OK, so maybe appeals to donate money based on factors of 100 wealth difference should be limited to people who actually have a third-world price/quality market for (food, accommodation, shelter) available to them. Hmmmm OK that would be no-one at all.
I agree that makes sense given one interpretation of the claim. But that definition also has some odd implications. Why does the actual option need to be available to you, even if you’re never going to take it?
If a shanty town opens down the road from me, giving me the option to live like the global poor, I become richer relative to my neighbors, but I don’t become richer in absolute terms. The reason the super cheap goods the global poor buy don’t exist in the West is because no-one wants them. Even if a shanty town opened, I’d buy the same stuff as before, so my quality of life would be exactly the same. Your definition, however, would say I’ve become ~10x richer, which seems odd.
I think both senses of the term are relevant and interesting. Personally, I find the sense used by the World Bank better at capturing what I intuitively think about when comparing living standards and income. But it’s useful to consider both.
You also haven’t shown that the differences would amount to a factor of 10. Even though the exact goods the global poor would use are not available in the West, there are still very cheap goods available (as in Will’s comment).
But these things are mostly not worth the massive amount of tax money I have to pay.
That’s a good point—you’re likely a net contributor of taxes right now. But many of things I mentioned aren’t a result of taxes. There are lots of public goods produced by being around lots of other educated, wealthy people that you benefit from but aren’t captured in the income figures, such as lower crime, more beautiful buildings, more opportunities to talk to people like that, lack of sewage on the street and so on.
Moreover, you’re going to get some of those taxes back in the future (and you’ve benefited from taxes when younger). I think the lifecycle comparison is more relevant.
Over your life, you’re probably not net-losing more than 10-20% of your income, so it’s not a big factor in the comparison. We’re looking for a 10x difference, not a 10% difference.
You can also reclaim tax on donations, so if the message if to donate more, arguably we should use pre-tax income instead.
If a shanty town opens down the road from me, giving me the option to live like the global poor, I become richer relative to my neighbors, but I don’t become richer in absolute terms. Even if a shanty town opened, I’d buy the same stuff as before, so my quality of life would be exactly the same.
I think this is incorrect. Right now I am looking for accommodation. The cheapest option I can find (which doesn’t have a working washing machine and is a single small room with shared facilities) costs €5400 per year. It would be very useful for me to have the option to live in a room of quality and price at the level of the 75th or 80th percentile in India. Eyeballing the graph above, the 80th percentile in India is on $1500 or so. They can’t be paying more than $700 for their accommodation.
I have to go live in this room—the alternatives are even more expensive, or being homeless and losing my job.
I agree that the shanty town wouldn’t help me—I would stink of feces and quickly lose my job on personal hygiene grounds—but the 50th and 75th and 80th percentiles in India do not live in ‘shanty towns’. Or am I completely misinformed here?
The reason the super cheap goods the global poor buy don’t exist in the West is because no-one wants them.
that’s false—they don’t exist because the government bans or taxes them, or because of cost disease. In almost every relevant category (cars, accommodation, food, household goods), the government bans you from buying the cheap options.
E.g.
Bike helmet made in China for $3 but sells for €40. (Compulsory safety testing to ludicrously high standards, tax, overheads)
Want to buy a second hand toaster? Nope, banned in many countries because it might be hazardous. Pay for a new one, including all the tax and overheads and then when you’ve finished, throw the old one away.
Learn to drive in the UK as a new young, male driver)? That’ll be £1500 for lessons, plus £3800 for insurance Why? Do people in India or Brazil need to pay that much? You tell me!
want to buy/rent a very small house/flat/room? Nope! It has to have a bunch of amenities and features that you don’t need, by law.
Want to buy a simple product like milk at market price? Nope! The government, media and farming lobby are getting together to make sure that consumers subsidize unprofitable dairy farms.
I think the key here is that once you have some money, the government finds many ways to take that money away from you, and those ways tend to scale as a percentage of your income for people in the range that we are talking about ($1000-$100,000). Being able to afford a place to live has a minimum threshold which depends on the average income in your country.
If you (in the west) fall behind in this race to make enough money so that once the government has thieved from you at both ends you can still afford a room to live, you end up falling into the homelessness trap which is very hard to escape from and is actually worse than the life of a median person in India.
I agree that makes sense given one interpretation of the claim. But that definition also has some odd implications. Why does the actual option need to be available to you, even if you’re never going to take it?
If a shanty town opens down the road from me, giving me the option to live like the global poor, I become richer relative to my neighbors, but I don’t become richer in absolute terms. The reason the super cheap goods the global poor buy don’t exist in the West is because no-one wants them. Even if a shanty town opened, I’d buy the same stuff as before, so my quality of life would be exactly the same. Your definition, however, would say I’ve become ~10x richer, which seems odd.
I think both senses of the term are relevant and interesting. Personally, I find the sense used by the World Bank better at capturing what I intuitively think about when comparing living standards and income. But it’s useful to consider both.
You also haven’t shown that the differences would amount to a factor of 10. Even though the exact goods the global poor would use are not available in the West, there are still very cheap goods available (as in Will’s comment).
That’s a good point—you’re likely a net contributor of taxes right now. But many of things I mentioned aren’t a result of taxes. There are lots of public goods produced by being around lots of other educated, wealthy people that you benefit from but aren’t captured in the income figures, such as lower crime, more beautiful buildings, more opportunities to talk to people like that, lack of sewage on the street and so on.
Moreover, you’re going to get some of those taxes back in the future (and you’ve benefited from taxes when younger). I think the lifecycle comparison is more relevant.
Over your life, you’re probably not net-losing more than 10-20% of your income, so it’s not a big factor in the comparison. We’re looking for a 10x difference, not a 10% difference.
You can also reclaim tax on donations, so if the message if to donate more, arguably we should use pre-tax income instead.
I think this is incorrect. Right now I am looking for accommodation. The cheapest option I can find (which doesn’t have a working washing machine and is a single small room with shared facilities) costs €5400 per year. It would be very useful for me to have the option to live in a room of quality and price at the level of the 75th or 80th percentile in India. Eyeballing the graph above, the 80th percentile in India is on $1500 or so. They can’t be paying more than $700 for their accommodation.
I have to go live in this room—the alternatives are even more expensive, or being homeless and losing my job.
I agree that the shanty town wouldn’t help me—I would stink of feces and quickly lose my job on personal hygiene grounds—but the 50th and 75th and 80th percentiles in India do not live in ‘shanty towns’. Or am I completely misinformed here?
that’s false—they don’t exist because the government bans or taxes them, or because of cost disease. In almost every relevant category (cars, accommodation, food, household goods), the government bans you from buying the cheap options.
E.g.
Bike helmet made in China for $3 but sells for €40. (Compulsory safety testing to ludicrously high standards, tax, overheads)
Want to buy a second hand toaster? Nope, banned in many countries because it might be hazardous. Pay for a new one, including all the tax and overheads and then when you’ve finished, throw the old one away.
Learn to drive in the UK as a new young, male driver)? That’ll be £1500 for lessons, plus £3800 for insurance Why? Do people in India or Brazil need to pay that much? You tell me!
Want to buy a cheap new car like the Tata Nano? Nope, your government has banned it because it’s 99.999% safe rather than 99.9999% safe.
Surely a speeding fine will be inconsequential to someone in the top 1% of the global income distribution, because the harm from speeding on a road is a fixed quantity? No, the government wisely decided to make it it scale with your income!
want to buy/rent a very small house/flat/room? Nope! It has to have a bunch of amenities and features that you don’t need, by law.
Want to buy a simple product like milk at market price? Nope! The government, media and farming lobby are getting together to make sure that consumers subsidize unprofitable dairy farms.
I think the key here is that once you have some money, the government finds many ways to take that money away from you, and those ways tend to scale as a percentage of your income for people in the range that we are talking about ($1000-$100,000). Being able to afford a place to live has a minimum threshold which depends on the average income in your country.
If you (in the west) fall behind in this race to make enough money so that once the government has thieved from you at both ends you can still afford a room to live, you end up falling into the homelessness trap which is very hard to escape from and is actually worse than the life of a median person in India.