Atanu Dey On India's Development

The Tangled Web — Part 6

The Lumpy Universe

One of the puzzles that cosmologists grapple with is the question of why the universe is lumpy. The universe has structure today – from super clusters of galaxies, to galaxies, stars and all sorts of other objects down to planets and asteroids. But the universe was much simpler earlier in its history. How did all these clumps of matter evolve from an undifferentiated soup of elementary particles and forces that existed in the early universe following the Big Bang?

A lot of very clever people have been doing a lot of hard sums for many years and have been partially successful in explaining why the universe is the way it is. There are inflationary models and there are string theories which attempt explanations. We just don’t know for sure. But the fact remains that the universe is lumpy. And we should be really grateful that it is so because its lumpiness is what makes the universe interesting. Not just interesting, it also makes us possible so that we can marvel at the nature of the universe. We should pause to consider that if the universe were uniform, it would have been sterile and we would not be here. The non-uniformity of the universe which arose for who knows what reasons is what makes for an interesting universe.

So the universe evolved gradually and became increasingly differentiated; parts of it became distinct from other parts. The inside of a star is quite different from the cold emptiness of space. At all scales, the universe is uneven. This unevenness is fractal. At every level of detail, the universe is evolving to be more uneven.

The Lumpy Life

Consider, if you will, life. As far as we can tell, it arose on earth a few billion years ago. Then it was mostly simple unicellular ooze. As time went by, all sorts of amazing life forms arose from bacteria to blue whales. The tree of life, once it took root, grew to be impressively massive with hundreds of millions of branches. One of those branches bears our species and we are the leaf nodes on that branch. Our species too appears to follow the basic rule that with the passage of time, we become more uneven.

Even at the level of the individual, embryonic stem cells have an uniformity which in later stages of development is missing in the cells of the mature organism. Development is the differentiation of cells into specific specialized units. Though the cells have a common origin, processes yet not fully understood push them into a state of non-uniformity.

The Lumpy Society

During the hunter gatherer stage of human history, there was uniformity. There were very few people in the world; fewer than a couple of million. It was an Hobbesian existence: nasty, mean, brutish and short. Everyone was equally poor. Even with the advent of settled agriculture, equality in poverty was the norm and only a few feudal lords escaped the common lot and had some wealth. The quality of life of the vast majority actually declined with the move to an agrarian lifestyle. But slowly, things began to change when human society became more complex and nation states came into being. The nation states became unequal and within nation states itself, different people started having more wealth and power than the average.

Inequality and Development

If uniformity is characteristic of early stages of development of an entity (universe, society, individuals), then inequality in some sense is characteristic of development. Inequality grows with time. Whatever be the moral and ethical dimensions of inequality, the fact appears to be that there is a monotonic increase in inequality among the entities that constitute an entity.

Here I will confine myself to the entity called an economy. Individuals are the basic building blocks of an economy, the cellular units of the body. My conjecture is that as any economy grows, the degree of inequality continues to grow. This is almost as if it were a natural law. Let’s look at the broad sweep of human history.

Five hundred years ago, wealth among humans was unequally distributed. But compared to the unequal distribution of wealth today, it was much less unequal. Granted the fabulously wealthy then had a lot more of land and all sorts of precious stuff but aside from living more comfortable lives, they had access to the same goods and services that the average person had. They could not, for example, get antibiotics or triple heart bypasses or buy first class air travel. Technology has increased what is on offer and thus accentuated the inequality. It is much more meaningful to be fabulously wealthy today than it was ever before in our history. Bill Gates, who epitomizes the wealthy individual, is richer than not just the current generation but is richer than any generation that ever existed. By the same logic, future Bill Gateses will be far richer than the present one.

Poverty and Inequality

It is almost an article of faith that whenever someone mentions poverty, they have to also mention inequality. It is as if you cannot decry poverty without also pointing out the growing inequality. My opinion is that they are not conjoined twins. Although often seen together, their personalities and characteristics are quite independent. Their growth (or decline) follow independent trajectories. You can have one without the other.

From a dispassionate point of view, inequality is neither good nor bad. It merely is. From an individual’s point of view, it is of course good to be on the winning side of inequality. From the other side, inequality induces envy and perhaps provides the motivation to move up the ranks. As inequality is a basic and persistent feature of the universe, I suppose envy and the attempt to become richer will also persist.

The point I wish to make is that unlike inequality, poverty is definitely not good and is not inevitable. Inequality is relative but poverty (in some sense) is absolute. Warren Buffet is poorer than Bill Gates but is definitely not poor. One can imagine a world of rich and poor without having any poverty in the world.

I think empirical evidence suggests that even as the inequality in the world is increasing, and the gap between the rich and the poor is increasing, poverty is decreasing. My prediction is that in a generation or two, poverty will be almost completely eliminated. Yes there will be poor people but there will be no poverty.

The basis of my claim is this. There is a monotonic decrease in the percentage of poor in the world over time. One can reasonably claim that by today’s standards, in the year 2000 BCE, nearly 100 percent of the people were living in poverty. In the year 1000 CE, it must have been 90 percent. Today that number is perhaps 50 percent. Twenty years hence, it could be 10 percent. And fifty years from now, it could be zero percent.

Of course poverty is a matter of definition as well. In the US, a family of four with an income less than $18,000 per year is considered poverty stricken. By that definition, around 98 percent of India is under the poverty line. The definition of poverty will vary across time as well. It will be naturally revised upwards.

My definition of poverty is this: if you have sufficient food, clothing, shelter, education, opportunities for recreation and creativity so as to allow you to live your natural human lifespan, you are not poverty stricken.

My Point

So what is the point in all this rambling on about poverty and inequality, you may ask. It is this. Policy makers should stop worrying about inequality. Not just that, they have to stop attempting to reduce inequality. It is a fool’s errand. It cannot be done, it is not required, and more importantly it could lead to real harm.

I do realize that there is a reason for harping upon inequality. The envy it evokes is sufficient to mobilize political support from the poor for redistributive policies. It is a way of gaining and maintaining political power. It is that fact that keeps socialists in power. Ultimately, socialism is what keeps people not only poor but also keeps a large percentage of the poor in poverty.

The newspapers regularly report how India has 10,000 (or whatever thousand) millionaires whenever they discuss poverty. That is generally meaningless. Let’s do the numbers. Assume that the average millionaire’s wealth in India is $2 million. So their aggregate wealth is $20 billion. Redistribute that to the billion Indians and you have the princely sum of $20 per capita increase in the wealth of the non-millionaires in India. See my point?

The wealth of the few rich (and yes, ten thousand or even 100 thousand is few relative to a billion) does not matter in any real sense. What matters is the general level of wealth and the overall distribution. What matters is not how little there is but how we can arrange matters so that the amount of wealth increases. If we stop focusing on inequality, perhaps we could spare some time and understand that the way to create more wealth is by freeing the economy from the socialistic mindset of poverty. That’s all.

  • Arvind

    Many a socialist/communist governments have taken an easy way, “Cannot generate wealth and make more people Rich, then make more people poor, so there will be greater equality”. They have been quite successful!

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  • http://sood.net.in/journal aadis

    Hmmm, pretty interesting. Let me quote Paul Graham from Great Hackers:

    Variation in wealth can be a sign of variation in productivity. (In a society of one, they’re identical.) And that is almost certainly a good thing: if your society has no variation in productivity, it’s probably not because everyone is Thomas Edison. It’s probably because you have no Thomas Edisons.

    The essay talks more about great hackers than pure economics, but interesting nonetheless.

    Also have a look at Inequality and Risk.

    PS: your link to “The Indian Economy Blog” is broken, missing http:// ?

  • Abhijat

    Hi Atanu,

    The ideas about “evolution” of inequality sound very similar to entropy – the measure of disorder in thermodynamics/statistical Physics. I wonder if Economics theory uses concepts similar to the Gibbs Ensemble and equal a priori probability. Would like to know. :)

    Cheers.

  • Sid

    Some questions on the article
    1. Why do you say in 2000 BC all people were poor? By your definition
    if one has sufficient food, clothing, shelter, education, opportunities for recreation and creativity so as to allow you to live one’s natural human lifespan, he is not poor. Were all people in 2000BC devoid of all these things? Why is sitting idle not a recreation and watching crap in cinema halls a recreation ? I suppose people back then had a lot more time to sit idly.

    2. How has quality of life improved with the coming of nation states? It seems you are drowning in your own delusions.

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