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January 28, 2007
Income Inequality
Heading into the President election of 2008 we already know that income inequality will be a big issue. I have already noted that income inequality figures come from tax data that contain many problems (much income is note included). I have also argued that some inequality may be an inherent part of the incentive system in a technology sophisticated, creative economy. New studies also show that whatever income inequality there is may be explained by simple demographics: As a nation state's age grows its income inequality grows (older folks are wealthier) and as a state's education grows its income inequality grows. Unless we want to outlaw age or education, income inequality growth may be, well, natural -- a statistical illusion. Gets votes though.
January 28, 2007 in Musings | Permalink
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Comments
I have also argued . . ., but lacking any factual basis
Here are the true facts on income inequality in the United States:
"The most convenient statistic for measuring income inequality is called a Gini coefficient, which measures a country's distribution of income from 0 (absolute equality, with each person sharing the same amount of wealth) to 1 (absolute inequality, with one person controlling all of the nation's wealth).
Here's what that statistic looks like for a handful of countries, including contemporary and historic figures for the U.S.:
Japan: .25
Sweden: .25
India: .33
The United States 1970: .39
The United States 2005: .47 (Note that a small fraction of the increase over time is due to a change in the methodology for calculating the Gini coefficient; still, income inequality has climbed steadily by this measure over the past four decades.)"
As too many experts on rhetoric have explained, no one knows what justice is but it is an injustice when too many have too small a part of the economic pie, especially when path dependence, corporate size, and a decline in available capital and opportunity are driving the results.
Posted by: Moe Levine | Jan 30, 2007 3:11:27 AM
As a nation state's age grows its income inequality grows (older folks are wealthier) . . .
what did you do, take $10,000 just like what is being offered on Global Warming
simple 101 economics disproves this argument. assume that an economy has 2 employees, one 25 and one 65. The 65 year old saves everything and the 25 year old spends everything. On reaching 66, the older employee must retire. On his first day of retirement he goes to the store and asks the 25 year old for a loaf of bread. The 25 year old will smile and say, "That will be your life savings, please."
The whole point of the story is that income distribution has nothing to do with what is fair, right, just, etc. It has nothing to do with how much value one creates. It only has to do with what "power" one has to get money from the other side in the bargain.
Posted by: Moe Levine | Feb 2, 2007 6:00:30 AM
