Monday, November 4, 2013

A cause and consequence of progress

The Great Escape: Health, Wealth, and the Origins of Inequality

I have spent this long weekend reading the last book by Angus Deaton. It appeared in the list of FT business books of the year, although was not shortlisted. You may find a short reference at The Economist and an article by the author at Foreign Policy. As you know, I'm a follower of his works. You'll find references in previous posts 1, 2.
The book is worth reading. The topic and the author deserves spending time on it. And specially right now, with dubious prospects about economic growth and how it will affect to inequality.
Let me highlight some paragraphs from the book.
On inequality paradox:
Inequality is often a consequence of progress. Not everyone gets rich at the same time, and not everyone gets immediate access to the latest life-saving measures, whether access to clean water, to vaccines, or to new drugs for preventing heart disease. Inequalities in turn affect progress. This can be good; Indian children see what education can do and go to school too. It can be bad if the winners try to stop others from following them, pulling up the ladders behind them. The newly rich may use their wealth to influence politicians to restrict public education or health care that they themselves do not need.
On efficiency and the economists:
Economists—my own tribe—think that people are better off if they have more money—which is fine as far as it goes. So if a few people get a lot more money and most people get little or nothing, but do not lose out, economists will usually argue that the world is a better place. And indeed there is enormous appeal to the idea that, as
long as no one gets hurt, better off is better; it is called the Pareto criterion. Yet this idea is completely undermined if wellbeing is defined too narrowly; people have to be better off, or no worse off, in wellbeing, not just in material living standards. If those who get rich get favorable political treatment, or undermine the public health or public education systems, so that those who do less well lose out in politics, health, or education, then those who do less well may have gained money but they are not better off. One cannot assess society, or justice, using living standards alone. Yet economists routinely and
incorrectly apply the Pareto argument to income, ignoring other aspects of wellbeing.
On inequality and what to do about it:
Inequality can spur progress or it can inhibit progress. But does it matter in and of itself? There is no general agreement on this: the philosopher and economist Amartya Sen argues that even among the many who believe in some form of equality, there are very different views about what it is that ought to be made equal. Some economists and philosophers argue that inequalities of income are unjust, unless they are necessary for some greater end. For example, if a government were to guarantee the same income for all of its citizens, people might decide to work a lot less so that even the very poorest might be worse off than in a world in which some inequality is allowed. Others emphasize equality of opportunity rather than equality of outcomes, though there are many versions of what equality of opportunity means. Yet others see fairness in terms of proportionality: what each person receives should be proportional to what he or she contributes. On this view of fairness, it is easy to conclude that income equality is unfair if it involves redistributing income from rich to poor.
On Aid and Politics, (chapter 7).
The arguments about foreign aid and poverty reduction are quite different from the arguments about domestic aid to the poor. Those who oppose welfare benefits often argue that aid to the poor creates incentives for poor behavior that help to perpetuate poverty. These are not the arguments here. The concern with foreign aid is not about
what it does to poor people around the world—indeed it touches them too rarely—but about what it does to governments in poor countries. The argument that foreign aid can make poverty worse is an argument that foreign aid makes governments less responsive to the needs of the poor, and thus does them harm.
Aid is a controversial issue, and Deaton was criticised for it at NYT .  You may find here a recent example that supports anecdotically the argument of Angus Deaton. It's up to you, the final view on this difficult topic.

PS. On inequality in our days, at NEG.

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