Not All Inequality Is Created Equal

Robin Hanson raises a good question:

President Bush just spoke of "income inequality" for the first time, Tyler Cowen (the most impressive mind I've met) said last week that "inequality as a major and chronic American problem has been overstated," while on Brad DeLong just said "on the level of individual societies, I believe that inequality does loom as a serious political-economic problem."

I find it striking that these discussions focus almost entirely on the smallest of these seven kinds of inequality: 

1. Inequality across species
2. Inequality across the eras of human history
3. Non-financial inequality, such as of popularity, respect, beauty, sex, kids
4. Income inequality between the nations of a world
5. Income inequality between the families of a nation
6. Income inequality between the siblings of a family
7. Income inequality between the days of a person's life

Consider that "sibling differences [within each family] account for three-quarters of all differences between individuals in explaining American economic inequality" and that "eliminating income inequality within all nations would reduce global income inequality by no more than one-third."  So why do we talk mainly about financial inequality between a nation's families, when each of these other six inequalities is arguably larger?

Great question!  I don't know how to address or analyze item #1 (nor does it cause me to lose too much sleep), but the rest of the points raise some very interesting questions and awareness.  I don't think there's anything to be done about point #2, but it does make me appreciate what I have and the world I live in. 

From my many travels around the world, I'd say #4 is the one that bothers me the most and the one where I think economics has the best bet of helping alleviate.  One of the key insights I've learned is how important institutions (rule of law, stable political systems, high quality financial markets, etc.) matter for allowing economic development to occur.  The question becomes how to try to develop credible institutions in areas that don't currently have them.  If I could figure out that quandary, I might be able to win a Nobel Prize or something...

Speaking of prizes, I wonder if there'd be a way to spur economic development using prizes?  Maybe awards could be given to national leaders who make the most progress in their country?  Or prizes could be given to people who come up with the best models and ideas for addressing economic development?  What else could be used to incentivize people towards economic growth?  What about tying the salary of politicians to the economic performance of a nation and to measures of human rights, transparency, etc.  How much of a difference would that make?