certainly narrow the wealth distribution but would improve the efficiency of the economy too.
Yet what Deaton’s argument really shows is that we should not care about inequality at all. Once one starts thinking about the need to eliminate “bad” causes of inequality, while leaving “good” causes alone, you are not really acting on inequality, but the justness or otherwise of other things that affect it. We should eliminate crony capitalism, prevent taxpayer bank bailouts, and ensure competitive markets that the public want for efficiency and fairness reasons, irrespective of their effect on inequality measures such as the Gini coefficient.
At best, inequality serves as an indicator of potential problems. At worst, obsessing about it distorts our priorities from what truly matters, such as the living standards of the least well-off. Inequality can sometimes be a reflection of some social ills. But it can be a reflection of social progress too, and some purported cures for it are much worse than the disease.
The Earth was 509.4 percent more abundant in 2023 than it was in 1980.
Marian L. Tupy, Gale Pooley —
The Simon Abundance Index (SAI) quantifies and measures the relationship between resources and population. The SAI converts the relative abundance of 50 basic commodities and the global population into a single value. The index started in 1980 with a base value of 100. In 2023, the SAI stood at 609.4, indicating that resources have become 509.4 percent more abundant over the past 43 years. All 50 commodities were more abundant in 2023 than in 1980.
Figure 1: The Simon Abundance Index: 1980–2023 (1980 = 100)
The SAI is based on the ideas of University of Maryland economist and Cato Institute senior fellow Julian Simon, who pioneered research on and analysis of the relationship between population growth and resource abundance. If resources are finite, Simon’s opponents argued, then an increase in population should lead to higher prices and scarcity. Yet Simon discovered through exhaustive research over many years that the opposite was true. As the global population increased, virtually all resources became more abundant. How is that possible?
Simon recognized that raw materials without the knowledge of how to use them have no economic value. It is knowledge that transforms raw materials into resources, and new knowledge is potentially limitless. Simon also understood that it is only human beings who discover and create knowledge. Therefore, resources can grow infinitely and indefinitely. In fact, human beings are the ultimate resource.
Visualizing the Change
Resource abundance can be measured at both the personal level and the population level. We can use a pizza analogy to understand how that works. Personal-level abundance measures the size of an individual pizza slice. Population-level abundance measures the size of the entire pizza pie. The pizza pie can get larger in two ways: the slices can get larger, or the number of slices can increase. Both can happen at the same time.
Growth in resource abundance can be illustrated by comparing two box charts. Create the first chart, representing the population on the horizontal axis and personal resource abundance on the vertical axis. Draw a yellow square to represent the start year of 1980. Index both population and personal resource abundance to a value of one. Then draw a second chart for the end year of 2023. Use blue to distinguish this second chart. Scale it horizontally for the growth in population and vertically for the growth in personal resource abundance from 1980. Finally, overlay the yellow start-year chart on the blue end-year chart to see the difference in resource abundance between 1980 and 2023.
Figure 2: Visualization of the Relationship between Global Population Growth and Personal Resource Abundance of the 50 Basic Commodities (1980–2023)
Between 1980 and 2023, the average time price of the 50 basic commodities fell by 70.4 percent. For the time required to earn the money to buy one unit of this commodity basket in 1980, you would get 3.38 units in 2023. Consequently, the height of the vertical personal resource abundance axis in the blue box has risen to 3.38. Moreover, during this 43-year period, the world’s population grew by 3.6 billion, from 4.4 billion to over 8 billion, indicating an 80.2 percent increase. As such, the width of the blue box on the horizontal axis has expanded to 1.802. The size of the blue box, therefore, has grown to 3.38 by 1.802, or 6.094 (see the middle box in Figure 2).
As the box on the right shows, personal resource abundance grew by 238 percent; the population grew by 80.2 percent. The yellow start box has a size of 1.0, while the blue end box has a size of 6.094. That represents a 509.4 percent increase in population-level resource abundance. Population-level resource abundance grew at a compound annual rate of 4.3 percent over this 43-year period. Also note that every 1-percentage-point increase in population corresponded to a 6.35-percentage-point increase in population-level resource abundance (509.4 ÷ 80.2 = 6.35).
Individual Commodity Changes: 1980–2023
As noted, the average time price of the 50 basic commodities fell by 70.4 percent between 1980 and 2023. As such, the 50 commodities became 238.1 percent more abundant (on average). Lamb grew most abundant (675.1 percent), while the abundance of coal grew the least (30.7 percent).
Figure 3: Individual Commodities, Percentage Change in Time Price and Percentage Change in Abundance: 1980–2023
Individual Commodity Changes: 2022–2023
The SAI increased from a value of 520.1 in 2022 to 609.4 in 2023, indicating a 17.1 percent increase. Over those 12 months, 37 of the 50 commodities in the data set increased in abundance, while 13 decreased in abundance. Abundance ranged from a 220.8 percent increase for natural gas in Europe to a 38.9 percent decrease for oranges.
Figure 4: Individual Commodities, Percentage Change in Abundance: 2022–2023
Conclusion
After a sharp downturn between 2021 and 2022, which was caused by the COVID-19 pandemic, government lockdowns and accompanying monetary expansion, and the Russian invasion of Ukraine, the SAI is making a strong recovery. As noted, since 1980 resource abundance has been increasing at a much faster rate than population. We call that relationship superabundance. We explore this topic in our bookSuperabundance: The Story of Population Growth, Innovation, and Human Flourishing on an Infinitely Bountiful Planet.
Appendix A: Alternative Figure 1 with a Regression Line, Equation, R-Square, and Population
Appendix B: The Basic 50 Commodities Analysis: 1980–2023
Appendix C: Why Time Is Better Than Money for Measuring Resource Abundance
To better understand changes in our standard of living, we must move from thinking in quantities to thinking in prices. While the quantities of a resource are important, economists think in prices. This is because prices contain more information than quantities. Prices indicate if a product is becoming more or less abundant.
But prices can be distorted by inflation. Economists attempt to adjust for inflation by converting a current or nominal price into a real or constant price. This process can be subjective and contentious, however. To overcome such problems, we use time prices. What is most important to consider is how much time it takes to earn the money to buy a product. A time price is simply the nominal money price divided by the nominal hourly income. Money prices are expressed in dollars and cents, while time prices are expressed in hours and minutes. There are six reasons time is a better way than money to measure prices.
First, time prices contain more information than money prices do. Since innovation lowers prices and increases wages, time prices more fully capture the benefits of valuable new knowledge and the growth in human capital. To just look at prices without also looking at wages tells only half the story. Time prices make it easier to see the whole picture.
Second, time prices transcend the complications associated with converting nominal prices to real prices. Time prices avoid subjective and disputed adjustments such as the Consumer Price Index (CPI), the GDP Deflator or Implicit Price Deflator (IPD), the Personal Consumption Expenditures price index (PCE), and the Purchasing Power Parity (PPP). Time prices use the nominal price and the nominal hourly income at each point in time, so inflation adjustments are not necessary.
Third, time prices can be calculated on any product with any currency at any time and in any place. This means you can compare the time price of bread in France in 1850 to the time price of bread in New York in 2023. Analysts are also free to select from a variety of hourly income rates to use as the denominator when calculating time prices.
Fourth, time is an objective and universal constant. As the American economist George Gilder has noted, the International System of Units (SI) has established seven key metrics, of which six are bounded in one way or another by the passage of time. As the only irreversible element in the universe, with directionality imparted by thermodynamic entropy, time is the ultimate frame of reference for almost all measured values.
Fifth, time cannot be inflated or counterfeited. It is both fixed and continuous.
Sixth, we have perfect equality of time with exactly 24 hours in a day. As such, we should be comparing time inequality, not income inequality. When we measure differences in time inequality instead of income inequality, we get an even more positive view of the global standards of living.
These six reasons make using time prices superior to using money prices for measuring resource abundance. Time prices are elegant, intuitive, and simple. They are the true prices we pay for the things we buy.
The World Bank and the International Monetary Fund (IMF) track and report nominal prices on a wide variety of basic commodities. Analysts can use any hourly wage rate series as the denominator to calculate the time price. For the SAI, we created a proxy for global hourly income by using data from the World Bank and the Conference Board to calculate nominal GDP per hour worked.
With this data, we calculated the time prices for all 50 of the basic commodities for each year and then compared the change in time prices over time. If time prices are decreasing, personal resource abundance is increasing. For example, if a resource’s time price decreases by 50 percent, then for the same amount of time you get twice as much, or 100 percent more. The abundance of that resource has doubled. Or, to use the pizza analogy, an individual slice is twice as large. If the population increases by 25 percent over the same period, there will be 25 percent more slices. The pizza pie will thus be 150 percent larger [(2.0 x 1.25) – 1].
“We find that each of the past four generations of Americans was better off than the previous one, using a post-tax, post-transfer income measure constructed annually from 1963-2022 based on the Current Population Survey Annual Social and Economic Supplement.”
“57% of [US] workers are making more money now — after adjusting for inflation — than they were a year ago. 41% of us have seen a real wage increase of more than 5%.”
1,000 Bits of Good News You May Have Missed in 2023
A necessary balance to the torrent of negativity.
Malcolm Cochran —
Reading the news can leave you depressed and misinformed. It’s partisan, shallow, and, above all, hopelessly negative. As Steven Pinker from Harvard University quipped, “The news is a nonrandom sample of the worst events happening on the planet on a given day.”
So, why does Human Progress feature so many news items? And why did I compile them in this giant list? Here are a few reasons:
Statistics are vital to a proper understanding of the world, but many find anecdotes more compelling.
Many people acknowledge humanity’s progress compared to the past but remain unreasonably pessimistic about the present—not to mention the future. Positive news can help improve their state of mind.
We have agency to make the world better. It is appropriate to recognize and be grateful for those who do.
Below is a nonrandom sample (n = ~1000) of positive news we collected this year, separated by topic area. Please scroll, skim, and click. Or—to be even more enlightened—read this blog post and then look through our collection of long-term trends and datasets.
