Business & Economics: February 2013 Archives
Which is more important: income equality or growth?
To see the limits of this reasoning, consider two hypothetical scenarios. In the first, 99 percent of the population has an average income of $10 and the top 1 percent has an income of $100. In the second, we increase the income gap. Now, the 99 percent earn $12 and the top 1 percent earns $130. Which scenario is better?This hypothetical comparison captures several key points. First, everyone is better off with the second distribution of wealth than with the first--a clear Pareto improvement. Second, the gap between the rich and the poor in the second distribution is greater in both absolute and relative terms.
The stark challenge to ardent egalitarians is explaining why anyone should prefer the first distribution to the second.
An underlying question, however, is whether or not the top 1 percent is extracting wealth from the other 99 percent, either through taxation, regulation or force. Absent some form of unfair dealing, everyone should prefer the second scenario even though there is more income inequality.
Just a friendly reminder that despite President Obama's continual promise to "focus on jobs" the unemployment rate is still higher in 2013 than when Obama took office in 2009.
The unemployment rate is 7.9 percent -- one tenth of a point higher than it was when Obama took office in January 2009. But the true toll of joblessness is far higher. The Labor Department's so-called U-6 rate, which includes people who want a job but have become so discouraged they have quit looking, is 14.4 percent. And a new study, by Rutgers University scholars, shows that 23 percent of those surveyed have lost a job sometime in the last four years, while another 11 percent have seen someone in their household lose a job. That is one-third of the American people who have experienced unemployment during Obama's time in office, along with many more who have experienced other hardships of the economic downturn.
I sincerely hope that the next four years are better for America than the last four.
