Much attention has been paid over the last week or so to An Anatomy of Economic Inequality in the UK, a government-sponsored study which has taken over ten years to produce: http://www.guardian.co.uk/society/2010/jan/27/unequal-britain-report
The study contains a huge amount of data, much of it on the gaps between richer and poorer groups. It turns out, for example, that the richest 10% own about one hundred times as the poorest 10%. Many appear to think that such inequality is obviously, in itself, a bad thing — something any government, especially one with its roots in socialism, ought to be doing something about. But in fact this is far from obvious. Imagine that each person in the poorest group were earning £100,000 p.a., and each in the richest group £10,000,000. Such a result would be described as an economic and political miracle. Or imagine that the government sought to deal with the real gaps between rich and poor merely by 'levelling down' the income of the rich to that of the poor. Given the absence of any trickling down, and the effects on incentives, the outcome of such a policy might well be to make everyone, both existing rich and existing poor, even poorer than they are now. The fact that the gap would have disappeared seems irrelevant in a situation when all have been made worse off.
Read More »Mind the Gap?