Lickety Piketty: A Very Brief Guide to Income Inequality

Friday, July 25, 2014 at 3:44 PM by

There has been a great deal of interest this year in the subject of income inequality – as evidenced by the fact that economist Thomas Piketty’s book, “Capital in the Twenty-First Century,” reached No. 1 on the non-fiction, best-seller list a few months ago.  However, it isn’t an easy summer read, which is why I’m bringing you a very condensed version of a short synopsis that appeared a few days ago in a New York Times column by Nicholas Kristof.

Apparently, buying Picketty’s book is one thing, and getting very far into the 685-page tome is something else.  An analysis of Kindle data by UW Madison mathematics professor Jordan Ellenberg suggests that Piketty’s best seller may also be this year’s most unread book.  With that in mind, Kristof wrote his recent column, which he calls “An Idiot’s Guide to Inequality.”

I don’t want to discourage you from buying and reading Piketty’s book, but if it isn’t something you envision taking with you to the beach this summer, I encourage you to read Kristof’s “idiot’s guide,” which elaborates on these five points (that I have excerpted from his column):

  1. Economic inequality has worsened significantly in the United States and some other countries. The cumulative wealth of 90% of Americans is less than the wealth of the richest 1 percent.
  2. Inequality in America is destabilizing. …we seem to have reached the point where inequality actually becomes an impediment to economic growth.
  3. Disparities reflect not just the invisible hand of the market but also manipulation of markets. …For example, financiers are wealthy partly because they’re highly educated and hardworking — and also because they’ve successfully lobbied for the carried interest tax loophole that lets their pay be taxed at much lower rates than other people’s.
  4. Inequality doesn’t necessarily even benefit the rich as much as we think.
  5. Progressives probably talk too much about “inequality” and not enough about “opportunity.” Some voters are turned off by tirades about inequality because they say it connotes envy of the rich; there is more consensus on bringing everyone to the same starting line. Unfortunately, equal opportunity is now a mirage.

Kristof concludes with the most important lesson:

Inequality and lack of opportunity today constitute a national infirmity and vulnerability — and there are policy tools that can make a difference.”

In the coming months as we get into campaign season, I hope we can press candidates to talk about whether they think the widening gap in income and wealth is a problem, and whether there are tools they would support using to address it.   A few of our suggestions can be found in this February 2014 report on growing inequality in Wisconsin.

Jon Peacock

 

 

 

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