The Measurement of the Inequality of Incomes Hugh Dalton The Economic Journal, Vol. 30, No. 119 (Sep., 1920), pp. 348-361 Published by: Wiley on behalf of the Royal Economic Society Stable URL: http://www.jstor.org/stable/2223525 Accessed: 03/08/2014 21:10 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at http://www.jstor.org/page/info/about/policies/terms.jsp JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. ## THE MEASUREMENT OF THE INEQUALITY OF INCOMES 1. It is generally agreed that, other things being equal, a considerable reduction in the inequality of incomes found in most modern communities would be desirable. But it is not generally agreed how this inequality should be measured. The problem of the measurement of the inequality of incomes has not been much considered by English economists. It has attracted rather more attention in America, but it is in Italy that it has hitherto been most fully discussed. The importance of the problem has been obscured by the inadequacy of the available statistics of the distribution of income in all modern communities. To such statistics as we have, no very fine measures can be applied. The improvement of these statistics is the business of statisticians, but the problem of measuring and comparing the inequalities, which improved statistics would more precisely reveal, should be capable of theoretical solution now. No complete solution is presented in this paper, but only a discussion of certain points of principle and method. 2. First, as to the nature of the problem. An American writer has expressed the view that “the statistical problem before the economist in determining upon a measure of the inequality in the distribution of wealth is identical with that of the biologist in determining upon a measure of the inequality in the distribution of any physical characteristic.” $ ^{1} $ But this is clearly wrong. For the economist is primarily interested, not in the distribution of income as such, but in the effects of the distribution of income upon the distribution and total amount of economic welfare, which may be derived from income. We have to deal, therefore, not merely with one variable, but with two, or possibly more, between which certain functional relations may be presumed to exist. A partial analogy would be found in the problem of measuring the inequality of rainfall in the various districts of a large agricultural area. From the point of view of the cultivator, what isThe Measurement of the Inequality of Incomes Hugh Dalton The Economic Journal, Vol. 30, No. 119 (Sep., 1920), pp. 348-361 Published by: Wiley on behalf of the Royal Economic Society Stable URL: http://www.jstor.org/stable/2223525 Accessed: 03/08/2014 21:10 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at http://www.jstor.org/page/info/about/policies/terms.jsp JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. ## THE MEASUREMENT OF THE INEQUALITY OF INCOMES 1. It is generally agreed that, other things being equal, a considerable reduction in the inequality of incomes found in most modern communities would be desirable. But it is not generally agreed how this inequality should be measured. The problem of the measurement of the inequality of incomes has not been much considered by English economists. It has attracted rather more attention in America, but it is in Italy that it has hitherto been most fully discussed. The importance of the problem has been obscured by the inadequacy of the available statistics of the distribution of income in all modern communities. To such statistics as we have, no very fine measures can be applied. The improvement of these statistics is the business of statisticians, but the problem of measuring and comparing the inequalities, which improved statistics would more precisely reveal, should be capable of theoretical solution now. No complete solution is presented in this paper, but only a discussion of certain points of principle and method. 2. First, as to the nature of the problem. An American writer has expressed the view that “the statistical problem before the economist in determining upon a measure of the inequality in the distribution of wealth is identical with that of the biologist in determining upon a measure of the inequality in the distribution of any physical characteristic.” $ ^{1} $ But this is clearly wrong. For the economist is primarily interested, not in the distribution of income as such, but in the effects of the distribution of income upon the distribution and total amount of economic welfare, which may be derived from income. We have to deal, therefore, not merely with one variable, but with two, or possibly more, between which certain functional relations may be presumed to exist. A partial analogy would be found in the problem of measuring the inequality of rainfall in the various districts of a large agricultural area. From the point of view of the cultivator, what is