Let's agree, for the sake of argument, that severe inequality is a bad thing in its own right. Does it also act as a drag on the economy? Recent research suggests it does, and calls into question the standard justification for tolerating rising inequality -- namely, that it's the price a society must pay for economic growth and overall prosperity.
In an earlier post I discussed Arthur Okun's classic book on this subject, "Equality and Efficiency: The Big Tradeoff." I defended Okun's view that, as a practical matter, the trade-off is almost impossible to avoid, even though it's true that, in theory, opportunities abound to make society both fairer and more efficient. Last week a new study from the Organization for Economic Cooperation and Development brought fresh evidence to this debate.
The title of this third big OECD volume on inequality captures the main theme: "In It Together: Why Less Inequality Benefits All." It reports that income inequality measured at the country level (as opposed to globally) has been rising almost everywhere for years. It also finds that "income inequality tends to drag down GDP growth" -- a finding you can expect to see cited frequently. On the face of it, measures to reduce inequality will therefore boost growth. In other words, there's no trade-off, and Okun was wrong.
Yet, as the report goes on to explain, it isn't quite so simple.
The OECD states this main finding so that it sits well with the prevailing obsession over inequality (thus guaranteeing that the report will be noticed), yet does so in a way that invites both misunderstanding and, I believe, misdirected effort. I suspect a case of Piketty Syndrome.
Mais
In an earlier post I discussed Arthur Okun's classic book on this subject, "Equality and Efficiency: The Big Tradeoff." I defended Okun's view that, as a practical matter, the trade-off is almost impossible to avoid, even though it's true that, in theory, opportunities abound to make society both fairer and more efficient. Last week a new study from the Organization for Economic Cooperation and Development brought fresh evidence to this debate.
The title of this third big OECD volume on inequality captures the main theme: "In It Together: Why Less Inequality Benefits All." It reports that income inequality measured at the country level (as opposed to globally) has been rising almost everywhere for years. It also finds that "income inequality tends to drag down GDP growth" -- a finding you can expect to see cited frequently. On the face of it, measures to reduce inequality will therefore boost growth. In other words, there's no trade-off, and Okun was wrong.
Yet, as the report goes on to explain, it isn't quite so simple.
The OECD states this main finding so that it sits well with the prevailing obsession over inequality (thus guaranteeing that the report will be noticed), yet does so in a way that invites both misunderstanding and, I believe, misdirected effort. I suspect a case of Piketty Syndrome.
Mais
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