When you worry about rising inequality, what are you thinking about?
I now know of two competing models for inequality, each of which has vastly different implications for political economy.
In the first, called consumptive inequality, inequality is embodied in differential consumption. Under this model, there is a huge gap between Oracle CEO Larry Ellison (net worth: $60 billion), with his private islands, his yacht, etc. and myself, with my cheap rented apartment, ten-year-old bike, and modest savings. In fact, under this model, there’s even a huge gap between Larry Ellison with all of his luxury goods and Berkshire Hathaway CEO Warren Buffett (net worth: $90.6 billion), with his relatively cheap house and restrained tastes.
The other day, I posed a question to my friends on Facebook:
Do you think countries with higher taxes see more charitable donations or fewer charitable donations? What sort of correlation would you expect between the two (weak positive? weak negative? strong positive? strong negative?). I just crunched some numbers and I'll post them later. First I want to give people a chance to guess and test their calibration.
I was doing research for a future blog post on libertarianism and wanted to check one of the fundamental assumptions that many libertarians make: in the absence of a government, private charity would provide many of the same social services that are currently provided by the government.