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Viewing All Challenges Through an Inequality Lens Distorts Focus on the Big Issues

May 17, 2019 in Economics

By Ryan Bourne

Ryan Bourne

To a man with a hammer, everything looks like a nail. To a
political leader who believes in equality of economic outcomes,
differences between groups look like injustices.

Jeremy Corbyn has made reducing disparities a central goal of
his political programme. Whether thinking about gender outcomes,
income inequality, or regional divides, he sees a world not
conforming to his priors as automatically unjust.

For him, there’s no room for positive explanations for
differences in economic outcomes, such as free choice, hard work,
or welfare-enhancing entrepreneurship. No, as the Pope once
claimed, inequality is an “evil” that must be stamped
out. In fact, economic inequality is the egalitarian Left’s
explanation for most social and economic ills that afflict us,
including our current political turmoil.

Such a world view has never had much truck with the public. Yet
usually careful analysts and journalists are increasingly
suspending their critical faculties in the allure of this
monocausal thinking. Starting with Richard Wilkinson and Kate
Pickett’s book The Spirit Level and pushed on by Thomas
Piketty’s bestselling tome Capital In The Twenty-First
Century, it’s now common to hear or read that, left
unchecked, inequalities threaten slower growth, health crises and
the future of capitalism and democracy.

It’s in this context that to great fanfare, the Institute
for Fiscal Studies launched a major inequality review this week,
chaired by economic Nobel Prize winner Angus Deaton. They promise
us “a comprehensive understanding of inequalities”
covering “living standards, health, political participation
and opportunity, not just between the rich and poor but by gender,
ethnicity, geography and education too”.

Its first paper provides interesting data on all these issues,
but is at pains to point out that the trends analysed need not be
thought problematic. Indeed, a key aim of the project is
disentangling which inequalities we worry about, which we should
worry about, and which are benign.

Yet reading the report, something struck me. The most concerning
trends are nothing to do with inequality, and should occupy us
regardless of which groups they affect. Meanwhile, the issues about
economic inequalities are often the least worrying.

In shoehorning together disparate issues under an umbrella
“Inequality Review”, the IFS therefore risks faulty
interpretation of their work’s message — with people
claiming economic inequality causes the bad outcomes they highlight
and over-dramatising what policy should do to correct them.

Some media reporting and political reaction to the paper shows
these fears are justified.

Take mortality rates. The IFS noted that among the middle-aged
(45 to 54-year-olds), death rates have risen for both men and women
since the early 2010s following previous continuous improvement.
This recent trend has been driven in part by higher “deaths
of despair” — suicides, overdose and …read more

Source: OP-EDS

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