Monday, January 26, 2015

Big Hand to Big Mouth

The pursuit of equality can be a direct obstacle to the pursuit of happiness. Equality forces relative comparison. In order to impose equality, you may have to remove liberty. I think liberty is a more attractive goal. Branko Milanovic wrote a great post yesterday on the fact that `Wealth is not income and income is not consumption'. It is a good reminder that statistics should be treated as questions rather than answers. One of the first questions you should ask back is what is the measure ignoring. Usually you have to look at something in lots of different ways to get a sense of the problem. Averages, for example, are very dangerous. One of my favourite quotes comes from Howard Marks in 'The Most Important Thing' who said 'Never forget the six-foot man who drowned crossing a river that was five foot deep on average'.

To super-summarise Milanovic' point. There are plenty of people in wealthy countries who have zero or negative net wealth but live to a very high standard. To work out wealth, you subtract all you owe from all you own, and ignore income. Where there is lots of financing or someone earns a fat salary, their lack of wealth will certainly not be visible to someone in the street. Someone who lives hand to mouth can have a very big hand and a very big mouth. When it comes to consumption, there are limits to what a mouth can fit in it. Arguably it is the size of the stomach that decides what is needed for equality, and the person who eats till they are 80% full that is happiest. If you live in a rich country, you are typically a cultural billionaire. How do you incorporate into the picture of someone's equality the happiness of their city? How do you incorporate that someone with a very high income may be time impoverished? How do you incorporate scale limits which prevent the very wealthy from being able to control everything - you still only have two eyes, two ears, a limited memory and an annoying lack of omnipresence.

Being someone who practices Yoga, I have many people I know who have chosen a life of volunteering. Some live in beautiful surroundings. They have no wealth and their income is close to board and lodging. They spend their days teaching yoga, cooking, cleaning, reading, exercising and sitting thinking about their breathing. They are happy. They would fall into the wealth and income measures of poverty. Some live on very, very simple diets and could possibly fall into measures of consumption poverty if those measures were poorly designed. Outside the Ashram, others have also chosen a different path. I wrote about Bill Cunningham whose view is 'If you don't take the money. They can't tell you what to do. That is the key to the whole thing.' He is a Cultural Billionaire and has zero interest in wealth or income equality. To force it on him would be to remove his liberty.

I have just finished binge watching the first season of Marco Polo after completing Borgia. While the focus of the series is on political wranglings of the elite, most of the normal people were living in poverty. Power seemed like a pageant to give desperate people some sense of belief that their hunger may end. The kings of those days would marvel at the material wealth and living standards of common men of today. When things are working, we don't have anyone who has the power those kings had. I still bristle at politicians who talk of being 'in power' or 'majority rules'. No one should rule. Constitutions and Laws decide what you can and can't do. There is often discussion over who the most powerful people in the world are. Obama's new wrinkles will argue against his candidacy. Janet Yellen will get some supporters, and her main role is just to influence a interest rate that most people in the world probably have no idea of. Putin may flex his muscles but all that does is decrease his influence.

There is still a lot of extreme poverty, prejudice and powerlessness in the world. We need to be careful what we measure, what it means, and if it is important.

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