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Income inequality in America has been growing rapidly, and is expected to increase [PDF]. While the widening wealth gap is a hot topic in the media and on the campaign trail, there's quite a disconnect between the perceptions of economists and those of the general public.
For instance, surveys show people tend to underestimate the income disparity between the top and bottom 20% of Americans, and overestimate the opportunity for poor individuals to climb the social ladder. Additionally, a majority of adults believe that corporations conduct business fairly despite evidence to the contrary and that the government should not act to reduce income inequality.
Even though inequality is increasing, Americans seem to believe that our social and economic systems work exactly as they should. This perspective has intrigued social scientists for decades. My colleague Andrei Cimpian and I have demonstrated in our recent research that these beliefs that our society is fair and just may take root in the first years of life, stemming from our fundamental desire to explain the world around us.
http://theconversation.com/lifes-not-fair-so-why-do-we-assume-it-is-45981
(Score: 0) by Anonymous Coward on Friday September 11 2015, @12:09AM
Would u say that the wealth is redistributed over time if there is slow growth? Which would be in line with economic principles of capitalism. If the population doesn't grow you can't throw money into investments and expect a return, so you have to spend the principle of your wealth as opposed to the interest.
(Score: 2) by Non Sequor on Friday September 11 2015, @12:57AM
I think there's merit to the idea that if certain families have sufficient wealth to live off of interest indefinitely, if they don't spend down that principle eventually, they may very well end up sitting on claims to resources that could be put to more productive use elsewhere. I find myself wondering if taboos on lending at fixed interest in various religious traditions may have some legitimate grounding. Maybe also, low interest rates like we have now are a product of too many individuals and institutions living off of interest rates to be sustainable.
As far as r vs g thing goes, I'm not sure. We don't really understand interest rates or economic growth or how they relate to each other. At the very least, r and g have different denominators. g is growth of the total economy, r is return on the investable portion of the economy. These things are like pieces in a time-dependent jig-saw puzzle.
Another way of talking about economic growth is saying that the growth of the economy is the growth in the population combined with the growth in labor productivity. Increased renewable power generation and improvements in efficiency can create prospects for economic growth even under a declining population. Keep in mind that the current trend is to make more of the economy open to public investment (although some fronts of that trend are kind of retarded so I can't say that I have a lot of faith in it).
You don't need a steadily growing population for our economic system to work, you need a relatively stable joint distribution of age and income. Young people are basically useless but they eventually grow up into productive people who then age into people who are useful for the sake of retaining institutional knowledge and guidance but less useful when you have a ton of them. You have to derive resources from this cycle and use them in a way that sustains the cycle.
I think there should be a stable flow for a level population. Actually declining the population may be difficult because if it happens quickly, it creates a generation that's much smaller than the older generations and you can reach a point where that's a really big freaking deal and you have relatively little you can do about it (having a ton of babies doesn't fix it).
However, net migration patterns will probably mean that we will never actually directly see stability. Every thing is always going to be flowing someplace else even if the aggregate flows are in some band around an equilibrium.
Short answer: economics can be interesting but really it's mostly useless.
Write your congressman. Tell him he sucks.