Abstract

Economists' use of the term “equality” in reference to a distribution of incomes has historically been in the sense of a consensus for some statistical characteristic(s) of the distribution rather than a firm concept of equality. Of course such a concept rests on appropriate welfare assumptions about income and its distribution, assumptions which, for the most part, have been left implicit (and unknown) in discussions of income equality in the literature. Our purpose in this paper is dual: first, we wish to discover an unambiguous, welfare-related equality measure. This we accomplish through suitable assumptions on a social welfare function. What is produced is an “index” of equality which describes the performance of a given distribution relative to the maximum welfare derivable from the total income it represents. The measure thus depends functionally on the welfare attributes of income, something which in reality we know little about.