Income Inequality as a Policy Consideration

Professor Alan Taylor writes for Financial Times that emerging markets are catching up to developed markets in a way that few would have expected five years ago.  Still, the article notes that significant risks remain for developing markets, particularly concerns about the increasing level of income inequality.  The full article is here: Do emerging markets deserve developed status? (H/T: Greg Mankiw).

A few days ago, for the New York Times, Nicholas Kristoff argued that increasing levels of privitization and reductions in local, state, and federal programs indicate some U.S. trends back toward developing nations, where wealthy people have their own private bodyguards rather than support a strong police force and use diesel generators instead of paying taxes to support a reliable electric grid. Kristoff also noted that income inequality is a significant danger, although on he concedes that the United States is "in no danger of actually becoming Pakistan, any more than we’re going to become Sweden."

I'm not on board fully with either article (and I'm more convinced by the former than the latter), but both raise the point that increased income inequality is a significant concern.  On that, I definitely agree. So whether we are going to increase or reduce regulations on businesses or increase or reduce taxes on people and/or businesses, I think the impact on income inequality, and what that could mean for the country, needs to be part of the consideration.

Frankly, I don't want to live in a country where no one can afford a Bugatti Veyron ($1,700,000). I would, however, like to live in a place where a Fisker Karma ($100,000) is at least a possibility, and my Subaru Legacy is a reasonable expectation, for everyone.  (If you're not a car person, please feel free insert your luxury to practical options of your own.)    

--JPF