Over the years I’ve spent a lot of time thinking, reading, etc. about economic inequality. This talk (ted) is amazing, and in a sense it comes down to this chart, which answers a key question: what is income inequality correlated with?
So we now know that income inequality has high social costs, or to say it in a more technical way inequality is negatively correlated with social welfare. I don’t know that would surprise most people. A society where the lower classes are more distant from the upper classes is going to have greater social stress – at least I don’t see that as surprising.
But what else is income inequality correlated with? There is a very scary possibility: That inequality drives greater economic growth. Not hard to make up an insta-theory for that: e.g. that the social gradient drives people to strive, and this drives significant economic growth. Or, that economy’s of scale assure that larger systems will lead to higher growth, and those large systems are naturally inclined to concentrate wealth in their owners.
That would be really horrific. A Hobson’ choice: pick one economic growth or social well-being. If you don’t pick the norms that lead to highest growth other nations will then run grow you. That’s not good, because with growth and scale comes power. And, societies that grow faster carry their social norms carried along with them. They become the standard.
So, it’s a very important question. And you’d think there would be libraries full of research on this question. There are not. Pick your insta-theory for why that is. As far as I can tell the data seems to suggest that growth and inequality are inversely related. Which is a relief. It is very frustrating that this is not a settled question.