In economic politics as in other fields, I think people tend to talk past each other a great deal because of unclear language. Here I want to make explicit three different forms of inequality that have - to my mind - pretty different normative implications. For at least some philosophies that disagree strongly (for instance, most socialists and most libertarians) I think that what looks like a normative disagreement masks a positive one: both centrally concern themselves with power and freedom, and just disagree about the conditions that get there. This doesn’t mean we can’t have any normative disagreements, just that it’s easy to mistake one for the other.
Even if there were no disagreements to clarify, we would still want to clarify our own intentions. Even if we were all on board that we want to replace capitalism with something more egalitarian, we’d want to know what our egalitarian goals consisted of and why they were important as we construct alternative institutions.
Consumption inequality is that some people get nice things that make them happy and others don’t. People are happier when they have more of these (Netflix, flush toilets, whatever) and less so when they have less. People will do things you want them to do in exchange for nice things, but the marginal utility of consumption is declining, so there’s a social engineering/efficiency question around how much consumption inequality there should be.
Consumption inequality qua inequality doesn’t matter. If it did, we’d be concerned about intertemporal inequality, or inequality between us and life on other planets. Instead we care about consumption deficits, and we care about gross consumption inequality as an indicator:
of misallocation; if some people shiver on the street and others have houses they don’t even live in, then the declining marginal consumption of income implies that something’s gone wrong
of power imbalance; if some people shiver on the streets and others have houses they don’t even live in, this might be something that everyone agrees is best, but frankly, not buying it; it’s more likely that the people with the extra houses have institutions to hold onto them and shove around the people without
(Note that neither of these matter for comparison with life on other planets, and for intertemporal inequality the direction is actually reversed: it is the poor past which exercises power over the (hopefully) rich future. )
Modern welfare economics tends to think primarily in terms of consumption, which tends to vastly understate the significance of economic inequality.
Power inequality is just what it sounds like: I have power over you, you don’t have power over me. If consumption inequality is that some people sleep on the street, power inequality is that you could sleep on the street, if you boss or landlord or parents wanted you to - even if, right now, your bed is snuggly and warm, your roof faultlessly shingled.
Power inequality sucks for various reasons explicable to the consumption-focused lens of welfare economics - misallocation, as above; deadweight loss to pursue competition over the powerful slots; the fact that the same person tends to get dumber and less empathetic as they grow in social power. But I also submit that we just don’t like it, over and above any hedonic output. If someone offered people pills that made them perfectly happy slaves, most of the people who consciously chose to take it after deliberation would be people who want that for sex reasons, and as with many sexual fantasies, many of them wouldn’t prefer to have the fantasy realized either. If freedom is good then power inequality is bad.
Consumption inequality and power inequality are entangled in a number of ways:
As noted, power inequality allows for extreme consumption inequality to be politically sustainable,
If you’re desperate due to consumption deficits, you may trade away power to someone who can alleviate them,1
At least in our society, the same tokens (money) purchase both goods and services and power over firms
Plenty of forms of power aren’t directly purchaseable. Modern liberalism is not just committed to the saleability of the means of production; it is also defined by its restriction on the saleability of permanent labor-power (i.e., slavery) and the purchase of direct political power; it would be easy to extend these. You could also at least in principle have a world where only power relations are subject to purchase; such a situation is unlikely for humans but perhaps something like this might be a default for a non-singleton AI economy.
Prestige inequality concerns how we look up to some and others not so much. We do some form of this inevitably; what we admire people for, we socially construct as much as we do our distribution of power and consumption.
Prestige inequality is a problem to the extent that people are stuck in a single metric of it. Gwern Branwen, in “The Melancholy of Subculture Society,” describes the nightmare scenario:
One can’t opt out of culture. “There is no view from nowhere.” To a great extent, we are our cultural artifacts—our possessions, our complexes of memes, our habits and objects of disgust are all cultural. You are always part of a culture.
Suppose there were only 1 worldwide culture, with no subcultures. The overriding obsession of this culture will be… let’s make it ‘money’. People are absolutely obsessed with money—how it is made, acquired, degraded, etc. More importantly, status is defined just by how much you have earned in your life; in practice, tie-breakers include how fast you made it, what circumstances you made it in (everyone admires a person who became a billionaire in a depression more than a good-times billionaire, in the same way we admire the novelist in the freezing garret more than the comfortable academic), and so on.
This isn’t too absurd a scenario: subjects feed on themselves and develop details and complexity as effort is invested in them. Money could well absorb the collective efforts of 7 billion people—already many people act just this way.
But what effect does this have on people? I can tell you: the average person is going to be miserable. If everyone genuinely buys into this culture, then they have to be. Their talents at piano playing, or cooking, or programming, or any form of artistry or scholarly pursuit are denigrated and count for naught.
I submit this explains why high school sucks: even if (due to geographic segregation) consumption inequality may be quite limited, you struggling against a cage of extreme concrete power inequality of adults over you, and find yourself in a Dunbar-sized unexitable social situation with basically a single prestige system whose first eigenvector boils down to, roughly, fuckability. The existence of self-conscious cliques and crowds is practically the only thing to blunt this.
As an adult, I have to endorse something of a bootstraps take on this: this problem exists mostly in your head; you can put yourself on the prestige ladders of your choice; put yourself on the ladders you care about and want to look up to people and get off the ones that don’t. There are extremely powerful people who are clearly miserable because journalists don’t like them; this is entirely an own goal. Me, I have a moody temperament that predisposes me to such failures, and to letting one piece of legitimate or illegitimate criticism from someone IRL ruin my week - but ultimately there are status tracks I don’t care about at all (fast cars, beach bods) and those I’m not on top of but benefit as a guidepost: I’m not the best teacher or writer or dungeon master or whatever, but those who are I can learn from.
You may note here that I think most people would be unwilling to take the happy slave pill, while being willing to make themselves unhappy subordinates. Doesn’t the first option monotonically improve the second? No, because of option value and because of preferences for dignity. And the thought experiment here relates to a conscious decision taken all at once; bit by bit, people will tend to make themselves happy with situations they can’t change, generally without consciously deciding to, because adopting those frames feels better.