Book: Inequality (Atkinson)

## Introduction

EoOPP: equality of opportunity

EoOUT: equality of outcomes

## Part 1: Diagnosis

### 1: Setting the Scene (9-44)

* 9: instead of trying to define the ultimate destination, the book is concerned with the goal of just *reducing* inequality. This chapter: (1) reasons to be concerned about inequality, (2) data on broad patterns of inequality, and (3) more specifics: what is in the statistics, what is missing?
* 9-14: **Inequality of Opportunity and Inequality of Outcome**: three reasons why we cannot just look at opportunity and ignore outcomes, even for those for whom equality of opportunity is the ultimate objective:
	+ (1) morally repugnant that some have nothing, plus there is luck involved in addition to effort.
	+ (2) need to distinguish between competitive and noncompetitive equality of opportunity—are the opportunities independent? If opportunities are dependent (=rival?) and have highly unequal outcomes we might not see this as ‘fair’.
	+ (3) inequality of outcome directly affects equality of opportunity for the next generation: today’s inequality of outcomes is tomorrow’s inequality of opportunities.
* 11-14: *Instrumental and Intrinsic Concerns for Inequality*: mentions a few (instrumental) reasons to be concerned about inequality of outcomes, e.g. social cohesion, increased crime, and macroeconomic stability. But, there are also arguments for intrinsically wanting lower inequality. He runs through utilitarianism, Rawls, and Sen's capabilities approach very shortly. Difference between last two is that the former doesn't consider inequality in ability to convert (primary) goods into good living, where the latter includes these opportunities as part of the analysis.
* 14-16: **Economists and Income Inequality**: until the 1990's, income inequality had largely been ignored by economists. After, theory began to catch up but it was in 2015 still lacking from most textbooks: not considered a primary concern. One reason given by Robert Lucas is that the potential for improving the life of the poor by redistribution "is nothing compared to the apparently limitless potential of increasing production". Atkinson disagrees for two reasons: (1) "it does matter!", and (2) the total size of the pie/production is influenced by distribution.
* 16-28: **A First Look at the Evidence**: looks at the evolution of household income inequality of the US and the UK which are of roughly the same shape while magnitudes differ. In both, there is an 'Inequality Turn' starting in 1979/1980. A part asks whether "the emphasis should be on eliminating poverty and not the overall distribution of income or the general extent of inequality" (Feldstein). Generally, countries with higher top income shares have higher poverty rates.
* 25-28: *Rising Earnings Dispersion*: makes the point that not all differences in outcomes are inequalities, e.g. if one gets paid more to compensate for educational investments. By referring back to fig 1.1 and 1.2, notes that individual earnings dispersion and HH income inequality don't follow the same trends in US/UK, and anticipates the upcoming analysis of how this is possible/what explains this divergence.
* 28-37: **The Dimensions of Inequality**: *Inequality of What and among Whom?* Should we measure at the HH, (nuclear) family, or individual level? A HH can consist of multiple families (e.g. elderly parent, adult child). This depends on social judgements on who should be treated as ‘independent’.  Income usually defined as the sum of all receipts; so the maximum amount that can be spent holding constant net worth. What do we measure? Do we use: (1) pre or post-tax, (2) just earnings, (3) monetary transfers, (4) in-kind transfers, (5) value of public services, (6) adjustments for HH/family size, (7) imputed home rent, (8) changes in asset values (accrued or realized? inflation adjusted? also for debt?), etc?
* 33-37: What about *Inequality of Consumption?*
* 37-44: **Who is Where in the Distribution?**:

## Part 2: Proposals for Action

Sets out 15 proposals indicating steps that countries can take to reduce inequality. + 5 further "ideas to pursue" listed at the end.

## The Way Forward

1. ↑ Point is not 100% clear to me. analogy used in book: we all have equal opportunity to acquire a swimming certificate, but only one can win a swimming competition.
2. ↑ If there is a relative aspect to poverty, these become partially the same question?
3. ↑ E.g. if you spend five years and 100k in education, if you then earn exactly the five years of foregone earnings + 100k and the rate of return more than someone who did not make this educational investment, this is not really inequality? Just fair compensation for investing in your human capital? Depends a bit also on the extent to which education is a pure labor market investment. Do we want to ignore other things like personal development/flourishing, etc. that come from education?
4. ↑ Would it make sense to determine this based on some factors? E.g. for a child at uni maybe not, but for someone who finished their terminal degree and is in the labor force, maybe yes?