Thursday, December 2, 2010

The Improving State of Human Well-Being

This very short video is a brilliant demonstration as to how two major factors of human well-being (wealth and health) have increased since 1810.  In just a few minutes you can see the dramatic changes that have taken place. Hans Rosling, of Sweden, is an expert on the links between health and wealth and his demonstration ought to be viewed by everyone.

The only caveat I have is that several times he emphasizes inequality, which I consider to be a major red herring.

Watch the video and then come back for the discussion that follows below the cut.

Notice that at the beginning of Rosling's demonstration, in 1810, there was substantial equality. The bulk of the countries in the world were clustered in the poor and unhealthy quadrant in the bottom left corner.

As time progressed nations developed at different speeds, but all of them developed. By 2010 none of the countries were as poor and unhealthy as they had previously been. Some moved faster than others. But that difference ought to only interest us when we are trying to discover how to improve the less developed nations even more.

Equality of health and wealth is not the goal, improved health and wealth is. No one would argue that a world similar to that shown at the beginning of the video would be a better place to live. Yet there would be substantial more equality between the nations.

I use the Bill Gates test. That is where I compare myself to Bill Gates. Let us say that someone comes to me and tells me that he will increase my annual income by $40,000. I don't have to do anything except spend the money. But, if my income goes up by $40,000 then Bill Gates will receive $100,000 more. The very substantial inequality between his income and mine will become even more unequal.

There is another alternative, however. I am also told that I can decline the $40,000 extra in income and as a result Bill Gates will see his income decline $100 million per year. This would have a major impact on the inequality between my income and that of Mr. Gates. There would be more equality under this scenario, yet less under the first.

But the second option means I am worse off than under the first option. Why should it matter to me if Bill Gates earns more than I do, when all that really matters if whether the state of my being has improved or not. Greater equality of wealth does not make me better off.

Considering that the worst-off in any society are not made better off by equality alone, but by improved standards in health and wealth, why does anyone worry about equality per se? Perhaps the best explanation is emotional, that there is resentment against the wealth of others, or envy. Aesop once describe this tendency quite well:
Two neighbours came before Jupiter and prayed him to grant their hearts' desire. Now the one was full of avarice, and the other eaten up with envy. So to punish them both, Jupiter granted that each might have whatever he wished for himself, but only on condition that his neighbour had twice as much. The Avaricious man prayed to have a room full of gold. No sooner said than done; but all his joy was turned to grief when he found that his neighbour had two rooms full of the precious metal. Then came the turn of the Envious man, who could not bear to think that his neighbour had any joy at all. So he prayed that he might have one of his own eyes put out, by which means his companion would become totally blind.

Aesop's warning is an important one for anyone who is concerned about the plight of the poorest segments of the world. It may well be, as 200 years have shown, that development for all will not take place an an equal pace. But that the development that does take place may greatly benefit the poorest of the world significantly. It may also be that wealth expands for everyone the fastest when it is unequal. That is, a more equal distribution of the wealth might impact the production of wealth is such a way as to reduce the well-being of everyone. 

This possibility is one that many advocates of greater wealth equality simply do not consider: greater wealth equality may be had but in doing so it would reduce the absolute well-being of the very people they claim to be most concerned about. That would mean that instead of focusing on levels of equality, we should focus on what are the preconditions for wealth. Instead of worrying about how wealth is distributed, we would have to concentrate on how wealth is produced. 

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