|Publisher:||Yale University Press|
|Series:||The Institution for Social and Policy Studies Series|
|Edition description:||New Edition|
|Product dimensions:||6.13(w) x 9.25(h) x (d)|
About the Author
C. Michael Henry is visiting research fellow at the University of Oxford.
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Race, Poverty, and Domestic Policy
Yale University PressCopyright © 2004 C. Michael Henry
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Chapter OneFrom Income Inequality to Economic Inequality
AMARTYA K. SEN
I begin by recounting a true story-a rather trivial and innocuous story, as it happens, but one with something of a lesson. Some years ago, when I went to give a lecture at another campus, I chose "Economic Inequality" as the title of my talk. On arrival, I found the campus covered with posters announcing that I was speaking on "Income Inequality." When I grumbled about it slightly, I encountered gentle, but genuine, amazement that I wanted to fuss about such "an insignificant difference." Indeed, the identification of economic inequality with income inequality is fairly standard, and the two are often seen as effectively synonymous in the economic literature. If you tell someone that you are working on economic inequality, it is quite commonly assumed that you are studying income distribution.
This implicit identification can be found in the philosophical literature as well. For example, in his interesting and important paper "Equality as a Moral Ideal," Harry Frankfurt (1987), the distinguished philosopher, provides a closely reasoned critique of what be calls economic egalitarianism, defining it as "the doctrine that there should be no inequalities in the distribution of money" (p. 21).
The distinction, however, is important. Many criticisms of economic egalitarianism as a value or a goal apply much more readily to the narrow concept of income inequality than they do to the broader notions of economic inequality. For example, giving a larger share of income to a person with more needs-say, due to a disability-may be seen as militating against the principle of equalizing incomes, but it does not go against the broader precepts of economic equality because the greater need for economic resources due to the disability must be taken into account in judging the requirements of economic equality.
The subject of this chapter is precisely the difference between economic inequality and income inequality. It will be argued that we ought to pay much more attention than we conventionally do to economic inequality in an appropriately broad sense, taking note of the fact that income inequality, on which economic analysis of inequality so often concentrates, gives a very inadequate and biased view of inequalities, even of those inequalities that can be powerfully influenced by economic policy. There is a serious gulf here, and the distinction, I would argue, is of considerable importance for economic practice as well as for economic theory. I shall also present some empirical examples, involving the United States as well as other countries, to illustrate the force of this distinction. The more difficult issue concerns the problems involved in having an appropriately broad notion of economic inequality that is both theoretically adequate and empirically usable. This question, too, I shall briefly try to address.
The Need for Going Beyond Income Inequality
A convenient point of departure is A. B. Atkinson's (1970) pioneering move in the measurement of inequality. He assessed inequality of incomes by bringing in an overall social objective function and measured inequality of an income distribution through the social loss (in terms of equivalent income) from that distribution in comparison with a corresponding equal distribution. However, he took the individuals to be symmetrical and also did not explicitly consider what the individuals respectively get out of their incomes and other circumstances.
There is a case for going beyond this structure and for examining the nature of individual advantages themselves as the constituent elements of social welfare (or, more generally, of social objectives). In this context, we have to take note of the heterogeneities of the individuals and of their respective non-income circumstances.
The important point to note is that the valuation of income is entirely as a means to other ends and also that it is one means among others. A more inclusive list of means has been used by John Rawls in his theory of justice through his concentration on primary goods, which include rights, liberties and opportunities, income and wealth, and the social bases of self-respect (Rawls 1971, pp. 60-65). Income is, of course, a crucially important means, but its importance lies in the fact that it helps the person to do things that she values doing and to achieve states of being that she has reasons to desire. The worth of incomes cannot stand separated from these deeper concerns, and a society that respects individual well-being and freedom must take note of these concerns in making interpersonal comparisons as well as social evaluations.
The relationship between income (and other resources), on the one hand, and individual achievements and freedoms, on the other, is not constant. Different types of contingencies lead to systematic variations in the conversion of incomes into the distinct functionings we can achieve (i.e., the various things we can do or be), and that affects the lifestyles we can enjoy. There are at least five important sources of parametric variation.
Personal heterogeneities: People have disparate physical characteristics connected with disability, illness, age, or gender, making their needs diverse. For example, an ill person may need more income to fight her illness than a person without such an illness would need. While the compensation needed for disadvantages will vary, some disadvantages may not be correctable even with more expenditure on treatment or care.
Environmental diversities: Variations in environmental conditions, such as climatic circumstances (temperature ranges, rainfall, flooding, and so on), can influence what a person gets out of a given level of income.
Variations in social climate: The conversion of personal incomes and resources into functionings is influenced also by social conditions, including public health care and epidemiology, public educational arrangements, and the prevalence or absence of crime and violence in the particular location. Aside from public facilities, the nature of community relationships can be very important, as the recent literature on social capital has tended to emphasize.
Differences in relational perspectives: The commodity requirements of established patterns of behavior may vary between communities, depending on conventions and customs. For example, being relatively poor in a rich community can prevent a person from achieving some elementary functionings (such as taking part in the life of the community) even though her income, in absolute terms, may be much higher than the level of income at which members of poorer communities can function with great ease and success. For example, to be able to "appear in public without shame" may require higher standards of clothing and other visible consumption in a richer society than in a poorer one (as Adam Smith  had noted more than two centuries ago). The same parametric variability may apply to the personal resources needed for the fulfillment of self-respect. This is primarily an intersocietal variation rather than an interindividual variation within a given society, but the two issues are frequently linked.
Distribution within the family: Incomes earned by one or more members of a family are shared by all, nonearners as well as earners. The family is thus the basic unit for consideration of incomes from the point of view of their use. The well-being or freedom of individuals in a family will depend on how the family income is used in furtherance of the interests and objectives of different members of the family. Thus, intrafamily distribution of incomes is quite a crucial parametric variable in linking individual achievements and opportunities with the overall level of family income. Distributional rules followed within the family (e.g., related to gender or age or perceived needs) can make a major difference to the attainments and predicaments of individual members.
Illustrations of Contrasts
I have presented elsewhere empirical examples of different types that illustrate the variability of the relation between incomes and achievements (Sen 1981, 1985a, 1995a, 1998). I shall take the liberty of dwelling on a few such illustrations to indicate what kind of contrasts may be involved. Figure 1.1 presents the gross national product (GNP) per head and life expectancy at birth of six countries (China, Sri Lanka, Namibia, Brazil, South Africa, and Gabon) and one sizable state (Kerala) within a country (India). The income-poor people of Kerala or China or Sri Lanka enjoy enormously higher levels of life expectancy than do the much richer populations of Brazil, South Africa, and Namibia, not to mention Gabon. Since life expectancy variations relate to a variety of economic influences, including epidemiological policies, health care, educational facilities, and so on, the reach of economic opportunities is much broader than that of income alone. I have had the occasion to discuss elsewhere how public policies in particular have been quite crucial in influencing the quality of life and longevity of different populations (see Sen 1981; Drèze and Sen 1989). In terms of inequality analysis, even the direction of the inequality points oppositely when we compare Kerala, China, and Sri Lanka on one side with Brazil, South Africa, Namibia, and Gabon on the other.
Figures 1.2 and 1.3 make a related but differently focused comparison, bringing in the United States itself. Even though the income per capita of African Americans is considerably lower than that of the American white population, African Americans are of course a great many times richer in income terms than the people of China or Kerala (even after correcting for cost-of-living differences). In this context, it is interesting to compare the survival prospects of African Americans vis-à-vis the immensely poorer Chinese or Indians in Kerala. American blacks do much better in terms of survival at low age groups (particularly in terms of infant mortality), but the picture changes over the years.
It turns out that, in fact, the Chinese and the Keralites decisively outlive American black men in terms of surviving to older age groups. Even American black women end up having similar survival patterns for high ages as the Chinese and decidedly lower survival rates than the Indians in Kerala. So it is not only the case that American blacks suffer from relative deprivation in the income space (vis-à-vis American whites); they are also absolutely more deprived than the much poorer Indians in Kerala and the Chinese (in the case of men) in terms of living to a ripe old age. In explaining these differences between living standards judged by income per capita and that judged by the ability to survive to higher ages, a number of causal issues are relevant (including medical insurance, public health care, elementary education, law and order) that are not unrelated to economic policies and programs.
Figure 1.4 compares, for different states within India, the values of gross domestic product (GDP) per capita, literacy (female and male), life expectancy at birth (female and male), and total fertility rate. The last has eventual importance for population growth, but its inclusion here is mainly for its immediate role, at high levels, as a major restraint that continual bearing and rearing of children imposes on the freedom and well-being of young women. Since continual child bearing and rearing are viewed as a negative influence on the quality of life, it is measured in the opposite (downward) direction from the zero line.
It is readily seen (as can also be confirmed by standard measures of statistical relations) that the relative values of GDP per capita figures are much at variance with the nonincome indices of aspects of quality of life (female literacy, male literacy, female life expectancy, male life expectancy, and low fertility rate), which all move very closely together. For example, the GDP figures would put Haryana and Punjab very much higher than Tamil Nadu and Kerala, but in terms of aspects of quality of life, exactly the opposite is the case.
As these illustrations exemplify (Figures 1.1 to 1.4) and as can be confirmed by other statistics (see, e.g., Sen 1985a, 1995a, 1998, and literature cited there), there are substantial differences between the income-based view and the nonincome indicators of quality of life. Inequality comparisons will yield very different results depending on whether we concentrate only on incomes or also on the impact of other economic and social influences on the quality of life.
A further issue, which I shall not take up in this chapter (but that I have addressed elsewhere, particularly in Sen 1997), concerns the severely negative impact of unemployment, especially persistent unemployment, on the lives that people can live. This is an especially important issue for the assessment of quality of life and inequality in contemporary Europe. Although unemployment benefits and social security may reduce the impact of the extraordinary levels of high unemployment on European income inequality in particular, the persistence of unemployment leads to many other kinds of deprivation (see Sen 1997 and literature cited therein) that are not reflected at all in the income statistics. An overconcentration on income inequality alone has permitted greater social and political tolerance of unemployment in Europe (and even some economic smugness vis-à-vis the achievement of low unemployment levels in the U.S.) that cannot be justified if a broader view of economic inequality is taken.
Interpersonal Utility Comparisons and Inequality
The illustrations just presented of contrast between income and achievement deal with particular classes of indicators of quality of life (longevity, survival, literacy, fertility, and employment status). Illustrations can also be provided to exemplify variability in the relation between income and other substantive achievements such as being healthy, being well-nourished, taking part in the life of the community, and so on. The acceptance of variability between income and achievement is not, however, an adequate ground for a definitive rejection of income inequality as the center of our attention in inequality assessment-without considering whether an alternative approach would be workable and satisfactory. Practical economics, no less than politics, is the art of the possible, and that issue remains, even when the need for going beyond income inequality is well accepted. Can we devise an alternative, practical approach based on the broader concentration on functionings rather than incomes?
Before taking on this issue fully, I would like to examine a related question, proposing a different alternative to the focus on incomes. Are we not likely, it may be sensibly asked, to be served better by opting for a more familiar notion, like utility, in shifting away from income inequality? Why not the inequality of utilities as the central focus of attention for inequality analysis? Indeed, just such a focus has been proposed and elegantly explored already by James Meade (1976) in his exploration of "the just economy." So the utility-based evaluation of inequality should be examined first, before stepping on to the less tried, and perhaps more hazardous, field of functionings (or the freedom to function).
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Table of Contents
|Introduction: Historical Overview of Race and Poverty from Reconstruction to 1969||1|
|Part I||Economic Inequality and Income Inequality|
|1||From Income Inequality to Economic Inequality||59|
|2||Racial and Ethnic Economic Inequality: A Cross-National Perspective||83|
|Part II||Issues in Measurement of Inequality and Poverty|
|3||Measuring Poverty: Issues and Approaches||99|
|4||Medical Spending, Health Insurance, and Measurement of American Poverty||117|
|Part III||Structural Causes of African American Poverty|
|5||The Dynamic Racial Composition of the United States||157|
|6||The New Geography of Inequality in Urban America||173|
|7||The Disparate Racial Neighborhood Impacts of Metropolitan Economic Restructuring||188|
|Part IV||Critical Factors Militating Against Black Progress: Retrospect and Prospect|
|8||The Demise of a Dinosaur: Analyzing School and Housing Desegregation in Yonkers||221|
|9||Suburban Exclusion and the Courts: Can a Class-Based Remedy Reduce Urban Segregation?||242|
|10||Civil Rights and the Status of Black Americans in the 1960s and the 1990s||270|
|11||Poverty, Racism, and Migration: The Health of the African American Population||311|
|12||The American News Media and Public Misperceptions of Race and Poverty||336|
|Part V||The Differential Impact of Skills on Earnings|
|13||U.S. Education and Training Policy: A Reevaluation of the Underlying Assumptions Behind the "New Consensus"||367|
|14||The Growing Importance of Cognitive Skills in Wage Determination||405|
|15||Escalating Differences and Elusive "Skills": Cognitive Abilities and the Explanation of Inequality||431|
|16||Earnings of Black and White Youth and Their Relation to Poverty||449|
|Part VI||Racial and Familial Hardship: Welfare Benefits and Welfare Reform|
|17||Teenage Childbearing and Personal Responsibility: An Alternative View||479|
|18||Where Should Teen Mothers Live? What Should We Do About It?||509|
|19||Family Allowances and Poverty Among Lone Mother Families in the United States||565|
|20||How Much More Can They Work? Setting Realistic Expectations for Welfare Mothers||583|
|21||Turning Our Backs on the New Deal: The End of Welfare in 1996||603|
|22||Fighting Poverty: Lessons from Recent U.S. History||631|
|Part VII||Communal Hardship in Black Residential Areas: Crime and Law Enforcement|
|23||Crime, Poverty, and Entrepreneurship||653|
|24||Violence and the Inner-City Street Code||670|
|Part VIII||Economic Development of Black Communities|
|25||Minority Business Development Programs: Failure by Design||701|
|26||A Social Accounting Matrix Model of Inner-City New Haven: An Alternative Framework for Development||731|
|List of Contributors||777|