Economics

A Spoonful of Inequality Helps the Medicine go Down

The conventional wisdom in the circles I hang out in – pro-Hillary, morally conscious,happy bunnies who pretend to enjoy French wine and opera – is that the greatest scourgeon humanity after the bubonic plague is inequality of wealth. They worship Pope St. John Paul Piketty and canonize Archbishop Paul Krugman. Not only is inequality bad for its own sake, they say, it makes people ill, like medically ill.

Their premise always struck me as specious. I once took them through a thought experiment. Imagine, I said, you time travel to the Bengal famine. There was a lot of equality then – people were equally malnourished. Everyone’s ribs protruded equally because of muscle wasting from marasmus. The loss of protein from kwashiorkor made sure everyone’s belly popped out without prejudice. Starvation because of poverty is a great leveler. It cares little about gender, caste or religion. It is non-judgmental.

You say to a starving Bengali: “I have a solution. It’ll give you food, occasional shelter, internet and a mobile phone.But here’s the catch. An ostentatious billionaire called Mukesh Ambani will own the most expensive house in the world, and because you’ll be reminded of his house, you might feel like crap. You’ll live longer, be well fed, perhaps overfed, but will feel like crap when you see someone driving a Mercedes. Want it? It’s called capitalism.” I suspect the starving Bengali might say “hell yes, please bring on inequality. I want food. I don’t give a damn about Ambani.”

Inequality affects tenured Ivy League professors, not rickshawallahs in India. You can understand why. It’s painful for the professor to sit in airline’s economy class drinking Chivas Regal Red Label (it’s hideous, BTW), whilst the undeserving 1 % drink Blue Label in business class. The rickshawallah in India doesn’t suffer from the maladies of the almost hyper affluent.

The response to my thought experiment was “yeah, yeah.” I was dismissed as a ranting, remorseless Scrooge. A landmark study by an economist, Raj Chetty, in JAMA will give me the “told you so” satisfaction. The study looked at income and life expectancy. The richest 1 % males live, on average, 15 years more than the poorest 1 % males.

This isn’t surprising, but the researchers found more. They found that the life expectancy of the poor depended,not on the degree of income inequality perse, but where the poor lived. The plot thickens….

The poor who live near neighborhoods (commuting zones) with highest life expectancies – i.e. affluent neighborhoods – live longer than the poor who live near neighborhoods of the lowest life expectancies. The poor live longer in New York than Detroit.

Let me repeat: the poor who live near the rich live longer.Get it? Those who stare at that carcinogen called inequality live longer than those who don’t.

The study decimates a narrative pervasive in medical and public health circles, which has escaped scrutiny because it is camouflaged by nobility – inequality (relative poverty) leads to ill health.

Mistaking morality for signal is an easy trap to fall into. And, to be fair, Chetty eats all ideologues for breakfast. After reading Chetty’s study, in Bayesian speak, everyone should update their priors, and have a new posterior. He has renewed my faith in health economists without whom moralizers, proselytizers and supply side Laffer curvers will run healthcare amok with their agenda-driven dodgy theories.

Chetty finds that life expectancy for the poor doesn’t correlate with access to medical care. Which means that the primary reason the poor are dying sooneren masseisn’t because they can’t access the emergency rooms on time, or because they lack insurance. Sorry Obamacare.

The study vindicates the objection to using life expectancy as a metric for quality of medical care when comparing the US with other industrialized nations, since life expectancy for populations is barely affected by quality of medical, such as ICU and trauma, care.

The rising tide lifts all boats, even though the tide lifts some boats more than others, and some not at all. Shetty found that the rich aren’t just getting richer but becoming more immortal. Between 2000 and 2014 the top 5 % gained 3 years of life expectancy and the bottom 5 % gained piddles. In some areas people have a lower life expectancy in 2014 than they did in 2000. So much for trickle-down economics, which, BTW,should join the flat earth society.

Why are the poorest 1 % not living as long as the richest 1 %? The easy answer is “habits.” The rich have different, life-enhancing, habits. They don’t smoke. They drink in moderation, and exercise. Conservatives might say the rich make better choices. But that answer is as pathetically naïve as blaming inequality. Habits don’t arise from thin air. It’s easier cycling when you have a bike path than when dodging bullets. Bike paths are more common in or near affluent neighborhoods. Affluent? There you go – it’s inequality all over again.

Bike paths are necessary, not sufficient. The will to ride bikes must exist. That will is driven by habit, but also by hope – hope about the future. Hope needs aspiration. To induce aspiration you need education – proper schools – and jobs.Incidentally, Chetty found no correlation between life expectancy for the poor and unemployment, but my prior about the necessity of jobs is so strong that I’ll just ignore that finding.

What’s the policy solution? It lies in the ideology of the beholder. The tirelessly moralistic Vox is still tediously harping on about inequality. Let me state, in no order of prejudice, what won’t help the poor much: more hospitals, bicycle helmets, screening, millennials fretting about names associated with historical wrong doing, and occupying Wall Street. Sorry social justice warriors – all of that righteous rage may have been for naught.

This is speculative. The problem is absolute, not relative poverty. The poor need an infrastructure of hope. They need schools with quality teachers. They need public parks. They need the government to invest in public works to create jobs. There are three reasons to connect the entire US with rail: jobs, jobs and jobs. They need the rich not to be segregated in enclaves where they self-flagellate about inequality, whilst drinking Dom Perignon and discussing chess camps for little Raj and ballet classes for little Rashmi. They need the rich to be living near them and not inside gentrified zip codes. They need the rich to use the same supermarkets, drink in the same pubs, eat at the same salad bars,and send their kids to the same schools.

The right, cheer lead by the metronomically one-sided Wall Street Journal, must be intellectually honest about taxation, and support public works and education. They have opposed higher taxes by appealing to the negative undertones of redistribution, and to theories which are partially, very partially, accurate such as the Laffer curve.

The poorest 1 % Americans live to 72 years which is, of course, longer than people in the Caucuses lived during Genghis Khan’s reign of terror, but no longer than war-stricken Sudanese. Hardly American exceptionalism.

Neither is equality good for its own sake nor is inequality bad for its own sake. Inequality is a consequence, not a cause. Inequality is bad if society becomes ossified – like a caste system – which America is becoming for reasons more complex than income disparities. The poor must be able to get on the conveyor belt to better opportunities. Don’t demonize the destination. Fix the conveyor belt.

Saurabh Jha is a physician and contributing editor to Healthcare Blog. He is currently suffering from a crisis in political economy, which is like an identity crisis but much worse.

He can be reached on Twitter @RogueRad. This piece originally appeared in 3 Quarks Daily.

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PeterWilliam Palmer MD@RogueRadAllanTom Emerick Recent comment authors
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William Palmer MD
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William Palmer MD

Our GINI is like .38 when we do it atter taxes and subsidies. This is around what all the OECDs are. I wonder if we really have exceptional inequality or are we dealing with BS?

Allan
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Allan

“Chetty finds that life expectancy for the poor doesn’t correlate with access to medical care. ”

Did Chetty find a correlation with government mandated EHR’s and every other scheme promoted by those hoping to get a bite at the health care buck?

Regarding your other concerns, I assume you read “Coming Apart” by Murray?

@RogueRad
Member

I have read Coming Apart. Murray is spot on. The cognitive elite tend to hang out together, which is part of the problem. The other part is the lack of hope, which I think can be mitigated.

Tom Emerick
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Tom Emerick

Thanks for this good and wise post. There is a myth in the US that that the wealth gap is larger than ever today. In fact, in inflation adjusted dollars the wealth gap was much larger in the 19th century when people like J.P. Morgan, Andrew Carnegie, Andrew W. Mellon, and John D. Rockefeller were accruing their health. We survived that and we will survive he relatively smaller wealth gaps today.

Today the largest wealth gaps are probably in China and some Moslem countries.

Cheers,

Tom

@RogueRad
Member

Thanks Tom. So long as the conveyor belt works, no one should care who is making what.

John Irvine
Member

Time for @roguerad to read “A Theory of Justice”?

via TweetBot

@RogueRad
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If Rawls had asked the starving Bengalis what they wanted, behind the veil of ignorance, he’d have gotten a different answer from tenured Harvard profs

Brad F
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Brad F

I don’t think the Vox folks would find your points concerning relative vs. absolute inequality altogether disagreeable. Getting the folks on the lower rungs above a minimum standard so their outcomes approach those on the upper should be the goal. As for some of the sweeping conclusions you make on some of the findings of the Chetty paper– and the three accompanying JAMA ops get into it–the data culls from city level data >500K. As we have learned from the Dartmouth maps and Mcare vs MCO, root causes change as you drill down and also as you move to dift… Read more »

@RogueRad
Member

On an individual level, of course, medical treatment matters. But it’s humbling, to say the least, how little it matters at a population level.

My main point – stop trying to slow down the rich, speed up the poor – is difficult to execute if people are still hung up about relative poverty.

Barry Carol
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Barry Carol

I agree that a good education is more important than it’s ever been now that we’ve transitioned from an agricultural economy originally to an industrial economy and now to an information economy. At the same time, it’s worth noting that some cultures value education more than others. Children need to be aspirational and to perceive that there is a future for them if they get a good education. Parents need to do their part to teach and encourage responsible behavior. Interestingly, liberals who rail against the injustice of income inequality the loudest are the same people who oppose school vouchers… Read more »

Tom Emerick
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Tom Emerick

Good points Carol. Higher capital gains taxes can be quite destructive in terms os hat economists call the “lock in ” effect, resulting in poorer allocation of resource and capital.
The US already has one of the highest capital gains taxes in the world, making America relatively less attractive as a place to invest.

Allan
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Allan

“It’s also probably true that taxes need to be raised”

First spending restraint, then consider taxes. The reverse leads to more debt and even higher taxes.

@RogueRad
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Yes. And, in more recent times, the death of employment in the former mining towns of England and Wales.

Peter
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Peter

“Interestingly, liberals who rail against the injustice of income inequality the loudest are the same people who oppose school vouchers and charter schools especially in inner city neighborhoods.” Barry, if I thought vouchers and charter schools are what inner city neighborhood kids (usually black) needed then I’d be for it. But pulling funding from schools in desperate need of support (and repair) to give to lottery schools or selective enrollment schools is not going to save those kids. Let voucher schools take all comers. In NC we are getting “charter” schools that don’t have the same oversight or governmental scrutiny… Read more »