People who talk about absolute measures of inequality do not realize that they put themselves in an impossible position to argue that today's inequality in the US is 20 times (yes, 20 times) greater than in 1776.
How?
Acc. to Lindert and Williamson, US Gini in 1776 was ~0.46. Today's Gini is ~0.41.
Absolute Gini = relative Gini x mean income
US mean income in 1776 was (acc. to Madison 2020) $2.4k; today, it is $53k (all in same prices).
So, absolute Gini was then 1.1, today, it is 21.7
Acc. to Lindert and Williamson, US Gini in 1776 was ~0.46. Today's Gini is ~0.41.
Absolute Gini = relative Gini x mean income
US mean income in 1776 was (acc. to Madison 2020) $2.4k; today, it is $53k (all in same prices).
So, absolute Gini was then 1.1, today, it is 21.7
Thus, inequality is 20 times worse today than in 1776! Totally absurd conclusion.
The reason why many people do not see how absolute measures of inequality can be misleading is in part because they never work with historical data.
The reason why many people do not see how absolute measures of inequality can be misleading is in part because they never work with historical data.
So they sort of forget about how with absolute measures of inequality, a simple increase in the mean, even if it leaves all relative positions unchanged, can dramatically increase absolute dollar distances between individuals.
Thus growth itself drives inequality up. And we totally lose from sight the real meaning of inequality.
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