Economic effects of inequality

[cyu]

Excerpts from http://toomuchonline.org/must-the-rich-rock-on-forever/

The vast majority of his colleagues in faculties of economics don’t just oppose any moves to make that distribution more equal. They tout, Adler notes, “a theory that justifies the process that creates inequality to begin with.”

Economics for the Rest of Us blasts away against that theory — and all the other contortions economists go through to make the case that “what’s good for the economy” must always be what’s “good for the rich.”

Adler explains with entertaining examples, growing concentrations of income and wealth at society’s summit make our lives far more “dismal” than they would be if we distributed resources and power more equitably.

In a relatively equal society, with little difference in income between the rich and everyone else, monopolistic vendors have “little to gain from selling only to the rich.” But that all changes when the rich go mega. Vendors can charge more for their wares — and not worry if their less affluent customers can’t afford the freight.

In the grand scheme of things, of course, our world can survive the shenanigans of ungrateful and greedy rock-and-rollers. But the same dynamics of inequality that aggravate rock fans help explain why so many people can’t afford AIDS drugs or stay in college or buy a home.

[cyu]

Excerpts from http://www.cognitionandculture.net/index.php?option=com_content&view=article&id=602:better-live-in-sweden-or-anywhere-else-than-in-the-us-why-more-equal-societies-almost-always-do-b&catid=37:nicolas&Itemid=34

There is a strong correlation between inequality and health and social problems.

http://www.cognitionandculture.net/images/users/nicolasbaumard/HealthIncome.png

In contrast, there is no relationship between income and health and social problems.

http://www.cognitionandculture.net/images/users/nicolasbaumard/HealthIncome2.png

the common intuition is that it must be because more equal societies have fewer poor people. The assumption is that greater equality helps those at the bottom. However, the truth is that the vast majority of the population is harmed by greater inequality.

Across whole populations, rates of mental illness are five times higher in the most unequal compared to the least unequal societies. Similarly, in more unequal societies people are five times as likely to be clinically obese, and murder rates may be many times higher. The reason why these differences are so big is, quite simply, because the effects of inequality are not confined to the least well-off: instead they affect the vast majority of the population.

http://www.cognitionandculture.net/images/users/nicolasbaumard/HealthIncome6.png

http://www.cognitionandculture.net/images/users/nicolasbaumard/HealthIncome7.png

Inequality is bad for everyone, including the richest.

Note that this is not a question of culture... Sweden and Japan... do very well, despite their big differences. Think about family structures. Sweden has a very high proportion of births outside marriage and women are almost equally represented in politics. In Japan, the opposite is true. Even the way in which Sweden and Japan achieve their greater equality is quite different. Sweden does it through redistributive taxes and a large welfare state. As a proportion of national income, public social expenditure in Japan is, in contrast to Sweden, among the lowest of the major developed countries.

in more unequal countries a higher proportion of GDP is spent on advertising, with the USA and New-Zealand spending twice as much as Norway and Denmark... several studies have shown that people work longer in more unequal societies.

People may use violent strategy to defend their status. The more we feel devaluated by those above us and the fewer status resources we have to fall back on, the greater will be the desire to regain some sense of self-worth by asserting superiority over more vulnerable groups. That's what social psychologists call 'displaced aggression'. Examples include: the man who is berated by his boss and comes home and shouts at his wife and children; the higher degree of aggression in workplaces where supervisors treat workers unfairly; the way in which prisoners who are bullied turn on others below them in the prison hierarchy.

[Agnapostate]

Ah, I was expecting that you'd be offering information about this (http://sfreporter.com/stories/born_poor/5339/all/) piece about Samuel Bowles when I saw the thread title:


The greater the inequalities in a society, the more guard labor it requires, Bowles finds. This holds true among US states, with relatively unequal states like New Mexico employing a greater share of guard labor than relatively egalitarian states like Wisconsin.

The problem, Bowles argues, is that too much guard labor sustains “illegitimate inequalities,” creating a drag on the economy. All of the people in guard labor jobs could be doing something more productive with their time—perhaps starting their own businesses or helping to reduce the US trade deficit with China.

But it's certainly preferable to find more literature out there. :D