Income Inequality is a Statistic …Not a Problem! Government is the Problem! Krugman is wrong! (again)


In this post my friend Jonathan Finegold Catalán makes an observation that I think some of you guys would find interesting, as it harks back to the free market v. interventionism. If we accept growing income inequality as an obvious reality that we have to deal with, we can study what has caused the growing income gap. We see that both the median income and GDP per capita has risen, which leads me to conclude that it could be a real possibility (pending further empirical studies) that the reason why there is greater income inequality is not because the rich are earning more than the poor at an accelerating rate, but because government interventions have cracked down on competition — this means that the top 1% is shrinking; less people are competing for the same size total income. So, these people are earning more, but not really at the expense of the “the poor,” just at the expense of each other. This is not good for “the poor,” but it is not as bad as a lot of liberals like to claim.

Here is his response at www.economicthought.net

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6 comments
  1. OTTObox said:

    1% isn’t shrinking. Bottom 99% is growing. Same effect though. Census and BLS data shows same number of companies in 1990 as in 2008 while employing 30% more workers. Regulation is allowing fewer players in. Plus I think fewer people are really interested in putting in the work to start and run their own companies. There is no economic formula to measure apathy that I know of.

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  4. Michael Johnson said:

    I have a very different take on income inequality. Before the 1970’s the average worker’s pay rose along with productivity. Since then, it’s barely kept up with inflation. All those gains in productivity since the 70’s have gone towards increased corporate profits and huge executive compensation. At the same time, union membership has dramatically dropped. I think these two things are related. Workers don’t really have the ability or knowledge to effectively negotiate higher wages on their own. Without collective bargaining, corporations are very effective at keeping pay down. They also lobbied for “free trade” with China – and got it – much to the American workers chagrin.

    http://powerlineiswrong.wordpress.com/2012/02/08/class-war-already-in-progress/

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