A very nice find by Megan:
It is a commonplace [notion] that since the 1970s, inequality in America has been growing rapidly–far more rapidly than our peers abroad. Naturally, this has invited a lot of attempts to explain that growth, usually in terms of America’s tax policy, its culture, or some sort of capture of our national institutions by the rich, allowing them to rig everything in their favor.
But Scott Winship offers an intriguing alternative possibility–is our outsized growth rate an artifact of mid-eighties changes to our tax code?
This is a perfect example of why econometrics are so problematic, something the Austrians have always complained about.
Even aside from this problem, the real measure of inequality should be in terms of utility, and marginal utility is logarithmic with income, so in terms of human suffering inequality is at an all-time low. That’s the magic of productivity growth.
Put more plainly, inequality is a much bigger problem when some people are starving and others are fat than when everyone is fat and some people have Ferraris.