Introduction
The life styles of the rich, the poor, and the middle-income ranks involve consuming very different bundles of goods and services. By definition, staples (necessities) are a large share of what the poor consume, and luxuries are a higher share of what the rich consume, generation after generation.
Any strong historical trend towards making staples more expensive relative to luxuries should widen the inequalities in real living standards.Yet our explorations of inequality trends in the past have missed this point. We have been content to trace the history of economic inequality around trends in the conventional shares of income or wealth in current prices, without noticing what the movements of relative prices implied about inequality.’ This chapter uses tentative estimates to support these conjectural conclusions:
’. Before ’9’4, and especially before ’8’5, movements in inequality within and between European nations were more pronounced than have been appreciated. Introducing the concept of real, as opposed to nominal or conventional, income inequality reveals these pronounced inequality movements because relative prices happened to move very differently for the poor and the rich before ’9’4.
2. Between ’500 and ’790—’8’5 the prices of staple foods rose much more than the prices of what the rich consumed. This greatly magnified the rise in real-income inequality because in those days the poor and the rich depended more heavily on buying factor services from each other than is true today. The poor needed landintensive food and housing, and land was owned and rented out by the rich. The rich, in turn, hired servants much more than today, so that the fall in workers' real wages became a fall in the cost of living an affluent lifestyle.
3. The opposite happened between ’8’5 and ’9’4, for two main reasons. One is that real wages rose, and servants became more expensive and less common. The other is that globalization cut Europe's price of food relative to other goods and services.
We begin with some basic issues of early modern historiography, emphasizing some contradictions and puzzles that a concept of real-income inequality can help to resolve.
2.