Why We Can't Leave The Problem Of Income Inequality To Economists

Raj Chetty from Harvard led a team of economists who have just released an important study about income inequality and mobility in the US.  They found that social mobility has not changed over the last several decades because most of the change in income has been concentrated in the top 20% and even within that group most of the change has occurred within the very top of the pyramid.  What we see happening in the US is pretty similar to the distribution of income in other nations as well.  The gap between the super-rich and everyone else has been growing at a rapid rate.

Justin Fox, who wrote this article on the Harvard Business Review site, read Greg Mankiw's maddening article on income inequality and he decided that economists have no competence in determining the socially appropriate level of income inequality.  Mankiw essentially argued that market forces determine the distribution of income and that little could be done about it.  Like most economists, Mankiw excludes moral and social outcomes from his analyses of economic data. That means the our political system must make the moral judgements about the level of inequality that is socially desirable.  Unfortunately, our political system has been making the decisions that have led to the maldistribution of income that we have today.  Most of the changes in what the "market system" has produced in the distribution of income have occurred in the last few decades.  We have allowed the super-rich to shape the market system in its favor.