The Economics of Inequality

Piketty’s 2013 masterwork, Capital in the Twenty-First Century, made income inequality a household phrase—particularly for those who hope to move their own households to the White House. This earlier work, first published in 1997 and since revised and updated, is more approachable, and it arrives at the same dismal conclusion: the rich are getting richer and the poor, poorer. In the developed world, this phenomenon occurs most sharply in the U.S., where the top 10% collectively have 5.9 times the disposable income of the bottom 10%. In Sweden, by contrast, the figure is 2.7. Piketty isn’t a sloppy or partisan thinker, and he methodically criticizes ineffective solutions from the left. In his view, the poor usually bear the brunt of these, whether in increased payroll deductions for social insurance, higher marginal income tax rates, or unemployment. Piketty, who believes income inequality leads to political instability, proposes a guaranteed minimum income or “basic income” as an efficient means of redistribution. He also explains how economists measure economic inequality and looks at the phenomenon’s underlying causes (which do not include hedge fund managers or Chinese laborers.) If Piketty is right, inequality is increasing and cannot be cured by the free market; we must understand the problem to understand how to address it. This should be required reading for every concerned citizen. (Aug.)