As those who have been following the presidential race know, John Edwards recently made his exit. In his 2004 campaign, Edwards frequently talked about "two Americas," describing a country where the rich have everything and the poor have nothing. His campaign in 2008 was not much different. Edwards is not the only public figure who frequently references inequality.
Inequality is a hot topic. For the most part, we like to think of ourselves as a people who support "equal opportunity" for all. However, America has a relatively high Gini coefficient. That is to say, our country's income distribution is not at all even. Many want to make policy changes that would help close the gap of inequality America faces. I have even come across inequality.org, a site dedicated to inequality awareness. Two recent articles are entitled, "Want to Stimulate the Economy? Address Extreme Inequality" and "Charity Fuels Disparity." However, I was recently exposed to another side of inequality, one that I had never heard of before.
While we often look at income to measure inequality, there is another standard by which we can measure quality of life. Consumption surveys do not look at what people earn, but rather at how much people spend. Consumption surveys can be a more accurate portrayal of inequality because they look at how people are actually living and the actual quality of life they experience. Consumption surveys and Gini coefficients do not always come to the same conclusions about inequality. In a 2006 study, "Does Income Inequality Lead to Consumption Inequality? Evidence and Theory," Dirk Krueger and Fabrizio Perri of the University of Pennsylvania and New York University, respectively, argue that while income inequality is rising, consumption inequality has remained constant for a few decades.
An Economist article went into more detail about the practical implications of consumption equality. As examples, they juxtapose the prices of a Jaguar and a Hyundai. Yes, only the extremely wealthy will be able to afford the former. However, both vehicles will quite effectively help an individual get from Point A to Point B. Refrigerators range from a few hundred dollars to tens of thousands. However, they both keep food fresh. The Economist article concludes that we are "experiencing a period of unprecedented material equality."
Politicians such as Edwards try to get us to believe that America is full of "inequality" that we need to eradicate. For example, consider Edwards statement: "Today...there are two Americas, not one. One America does the work, while another America reaps the reward." However, when one looks at our country's consumption habits, both Americas are reaping the reward. We do observe a relatively equal playing field when it comes to consumption.
Now, I'm not saying everything is perfect. There are certain inequalities in America that need to be overcome. I think many people would be just fine with less and there are others who need a little more. There are other areas, public schools, for example, where Edwards may have hit the nail on the head regarding the system's unequal nature. I am not trying to say that nothing should be changed; that will depend on people's individual political persuasions. However, when Edwards and other politicians refer to the "two Americas" based on income inequality alone, we need to recognize that there is more to inequality than just income.