Consumption inequality is a critical metric because it directly reflects living standards, far more so than income levels. While income determines potential, it is actual consumption that defines quality of life. Therefore, variations in consumption offer a more accurate picture of disparities in living conditions than income differences alone.
A striking example is the kibbutzim in Israel during the 1960s and 1970s. Despite significant differences in income between kibbutzim from various movements, there were minimal differences in their levels of consumption. This illustrates how income inequality does not necessarily translate into consumption inequality, making the latter a more meaningful indicator of social welfare.