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Income inequality is not the disease. It's a symptom of other issues. A better indicator of economic health is to look at changes in the individuals with highe

Income inequality is not the disease. It's a symptom of other issues. A better indicator of economic health is to look at changes in the individuals with highest net worth. In countries with government-granted monopolies, the list remains relatively constant year upon year. In more competitive countries, the list churns new wealth in with the old. I do wish we could get over this "1% vs 99%" meme though. Incomes are mostly continuous as you go up the scale. The change in annual income / net worth of the bottom guy in "the 1%" and the top guy in the "the 99%" is immaterial. If the article is warning us that we're on the brink of a Depression, mentioning the 1927 stats, I would like to see some sort of charts showing this 1% slice over time[1]. And for "the rest of us," it isn't the fault of "the 1%" that median incomes haven't matched productivity gains over the last 40 years[2]. This is where more scholarly work should be focused, in my opinion. Basically, it doesn't matter how much wealth the top earners have, as long as the median income is growing. The headline and article are simply engendering class warfare instead of examining the deeper causes of median income stagnation. [1] http://en.wikipedia.org/wiki/File:2008_Top1percentUSA.png http://en.wikipedia.org/wiki/File:2008_Top1percentUSA.png [2] http://upload.wikimedia.org/wikipedia/commons/4/45/Productivity_and_Real_Median_Family_Income_Growth_1947-2009.png http://upload.wikimedia.org/wikipedia/commons/4/45/Productiv...

eli_gottlieb 13y ago
And for "the rest of us," it isn't the fault of "the 1%" that median incomes haven't matched productivity gains over the last 40 years[2]. Who says? The top 1%, in any given year, mostly consist of capitalists (literally: people who invest capital for a living) or rentiers (people who control commons resources like land or mineral wealth). The top industrial sectors, often the only healthy sectors, in most of the developed world, are now: FIRE (Finance, Insurance, and Real Estate), Resource Extraction (basically: energy and raw materials), and technology (us on this site). Income has always been divided between capital, labor, and rentiering (even though economists like to operate in a True Scotsman Efficient Market, where rentiering is eliminated by perfect competition). Recently, more and more of that income has been going to capital and rent, less to labor [1]. "Since labor income is more evenly distributed across U.S. households than capital income, the decline made total income less evenly distributed and more concentrated at the top of the distribution, and this contributed to increased income inequality." So actually, what we are seeing is very much class warfare, in the Marxist sense of the word. Even the tax system (normally the tool of obnoxious redistributive Big Government) is now configured to favor capital over labor [2], contributing to income inequality, the deterioration of national infrastructure, and the accumulation of national debts. “There’s class warfare, all right,” Mr. Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.” [1] -- http://www.clevelandfed.org/research/commentary/2012/2012-13.cfm http://www.clevelandfed.org/research/commentary/2012/2012-13... [2] -- http://www.nytimes.com/2006/11/26/business/yourmoney/26every.html?_r=0 http://www.nytimes.com/2006/11/26/business/yourmoney/26every...
- rayiner 13y ago
  I have to say I really enjoy your posts that discuss things in plain labor/capital terms. It seems to be out of vogue, but you don't have to be Marxist to appreciate that the basic dynamic of labor versus capital is simply a description of reality.
  - eli_gottlieb 13y ago
    Well thanks ^_^.
fewy 13y ago
clarkmoody, You seem to miss the point that this is a zero sum game, you only have 100% of the pie to go around. If the top 1% take more of it, it means the other 99% get less. So it does in fact matter how much the top earners make because it will lower the median income if they take more money. http://en.wikipedia.org/wiki/Household_income_in_the_United_States http://en.wikipedia.org/wiki/Household_income_in_the_United_...
- baddox 13y ago
  It's clearly not a zero sum game.
- ohazi 13y ago
  No, it isn't. Rent seeking is a zero sum game, but the productivity gains over the last 40 years have increased the size of the pie.
  - fewy 13y ago
    The pie we are looking at is in percent, the article stated that the top 1% took a bigger share of it than before. This means they took a bigger share of your productivity gains. But why argue about such things, it would be easier if you can show me a mathematical example where the top 1% take a bigger percentage of the pie yet the median increases. Let me know if you like the results you come up with.
gethoht 13y ago
Income inequality is a disease as it eventually will cripple an economy. It's foolish to assume that it "isn't the fault of the 1% that median incomes haven't matched productivity gains..." How is it not the fault of the 1%? Who pushes for tax measures favoring the wealthy? Who pushes for outsourcing? Who squashes labor movements? Who created a $1200 TRILLION derivatives market? Who got bailed out when the economy crashed? Who gets the all of the federal reserve loans and the benefits of their policy decisions? As for class warfare, Warren Buffet said it best: "There's class warfare alright, but it's my class, the rich class, that is making war, and we're winning".
rayiner 13y ago
Its a false assumption that it doesn't matter how much the income of the 1% grows as long as the median goes up. Humans intrinsically measure relatively, not in absolute terms. The goal of a democratic society should be to figure out how to maximize the growth of the median income, not simply accept stagnation at the median so long as a few people are getting rich.

eli_gottlieb 13y ago

And for "the rest of us," it isn't the fault of "the 1%" that median incomes haven't matched productivity gains over the last 40 years[2]. Who says? The top 1%, in any given year, mostly consist of capitalists (literally: people who invest capital for a living) or rentiers (people who control commons resources like land or mineral wealth). The top industrial sectors, often the only healthy sectors, in most of the developed world, are now: FIRE (Finance, Insurance, and Real Estate), Resource Extraction (basically: energy and raw materials), and technology (us on this site). Income has always been divided between capital, labor, and rentiering (even though economists like to operate in a True Scotsman Efficient Market, where rentiering is eliminated by perfect competition). Recently, more and more of that income has been going to capital and rent, less to labor [1]. "Since labor income is more evenly distributed across U.S. households than capital income, the decline made total income less evenly distributed and more concentrated at the top of the distribution, and this contributed to increased income inequality." So actually, what we are seeing is very much class warfare, in the Marxist sense of the word. Even the tax system (normally the tool of obnoxious redistributive Big Government) is now configured to favor capital over labor [2], contributing to income inequality, the deterioration of national infrastructure, and the accumulation of national debts. “There’s class warfare, all right,” Mr. Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.” [1] -- http://www.clevelandfed.org/research/commentary/2012/2012-13.cfm http://www.clevelandfed.org/research/commentary/2012/2012-13... [2] -- http://www.nytimes.com/2006/11/26/business/yourmoney/26every.html?_r=0 http://www.nytimes.com/2006/11/26/business/yourmoney/26every...

rayiner 13y ago
I have to say I really enjoy your posts that discuss things in plain labor/capital terms. It seems to be out of vogue, but you don't have to be Marxist to appreciate that the basic dynamic of labor versus capital is simply a description of reality.
- eli_gottlieb 13y ago
  Well thanks ^_^.

fewy 13y ago

clarkmoody, You seem to miss the point that this is a zero sum game, you only have 100% of the pie to go around. If the top 1% take more of it, it means the other 99% get less. So it does in fact matter how much the top earners make because it will lower the median income if they take more money. http://en.wikipedia.org/wiki/Household_income_in_the_United_States http://en.wikipedia.org/wiki/Household_income_in_the_United_...

baddox 13y ago
It's clearly not a zero sum game.
ohazi 13y ago
No, it isn't. Rent seeking is a zero sum game, but the productivity gains over the last 40 years have increased the size of the pie.
- fewy 13y ago
  The pie we are looking at is in percent, the article stated that the top 1% took a bigger share of it than before. This means they took a bigger share of your productivity gains. But why argue about such things, it would be easier if you can show me a mathematical example where the top 1% take a bigger percentage of the pie yet the median increases. Let me know if you like the results you come up with.

gethoht 13y ago

Income inequality is a disease as it eventually will cripple an economy. It's foolish to assume that it "isn't the fault of the 1% that median incomes haven't matched productivity gains..." How is it not the fault of the 1%? Who pushes for tax measures favoring the wealthy? Who pushes for outsourcing? Who squashes labor movements? Who created a $1200 TRILLION derivatives market? Who got bailed out when the economy crashed? Who gets the all of the federal reserve loans and the benefits of their policy decisions? As for class warfare, Warren Buffet said it best: "There's class warfare alright, but it's my class, the rich class, that is making war, and we're winning".

rayiner 13y ago

Its a false assumption that it doesn't matter how much the income of the 1% grows as long as the median goes up. Humans intrinsically measure relatively, not in absolute terms. The goal of a democratic society should be to figure out how to maximize the growth of the median income, not simply accept stagnation at the median so long as a few people are getting rich.