Inequality

I am preparing a talk on inequality here in America, and so have been re-reading the Piketty and Saez work. Amongst the more eye-opening facts I have come across is the assertion, by Saez, that the surge in the top 1% incomes is so large that the growth of the bottom 99% amounts to only half the average [mean].

Think about that for a moment.

It would be like walking into a room full of people two feet tall with one thirty footer in the corner. The mean average is meaningless in such circumstances. We are all taught that in statistics class, but to come across such an egregious example in a dataset as large as all US tax returns is astonishing.

Not only is this an alarming fact, but to portray it adequately on a chart is difficult to do. The line representing that 1% doesn’t fit well with the 99%  because any scale you use cannot easily accommodate such extremes.

When I chat with people about the topic I realize that most have no clue as to how skewed and screwed up the economy now is. Even when they start to comprehend they retreat into a kind of ‘it doesn’t affect me’ denial.  The fact seems to be that most people want to cling onto the mythological image of America they carry with them, perhaps because confronting the reality we have made for ourselves means accepting unpleasant and disturbing facts.

Yet they’ve all been hurt by what happened.

They key, I think, is to be as apolitical as possible when you portray the facts. People can absorb those facts given time and lack of controversy. The bigger challenge is getting them to understand that they have suffered and need to do something to help re-assert a more acceptable balance.

There are still plenty who argue that inequality does no harm and that those who accumulate great wealth and/or incomes somehow deserve it. Ironically mainstream economics can help win the argument. Once you get people to commit to allegiance to free markets you can more easily get them angry over massive inequality when they realize it represents a perversion of market magic.

But then you get trapped into arcane discussions about how mainstream economics has nothing to do either with capitalism or reality or much of anything at all. People’s eyes glaze over, and economics is once again shown to be a waste of time.

Why do we bother?