To the Editor:
While I agree with many of the author's points on the scourge of extreme poverty and inequality of opportunity, an Op-Ed in Tuesday's paper ("The moral dilemma of the 21st century") implied a factual inaccuracy that deserves correction.
Economics teaches us the difference between real income and nominal income. Real income is the amount of equivalent goods that your money can buy adjusted for inflation.
Sachs' $1 a day baseline is measured in Purchasing Power Parity (PPP), a measure of real income based on a basket of goods an average citizen in that particular country can buy. While it is hardly a perfect measure of income, an increase from 50 cents to $1 doubles the amount that one can buy.
Therefore, the statement that "more wealth means higher prices and therefore ... continued poverty" is factually incorrect. Bringing more of the world's population over the $1 a day threshold has a very meaningful significance - a rising tide does raise all boats.
Moreover, I would question whether today's current state of inequality is a result of the inherent failures of capitalism or, instead, a failed social policy fueled by state capture.
Are our problems with capitalism itself or with poor governance and the resultant market failures from insufficient policy? How have other economic systems - which have promised equality of economic outcome - performed?
Michael Eddy
Class of 2008
