Today while I was out running errands in my 5-year-old Honda Accord, I passed a Tesla. If I were a different kind of guy, seeing Elon Musk's latest creation whisk past me as I trundled along in my middleclassmobile might have inspired a sense of personal envy, or even some worry about the social implications of inequality in America.
But I'm an economist. And let's face it: In practical terms, the difference between a $200,000 Tesla and my last car, a beat-up minivan worth $2,000 at trade-in, is not all that large. They're both safe forms of transportation that get you from point A to point B and, given legal limits and the reality of suburban traffic, most of the time they're driven at roughly the same speeds.
In that sense, measures of income inequality overstate the differences within a developed country like the United States. The products available to the masses are, in many cases, nearly as good as those available only to the elite. Your garbageman's old Timex and your podiatrist's brand new Rolex serve almost precisely the same function.
It wasn't always so, writes John V.C. Nye.