Most likely inequality has an effect in addition to any problems caused by the absolute level of income. Remember that this study was done in Denmark which has a functioning welfare state (no doubt imperfect of course), so not very many of the people in question would suffer severe physical privation.
It would be interesting to see a similar study in a country where being in the bottom quintile also meant being absolutely poor.
Is it a real effect, or a mere correlation between relative low income and other kinds of social marginalization and/or lack of social capital? It's not always easy to measure the latter at an individual or household level (hence why relative SES is often used as a correlate), but there's plenty of research highlighting the importance of social capital provision at a broader community scale.
Anecdotally, I see many people with poor decision-making skills prosper because they were born into wealth, and conversely many who make the best decisions available to them yet fail to thrive because of situational challenges (or, for example, the decision to become a schoolteacher in the US).
Bad decisions may (may) lead you to financial ruin, but financial ruin is not an indicator of bad decisions.
I would expect the population-wide correlation between good decision-making and financial outcome to be positive. (Good decisions, all else equal, will tend towards better outcomes financially and I’d expect the converse would also hold.)
How much influence that has I’m not as sure about, but I would be shocked if there were zero or negative correlation.
> (Good decisions, all else equal, will tend towards better outcomes financially and I’d expect the converse would also hold.)
There's a study that does hint the converse is true.
> Childhood poverty: Experiencing or growing up in poverty affects people’s lifelong decision-making style. People living in poverty make decisions focused on coping with present stressful circumstances, often at the expense of future goals.
>> Is the problem inequality or that the income is below...
I'm not sure this is a valid (in a Popperian sense) QUESTION.
Income is interrelated to a motherload of other population factors that interact in complex ways. Things can be both cause and effect. You live in a cheap neighborhood because you're broke. Maybe this low income neighborhood or has worse jobs or worse schools. Maybe crime is high. Stress. Mental health. Relationship consequences. Financial consequences Etc.
These things are complex in practice and can span communities/societies.
I don't think we can understand these things fully or mechanically. There's plenty of evidence, theory, and common sense that such problems stack. No theory or measurement is definitive, IMO. Weather you theorize about the world or deal in data, you're probably not distinguishing between income and income inequality well. They're too tightly interlinked in practice.
That said, I doubt that middle-quintile income groups in much poorer countries than Denmark exhibit the same mental health patterns as bottom quintile groups in Denmark. So... "income threshold, not income inequality" probably isn't true in that sense.
I wouldn't jump to the opposite conclusion either, that absolute income thresholds don't matter either. I just don't think we can reach conclusions about social issues in perfect isolation from each other. Society doesn't work that way, so it's hard to reach conclusions about it that way.
In practice, income and income inequality within societies exist in an interlinked way. We don't generally affect one without the other. We can't easily study/measure it either.
Parsed as a strict-sih Popperian question, it just ends up being a moot question. Maybe in a human petri dish it's possible that mental health is totally unrelated to income. Does that even mean anything?
In my view, the problem is societal outcomes like the one we see in the linked article. The factor that compounds the problem is income equality. Your question is interesting but I'd like to rephrase it a bit.
What should the minimum income threshold be that puts reasonable guarantees on desired societal outcomes?
This should probably be expressed as a proportion of total economic output rather than a dollar amount. Because ultimately money represents a share of societies economic output.
Disproportionately large incomes also cause significant problems to capitalist societies, because our market system is predicated on the idea that we indicate our preferences by spending our money on the things we want. That system breaks down when a significant proportion of the wealth is controlled by only a few people, leading to many of the same problems you get in planned economies that have a similar concentration of power.
You switched from spending money to wealth. That exposed a weakness in the argument: it’s only when wealth is spent that the problem arises (if it exists at all).
No, because wealth is a monopoly over money, and holding on to wealth means someone else cannot make decisions about spending that money.
The problem doesn't just exist, it's very obvious and pressing.
And ultimately it leads to huge distortions in democracy and policy at every level.
There's a good case to be made for the assertion that any economy that prioritises the wealth of a very small number of individuals over eliminating poverty for most of the population is fundamentally and unavoidably unstable. At best it will be unable to operate as a functional democracy and at worst it becomes an oligarchy where inherited privilege trumps any real prospect of social mobility.
The fact that the US scores very poorly on objective measures of social mobility compared to more redistributive economies only reinforces this.
> No, because wealth is a monopoly over money, and holding on to wealth means someone else cannot make decisions about spending that money.
This implies that people become wealthy by taking money from others. This is not correct, people become wealthy (in a free market system) by creating wealth. The money supply automatically increases because of that.
There isn't a monopoly on money - anyone can create wealth.
This is more of an ideal than a reality. Anyone can create wealth, but it's not so simple to convince someone to give you money for it. A lot of value is generated and given away for free (Open source is perfect example. Other people might point to the work involved in raising children or running a home), and plenty of people manage to gain control of bootloads of money without providing any value (or even negative value).
A free market is an approximation of value at the best of times: at best it represents people's estimation of that value given the information available to them. But in real societies it's not even that good, it's distorted by power differentials. One of the most significant being wealth disparities. In a hypothetical society where everyone had equal wealth then a market does distribute wealth to at those people who others think are providing value. But as soon as there's a wealth disparity then people with more wealth have proportionally say over where money gets distributed and thus money accrues to what those people consider valuable. The greater the wealth disparities that exist the further away this gets from distributing money to those who truly create wealth.
The mere potential for spending would create a distortion/bias in favor of/in the direction of larger pools of accumulated capital prior to any expenditure and in spite of whether or not any specific potential expenditure were to take place.
> leading to many of the same problems you get in planned economies that have a similar concentration of power.
Yet it seems that the overwhelming bulk of products and services in the marketplace are designed for broad market appeal, not just to 1% of the population. For example, in Seattle, I don't even know of any stores that target the 1%.
McDonald's is one of the biggest (or the biggest) restaurateur, yet it clearly is targeted at pretty much everyone.
What you're talking about reminds me of the horseshoe model of politics. I've always found it fascinating how corporatism is so similar to aspects of communism, or how communist bureaus in some ways are very similar to corporations with huge market shares (de facto monopolies, with only token competition being allowed). A corporation of course works under the system of capitalism, which is often said to be the antithesis of communism. Yet the outcome of either model goven monopolist tendencies and largesse is strangely similar.
In political economy literature, the Soviet Union is often called a "state capitalist" type of economy rather than communist. It functioned as a giant corporation in global capitalism.
https://en.m.wikipedia.org/wiki/State_capitalism
If you raised everyone's income above a minimum threshold, that would reduce income inequality by almost any measure.
Gini coefficient (the most commonly used inequality measure) effectively uses logarithms in its calculations: so raising incomes away from zero is the most effective way of reducing inequality by this metric (and most other metrics, and, I think, in most people's minds).
[Edit: are y'all down-voting because I said something technically wrong, or because you disagree in your mind? I'd like to know.]
What if you did it in a way that makes Bezos even richer? What if you could increase low end incomes while simultaneously worsening inequality? Should we do it?
My vote is, of course. But I'm genuinely curious to hear the counter argument.
> What if you could increase low end incomes while simultaneously worsening inequality?
If you could increase them more than you would be able to by redistributing wealth, then I think you should. But I can't think of any scenario where this is evenly remotely close to being the case. In practice we have plentiful but finite resources, and by far the easiest and most practical way to increase lower end incomes would be to redistribute our existing wealth.
Resources are infinite under free markets. For example, software. There is great wealth in software creation, yet it does not exist in the physical world. Even for physical things, they can be re-arranged to make the new arrangement more valuable.
That is the beauty (sometimes cruel beauty) of capitalism. It's not up to you to imagine a way for this to happen. Anyone can imagine a way to increase their own wealth by creating value for other people.
Increasing income does not have to be increasing the number of dollars you make either. What if you made the same money, but it went a longer way? Like you could get cheaper healthcare, but good food for less, or have any other show up at your doorstep in two business days?
I'm not saying our system is perfect, and I actually agree that this is probably a good time to look at redistribution of wealth. But I think limiting others' creativity because of our own lack of imagination is a terrible idea that makes us all worse off.
Who said anything about limiting people's creativity. I do think we should limit how much we compensate people for their creativity (in order to balance compensating others for theres). But they are free to be as creative as they like.
Agree, a balance has to be found, I would say most of Europe is in balance. Cake could be (practically) unbounded, since (real) value can increase with actually less consumption of resources.
> What if you could increase low end incomes while simultaneously worsening inequality?
That it absurd. If you double the wealth and income of every person on the world, nothing changes. Same gini coefficient, same poverty.
The sum of all money and other financial objects might change in numerical value but still represents the current amount of goods and land that exist on the planet.
I'd argue that you haven't really increased incomes at all if you simply double the monetary amount. To actually increase wealth/incomes you'd have increase the amount of material goods, services, and realise improvements to their quality of life.
That statement is obviously false. The US and Haiti have about the same gini coefficient.
> If you double the wealth and income of every person on the world, nothing changes.
The commenter surely meant doubling material wealth (as you put it, the "current amount of goods and land that exist on the planet"), not just some abstract numerical value.
If you increase their income by giving them jobs where they can be more productive, poverty decreases even if the rich also get richer. Consider building factories in a poor country. People can both contribute and earn a lot more in factory jobs versus back on the farm.
The fact that Bezos can get incredibly richer this year, while other people struggle harder is symptomatic of a system that allows inequality - it's not that Bezos getting richer in itself causes inequality.
Bezos's wealth is already effectively unbounded. He has the same wealth as ~50% of the population of United States altogether. That won't immediately change if you uplift poor people's income (since income is not wealth). Why is it important to consider his right to get even richer?
> Why is it important to consider his right to get even richer?
Because it has a correlation with making a lot of other peoples' lives better. For example, I needed to do some repairs two days ago, and ordered the parts necessary from Amazon, and received the parts yesterday. I didn't have to spend 2 hours driving somewhere to get those parts. That extra 2 hours is a benefit to my life. Amazon, in aggregate, has saved me a great deal of time. Another benefit Amazon provides is selection - I can find much more exactly what I want, rather than accepting whatever the store has.
This example is a specific benefit, but not one that Amazon has provided.
It's a benefit that online shopping has provided, which Amazon has monopolized, partly via suppressing competition and exploiting labour (which society has to pay for in other ways).
Amazon utterly revolutionized online shopping, a benefit Amazon provided. There's simply no way it could have otherwise grown to the biggest company in the world from a garage in Bellevue.
25 years later it's easy to assume that online shopping was always like it is today. No way. Nobody even conceived of what it has become. I remember, for example, when ordering by mail meant "allow 3 to 6 weeks for delivery". I'm still astonished by next day delivery - which Amazon created and made ordinary.
It would be interesting to see a similar study in a country where being in the bottom quintile also meant being absolutely poor.