Frequently Asked Questions

To provide information to consumers, in an easily-accessible, easily-understandable way, about the income inequality involved in the conception, financing, manufacture, marketing and sales of every good or service on offer, at the point of sale. The suggestion is to provide this information could be provided via a mobile phone app.

See here and here for more.

Theoretical analysis (see here) suggests that universal information provision would reduce income inequality. Moreover, it would improve social efficiency (roughly, society would be better, as judged by its members).

On the practical side, just providing information is a relatively 'light' suggestion. In particular, it leaves people full freedom of (informed) choice.

Here and here, I set out some pretty evident principles governing the information provided for this proposal to have any chance of having an impact. Roughly, the issue can be split into these two questions:

As argued here and here, the inequality information provided should be objective - based on real, verifiable figures - and given in a format that is conceptual simple - so what the figures mean is clearly understandable to all. Moreover, the inequality reported should be exhaustive, covering everyone contribution to the creation of a good (across several firms, including subcontractors, suppliers and financiers, where relevant).

These principles have consequences for:

• The inequality "score(s)" or "measure(s)" -- i.e. the number(s) reported to consumers and calculated from e.g. raw salary information. These have to have a simple meaning that can be easily grasped by non-experts.
• The "inequality base" -- i.e. the data from which inequality scores are calculated. This has to objective (e.g. relying on objective salary data) and cover everyone involved in the production of a product: not only employees of the firm producing it, but those of firms supplying goods or servicing involved in the production of the good, and more generally its existence on the market.

It is not difficult to come up with first-pass suggestions for inequality measures satisfying these conditions (see Section 4 here for some suggestions). They can form a springboard for the development of detailed measures.

As argued here and here, information should be comprehensive - provided for all goods (and firms), be they sinners or saints - transparently sourced, freely available and overseen by an independent body. An essential factor is consumer trust in the information provided, and transparency and independence are central in this regard.

In practice, this means that the information scores or measures of goods will be compiled a central, open-access database, as has been done for nutritional values of foodstuffs (for instance here). The question then becomes where the data used to calculate these scores comes from.

Here are some preliminary thoughts.

• First of all, for many developed countries at least, the data exists in the public or semi-public domain. For instance, researchers on inequalities use the Mean Earnings File in the US or the DASD in French, which provide firm-level income information, and are compiled from government sources. Whilst these cannot necessarily be used to provide inequality measures for a specific, named, good or firm (due to privacy issues), they can be used to calculate average, minimum and maximum inequality scores across categories of goods and size and location of firms.
• Secondly, firms have the data (about the incomes of their employees) and can be asked to provide it. Consider for comparison the case of eco-labels. There, firms submit a range of details about their production processes, materials used, energy and water consumption etc. on a web-portal (such as this one). Then crossing this information with a previously compiled table of typical environment impacts per production process, material, consumption etc. (such as this one), an eco-score is calculated. Often, there are mechanisms to control correct reporting by firms.

One can imagine a similar web-portal for inequality, in which firms are invited to enter the data needed to calculate the inequality scores of the goods they produce. Their information can be combined with other information on the database (in particular, the relevant information for suppliers, subcontractors, financiers etc.) to calculate the inequality measure for the relevant goods or services.

The issues, under this proposal, are how to deal with missing data (firms who have not reported), and how to verify firm reports.

• One way of dealing with missing data is to establish a database of default inequality measures, according to the type of good, size and location of firms and other relevant factors. As noted above, this can be done on the basis of semi-public data (though government cooperation would only improve data quality). The relevant value in this database could be assigned to any firm that does not report.

Note that such a system would provide an incentive for firms with low inequalities (given their size and sector) to report. Moreover, it might mean that in most cases, small firms would have no need to report in practice.

• Finally, governments often have access to the data required. They could play a role, for instance, in the verification of firm reports, perhaps even via an automatic system of checking with firm statements, tax returns etc.

And of course, since the inequality measure is open-source, anyone wishing to check the correctness of the measure for a given good or firm (e.g. journalist) may do so.

That's a big question. For some indications for similarities and differences to some things you might have in mind - and more generally the relationship to some of the economic literature on inequality - see Sections 1 and 5 of this paper. Here I offer some brief comments.

Central characteristics of this proposal are:

• universality: inequality is reported for every good and service (unlike e.g. eco-labels, Corporate Social Responsability or Free Trade labels, which are optional for firms).
• information-based: just providing information does not impinge upon freedom of choice (both of consumers and firms).
• objective: providing inequality reports based on objective data is, well, objective, and independent of specific or idiosyncratic judgements or opinions.

As set out here, one central difference is the following. Much of the existing economic literature on inequality aims to understand current levels of income inequality (and why it has increased in several countries in recent decades) by looking for mechanisms exerting upward pressure on inequality. By contrast, the proposal here focuses on a potential reason why counterweight downward pressure is so weak: namely that inequality is not incorporated into the market and the consumption decisions of those who care about it (i.e. people who buy goods and services whose production potentially involves high levels of inequality).

An analogy with pollution may be enlightening here. To the question ‘Why has pollution increased so much over the last two centuries?’ one can cite upward pressures, such as technological change or population growth. But one can also mention the lack of potential downward pressures, such as the fact that pollution is an externality in many markets (i.e. firms can pollute without paying for the consequences of their pollution for society at large). Whilst much of the aforementioned literature on inequality examines the (analogue of the) former sorts of reasons, the current proposal is inspired by the reasons of the latter sort.