1In this final lecture of the series, we confront a deceptively simple question: how exactly do economists measure inequality?
2The most familiar instrument by far is the Gini coefficient, a single summary figure intended to capture the entire distribution of income.
3A coefficient of zero denotes perfect equality, while a value of one implies that a single household receives everything.
4Contrary to widespread popular belief, the Gini coefficient itself says nothing whatsoever about absolute living standards or prevailing poverty levels.
5Two societies displaying precisely identical coefficients may in reality differ enormously in the incomes enjoyed by their poorest citizens.
6What I want to emphasize is that the choice of measure is never neutral; it embeds political judgements.
7Consider household consumption surveys: they initially appeared considerably more reliable than income data, though further analysis revealed systematic underreporting.
8It is not deliberate dishonesty but the irregular rhythm of informal earnings that renders respondents' answers so frustratingly imprecise.
9Moving on now to wealth, the measurement problems multiply considerably, because assets such as private businesses resist any straightforward valuation.
10Tax records help, yet they capture only what citizens declare, which the very wealthy are adept at minimising.
11To conclude, then, treat every headline statistic about inequality with caution, and always ask precisely which measure produced it.