Vox Connects the Dots Between Inequality and Envy

Imagine that the wealth of both the poorest and richest Americans were to double overnight (and the middle class wealth stayed the same). Would the poor be better off? Most of us would agree they would be. But those obsessed with income and wealth inequality would fret that the poor were in even worse shape than before since inequality just got much, much worse.

Disagree totally. San Francisco is a great example

Person making 20k a year, the poor person in this example, sees his yearly income jump to 40k a year. 3.3k a month before taxes

The rich person in this example has 1 M dollars of income coming in a year (via whatever means, rent, salary, stocks, whatever)

Rich person goes to 2M per year.

At first, the rich person only has 980k more to spend then the poor person who makes 20K per year. Rich person can still get a place in the nice part of town by transit, grocery stores, good neighborhoods and good school. Even when his basics are covered, he has plenty of disposable income left over.

The poor person meanwhile is forced to spend all the $$ he has on the basics, i.e shelter, food, whatever, and lives in a trashy part of town with poor schools and limited transit options

Double their income

The rich person now has 1.96M MORE $$$$ to spend then the poor person.

Rents go up because rent seekers are seeking higher rents from those whose income has doubled. Rich person, who may have spent 3,000 a month in rent before, now spend 6,000 a month in rent, which is still a drop in the bucket for him. Yearly rent spending goes from 36k to 72k, however rich person has far more wealth

The poor person, whose rent has doubled 1500 a month to 3000 month, now sees a greater percentage of his income going to the basics

The poor person, despite having his “wealth” doubled is now in even worse shape then when both his and the rich guy’s wealth were in half.

The rich guy can quickly adjust to changing market conditions and the poor person sees a greater % of his income gone.

This is the reality in many urban areas now, with San Fran an extreme example of it.

Your thought experiment has actually happened in real life. Just ask anyone under 45 whether he would take a million dollars if he could never, ever use any form of computer technology for the rest of his life: no computer, no internet, no cell phone, nada, either directly or indirectly. If he has any sense of the seriousness of the implications, he would say no, because otherwise he’d have to live like a hermit. A rich hermit, but a hermit nonetheless.

In fact, the internet has bestowed enormous wealth upon every single inhabitant of the modern world. To have a library of 20-30 books was the mark of a wealthy and sophisticated person in antiquity. With the internet, we all have the equivalent of hundreds of thousands of books — for free — even though few bother to read them.

Not to mention that we now have HDTV instead of the crappy black-and-white TV that the Rockefellers watched in 1960, we have smartphones instead of the crappy rotary phones that the Mellons used in 1970, we have reliable cars instead of the crappy, rust-prone Cadillacs that the Kennedys drove in the 1980. On any number of levels, low and middle income Americans have better consumer opportunities than the rich just 50 years ago. And, it ain’t due to good government ... it’s due to free markets and private innovation.

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