Why Income Inequality Means Less Today Than Ever Before

Mark Perry strikes again in a wonderful post where he summarizes Northwestern University law professor John O. McGinnis’ Innovation and Inequality” article.  After excerpting several great points from the article, here is Mark’s summary:

 In today’s 21st century global information age, innovation, entrepreneurial capitalism, and advances in technology create more wealth for society’s most visionary and talented risk-taking entrepreneurs than ever before. The creation of enormous amounts of new entrepreneurial wealth is disproportionately today concentrated on the innovative genius class (Bill Gates, Mark Zuckerberg, Jeff Bezos, Steve Jobs, etc.), which exacerbates inequality when measured by income or financial wealth. But the “continual stream of new ideas and products” that flows from innovation (Facebook, Amazon, Apple, Microsoft) are now “quickly enjoyed by everyone,” often because those new innovative goods and services “quickly become essentially free.”

Stated differently, at no other time in history have differences in monetary income told us less about differences in people’s real standards of living than in today’s information, digital age. Alternatively, at no other time in history has income inequality been more meaningless than in today’s innovation-filled world of advanced technologies and free or nearly free goods and services. Despite rising income or wealth inequality (if that’s true), consumption equality has probably never been greater than today. For example, there are almost no technologies that are available today to a billionaire like Warren Buffett or Tim Cook (computers, Internet, GPS, wireless, Facebook, Spotify, smartphones, Amazon Prime, Netflix, Google, etc.) that aren’t also available to the average person in America, often at a cost that is essentially free.

In the comments section the question was raised about whether the proliferation rate of technology has increased in recent decades.  Mark responded with this:

Yes, the “market penetration rate” is speeding up see this article, and note the two charts:
https://hbr.org/2013/11/the-pace-of-technology-adoption-is-speeding-up

“It took decades for the telephone to reach 50% of households, beginning before 1900. It took five years or less for cellphones to accomplish the same penetration in 1990. As you can see from the chart, innovations introduced more recently are being adopted more quickly.”

“It took 30 years for electricity and 25 years for telephones to reach 10% adoption but less than five years for tablet devices to achieve the 10% rate. It took an additional 39 years for telephones to reach 40% penetration and another 15 before they became ubiquitous. Smart phones, on the other hand, accomplished a 40% penetration rate in just 10 years, if we time the first smart phone’s introduction from the 2002 shipment of the first BlackBerry that could make phone calls and the first Palm-OS-powered Treo model.”

Interesting stuff.

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