PHIL 237 Lecture Notes - Lecture 12: Simon Kuznets, Thomas Piketty, Thomas Robert Malthus

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16 Aug 2016
PHIL 237
Lecture 12 — March 14
Economic Inequality
Thomas Piketty, Capital in the twenty-first century
Reverend Thomas Malthus, David Ricardo, Karl Marx: held to the notion that capitalism would
lead to increased inequality — believed that the regime of political private property is not
Simon Kuznets: had access to extensive income data — decreasing shape the inequality curve
in regards to income and capitalism. High to start with, but through time it would become less in
society since people would be more wealthy, thus reducing inequality and creating more
Piketty — held that Kuznet’s data was misleading for two reasons:
1. Three decades of growth following World War II
2. Accidental compression of high US income from 1913 to 1948
-Major conclusion of book: should be wary of any economic determinism in regard to
inequalities of wealth and income. It is hard to predict how this evolves over time, and it is
hard to conclude that will happen in the future
Capital in the twenty-first century
When thinking about inequalities, must take into account: income (salary), capital (wealth such
as assets, land, houses…) — though one is stock, and one is fixed
-Capital is fixed, income is received in a given period of time making these difficult to compare.
This leads to the use of Piketty’s Capital/Income Ratio
-How much percentage of income does this represent — Capital/ Income Ratio
-When the rate of return r on capital is greater than growth g = concentration of wealth
Atkinson — Why Inequality Matters?
General position on the reduction of inequality
-Not aiming for total equality — would not be fair for only the wealthy to have access to going
to med school
-Certain differences in economic rewards may be justifiable
-Rather, the goal is to reduce inequality below its current level, in the belief that the present
level on inequality is excessive
Not just inequality of opportunity is important, but also inequality of outcome We cannot ignore
completely what happens after the starting gun is fired
I. Must make sure the competition is fair
II. Inequality of outcome affects inequality of opportunity for the next generation
Common Thought: agree that inequality is rising, but this is for the better. Unequal salaries
motivate people to be more innovative to increase their income — stimulates economic growth
and in the end, everyone benefits
-Atkinson plotted the percentage of total gross increase going to the top 1% — plotted the
poverty rate in comparison to gross income
-Countries that are higher poverty, the larger the top shares — in countries where income is
equally distributed, there is a lower poverty rate (less poor people)
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