Wednesday, December 3, 2014

(Related Update): Still Worried about Income Inequality?

Related update:   Bob Higgs is a leading economic historian from the Austrian School of analysis.  In a recent post, he reminds us that the whole issue of income inequality is really a statistical creation, manipulated in ways beneficial to the liberal political class.  His articles are always worth reading, and this one on income inequality is no exception:
Income inequality has no necessary connection with poverty, the lack of material resources for a decent life, such as adequate food, shelter, and clothing. A society with great income inequality may have no poor people, and a society with no income inequality may have nothing but poor people. Coercively reducing income inequality by fiscal measures may do nothing to reduce the extent of real poverty and may indeed—to tell the truth, almost certainly will—create incentives that increase the extent of real poverty (and many other social ills).
Probably no subject in the social sciences has created so much unnecessary heat. Yet, at the same time, economists actually know a great deal about it and can dispel the public’s confusion about it if they try. Sad to say, many (such as Piketty) do not try in a competent fashion, but only add to the confusion and feed the already raging fires of envy. These economists are therefore acting as ideologues, rather than economists, in such work.
[ht: Cafe Hayek]

Original post 11/1/14:  With a hat tip to Cafe Hayek, here are items 2 and 3 (of seven) from a report looking at the issue of income inequality in the USA.  The items below are from a post at the American Enterprise Institute which, in addition to the full seven items, has interesting analysis and commentary definitely worth your time.
2.)  However, when changes in income concentration and living standards are considered across countries—a more rigorous approach to assessing causality—larger increases in inequality correspond with sharper rises in living standards for the middle class and the poor alike.
3.)  In developed nations, greater inequality tends to accompany stronger economic growth. This stronger growth may explain how it is that when the top gets a bigger share of the economic pie, the amount of pie received by  the middle class and the poor is nevertheless greater than it otherwise would have been. Greater inequality can increase the size of the pie