http://econlog.econlib.org/archives/201 ... is_al.html
Income inequality is the most commonly cited measure, primarily because the data on it is the most comprehensive. However, for the purpose of measuring how inequality affects a community it is also probably the least interesting yardstick of the three.
Consumption inequality, though harder to measure, provides a better proxy of social welfare. This is because people's living standards depend on the amount of goods and services they consume, rather than the number of dollars in their wage packet.
The rest of the piece goes off with policy proscriptions I don't particularly agree with from there but I found the fundamental idea of consumption inequality, the actual material outcomes of people, to be a far more important thing to look at than income inequality. I also found a progressive consumption tax an interesting idea.
Personally I would still pair it with a tax on idle money and income streams but I can see the value in looking at inequality in terms of consumption and not just raw money totals.
Another argument he makes, one I'm less certain of, is that it's not necessarily very wealthy individuals that are a danger in terms of political influence but interest groups who are constrained by their desires to maintain a certain level of consumption for that group that are the most powerful in political influence terms. The very wealthy can better afford to give up some of the income they aren't using for idealistic causes while upper middle class interest groups are more likely to outright wreck parts of the economy and political system to maintain their current material positions.