Why would we want a more equal society?

Economists want equality more than anyone. More than social change advocates, more than equality campaigners, more than any disadvantaged and discriminated person.

For an economist, success is when the global economy grows, which happens when more people enter the labour market and the spend money they earn. That requires greater equality. If you think I’m wrong, tell me why the standard measure for inequality is wealth distribution. We don’t measure inequality by how many people have the right to vote, or which countries maintain a standard of civil rights, we measure using the Gini index, which tells us how wealth is distributed across the citizens of any given country. A score of 0 on the Gini scale would tell us that everyone has the same amount of money, wealth is perfectly distributed. And a score of 100 would tell us that one person has all the money and everyone else has nothing.

By the Gini index, Slovenia is the most equal country in the world with a score of 24.6. With a score of 63, South Africa is the least equal. But why would we equate wealth distribution with equality? Is income inequality a solid proxy for equality in general? Probably not. Social equality is defined as having “equal rights, liberties, and status, possibly including civil rights, freedom of expression, autonomy, and equal access to certain public goods and social services.” What’s missing from that definition? Wealth. So, we don’t define social equality by wealth distribution, but we do measure social equality by wealth distribution.

Based on the logic of the Gini index, we could make society perfectly equal by just giving everyone the same amount of money. Every country in the world a Gini index of 0. And then what? How soon would the index climb above 0? As soon as any trade takes place. Once there is an exchange of goods for money then one person has less and another has more. The person with more money can now buy more goods to sell at a profit. This is how wealth distributes.

The board game Monopoly illustrates it. Everyone starts with the same amount of money but very quickly some players lose and some gain. The game ends when one player owns everything and everyone else owns nothing. The difference between Monopoly and real life is that in the game players take turns, whereas in real life no one is patiently waiting for the other players.

Clinical psychologist and professor emeritus Jordan Petersen says that because of this Matthew Effect, where the rich get richer and the poor get poorer, a perfectly equal society is impossible. If this were left unchecked, perhaps society would reach near perfect inequality where one person has all the wealth, just as in Monopoly, but in real life governments step in with regulations, taxation and benefits schemes to redress the imbalance.

Research by Norton and Ariely showed that Americans want better wealth distribution in their country, they just don’t want too much equality. Feelings of deservedness and effort played a part in their reasoning. They didn’t want lazy people to have the same income as people who work really hard, that just didn’t seem fair to them. So it seems that perfect equality as achieved by wealth distribution is nobody’s goal.

Maybe wealth distribution isn’t the best way to measure inequality.

Let’s go up a level. Wealth is just one type of capital, but it isn’t the only one. Broadly, we can say that capital is all the assets of value a person owns or has at their disposal. And there are lots of types of capital.

We have individual capital in the form of skills, understanding, physical health and mental wellness. A person can hold intellectual capital in the form of knowledge, ideas, education, even patents and copyrights as a means of controlling access to their knowledge. Material capital includes all the physical goods and objects that a person owns which could be exchanged for other types of capital. Cultural capital refers to the traditions & customs, and artistic outputs such as paintings and poetry. Built capital is the infrastructure such as buildings, sewer systems, broadband and roads that we might have access to. How much influence a person has on decision-making makes up their political capital. Social capital is made up of all the connections with other people and good reputation that we may have. And of course financial capital, wealth, the money you have in the bank, the earning potential you have for generating income and access to credit. We all have all types of capital in very varying amounts.

All of these types of capital, and many many more, form the true breadth of value exchange in society. Not just in that each of them can be exchanged for financial capital, as is often thought of as the motivation for having natural resources like forests and cultural artifacts like paintings, but for the value that they all offer to everyone. Listening to the music someone plays is a cultural exchange of value. Driving down a road is utilising built capital that is available to you. Buying a sandwich utilises your financial capital and the shop owner’s material capital to exchange one type of value for another. Sharing an idea on social media is a value exchange of intellectual capital for social capital.

In contrast to only using wealth as a one-dimensional proxy measure for equality, the more of each of these types of capital available to the citizens of a country, the more value exchange will take place between citizens. The more value, of all types, that each citizen holds, the greater the equality of that country. And conversely, a lack of any or all these things is an indicator of inequality. This gives us a glimpse of what a truly equal society could look like. It isn’t one where everyone has the same amount of money, we know that doesn’t work. but it could be a society where all of these types of capital are considered valuable, and where the exchange of value is recognised.

The human desire to create, in all its forms, provides the capital of our society that we all utilise and benefit from. The more of all these types of capital our society or each nation has, the more it’s people can utilise them to create more. And so a nation grows and improves when it is more equal.

This is why we should all want a more equal society. Because we all benefit together.