San José State University

applet-magic.com
Thayer Watkins
Silicon Valley
& Tornado Alley
U.S.A.

The Baselessness of Figures on
so-called "Income Distribution"

This is a demonstration that that the conventional analysis of what is called income distribution does not and cannot measure what it purports to measure. Fundamentally it is quasi-religious political ideology hiding behind irrelevant arithmetic. Its policy implications are based upon two erroneous assumption: that there is a fixed quantity of income to be distributed and that the recipients in the various income brackets are the same people year after year.

Here are some illustrations of why the analysis of income distribution does not measure what it purports to measure; the deveiation from equality of satisfaction (happiness).

Consider a society in which everyone faces the exact same earnings profile ove their lifetime. They start out earning through odd jobs low income. When they enter the labor force they start out with relatively low pay compared to what they will earn later with experience. When they retire they again have relative low pay but by that time they have accumulated assets so they do not need a higher pay to achieve the same level of satisfaction they had earlier. And, at a particular age, say fifty, everyone recieves a substantial payment from an inheritance and insurance upon the death of their parents.

This is a society of exact equality yet by the conventional analysis of income distribution there will appear to be disparity. There appears to be disparity because the conventional analysis assumes the people in each income level are the same people year after year.

Consider another case of exact equality of opportunity. Suppose everyone can choose the amount of work time and pay that they want. Some might choose a 20 hour workweek, others a 40 hour one and some benighted souls a 90 hour one. The rate of pay is the same. The so-called distribution of income will show disparity. But those working 20 hours per week are better off than they would be working 90 hours per week. The conventional analysis of the distribution of income would presume that those working 20 hour work weeks are worse off than those working 90 hours per week.

In this case the analysis would be less erroneous if a value of leisure time were included with the earned income. But fundamentally there is no way to make a valid comparison when outcomes are result of individual choices.

Consider a situation in which the region of location is a matter of personal choices. Suppose there is an old area in which there are too many seeking work compared to the jobs available. Another is developing and due to an indequate supply of workers the rate of pay is higher. Some opt to stay in the old area because of their age and other factors. Their incomes are lower than those who opt for the new area. Those who stay in the old area have a lower income in terms of money but taking into account the value to them of living in a familiar area they are better off there than they would be in the new area. Yet the conventional analyis

Thus the irrelevant arithmetic of the conventional analysis of the distribution of income does not measure what its proonents claim it measures. That analysis is just a guise for the desire of a certain political faction to have the economy managed by an elite who are analogous to the military and ecclesiatical elite that managed the society of the middle ages. It can be done but the result is an overall poor society. of income distribution would erroneously deem them disadvantaged compared to those living in the new area.

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