RUSS ROBERTS

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Can You Be Too Rich?

This commentary appeared in the Los Angeles Times on March 18, 2007 along with pieces by philosopher Peter Singer, and Sam Webb the head of the Communist Party, USA.

ECONOMISTS can tell you, using publicly available data, that income inequality is growing in the United States. But if the data weren’t collected, you’d never know. If anything, the differences between the rich and the rest of us are less intrusive and noticeable than in the past.

In the early part of the 20th century, rich people ate better than the rest of us, had nicer clothes and a few even had cars. Rich people had servants and lived one family to a house. By those measures, the masses fell into the have-not category. No servants. Cramped quarters. Coarser food and clothing. A longer and more physical working day. If you were in the bottom half of income distribution and you encountered someone in the upper half, you knew it.

But steady economic growth over the years has eliminated most of the tangible differences between us.

Today, almost every family owns a car. Most own their own home. Most of us have dishwashers and cellphones and computers and air conditioning, comforts only the richest of the rich had 40 years ago. Rich people work longer hours than poor people today. Neither is likely to encounter much danger on the job. A poor person having a heart attack gets the same treatment as a rich person, and both get better treatment than the richest fat cat received 25 or 50 years ago.

Yes, the rich get richer in America. But so does everyone else. So why should we care that inequality is climbing if we’re only aware of it when we read the government data? Deep down, we assume that if the distribution of income is getting less equal, someone must be manipulating it to make it so — evil politicians, maybe, or greedy multinational corporations.

But no one is. The measured level of inequality is, in fact, the result of the choices that millions of us make individually, decisions to go to school or drop out, decisions to marry or divorce, decisions to emigrate to America or stay in one’s home country.

What most of us really care about isn’t inequality but opportunity. We’re less concerned with getting ahead of the Joneses than with simply getting ahead. Stay in school, finish high school and go on to college and you get ahead in America. Spend less than you earn and you can end up wealthy.

The data are easily manipulated to scare us. We should worry less about inequality and more about opportunity.

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