# Economic Inequality

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Category: Economics
Slides: 32
Updated: 2026-05-17T20:51:55.645Z
Tags: economics, economic, inequality

## Summary

The rich get richer. But why? How unequal are we, what drives it, does it matter, and what can be done? A data-driven exploration. Key sections include: Economic Inequality; Table of Contents; Measuring Inequality; The Scale of Global Inequality; The Elephant Curve: Who Won from Globalisation?; Inequality Within Nations: The U.S. Case; Piketty's r > g; The Kuznets Curve: Rise Then Fall?; Engines of Inequality: Technology; Engines of Inequality: Institutions and Policy.

## Slide Outline

1. Economic Inequality
2. Table of Contents
3. Measuring Inequality
4. The Scale of Global Inequality
5. The Elephant Curve: Who Won from Globalisation?
6. Inequality Within Nations: The U.S. Case
7. Piketty's r > g
8. The Kuznets Curve: Rise Then Fall?
9. Engines of Inequality: Technology
10. Engines of Inequality: Institutions and Policy
11. Engines of Inequality: Globalisation
12. Wealth Inequality: The Hidden Iceberg
13. The Racial Wealth Gap
14. CEO Pay and the Top 0.1%
15. Social Mobility: The Great Gatsby Curve
16. Does Inequality Harm Economic Growth?
17. Inequality and Health
18. Inequality and Democracy
19. Inequality Across Countries
20. The Nordic Model: A Counter-Example
21. Policy Toolkit: Taxation
22. Policy Toolkit: Pre-Distribution
23. Policy Toolkit: Redistribution
24. The Billionaire Question
25. Global Inequality: Between Nations
26. Inequality and the Pandemic
27. Philosophical Perspectives on Inequality
28. Inequality in the Age of AI
29. Key Debates and Open Questions
30. The View from the World Inequality Lab
31. Key Thinkers on Inequality
32. Reading List

## Slide Transcript

### Slide 1: Economic Inequality

- The rich get richer. But why? How unequal are we, what drives it, does it matter, and what can be done? A data-driven exploration.
- 32 slides • Scroll or use arrow keys
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### Slide 2: Table of Contents

- Measuring Inequality
- The Scale of Global Inequality
- Inequality Within Nations
- The U-Curve: Piketty's Long View
- The Engines of Inequality
- Capital vs. Labour
- Education, Skills, and the Wage Premium
- Race and Wealth Gaps
- Social Mobility
- Does Inequality Harm Growth?
- Health, Democracy, and Social Trust
- Policy Responses
- The Future of Inequality
- Reading List
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### Slide 3: Measuring Inequality

- Gini Coefficient
- Ranges from 0 (perfect equality) to 1 (one person has everything). South Africa: 0.63. US: 0.39. Denmark: 0.28. World Gini (treating all humans as one population): ~0.67.
- Top Income Shares
- What share of national income goes to the top 1%, 10%, or 0.1%? Piketty and Saez's reconstruction of top income shares from tax data revolutionised inequality research. In the US, the top 1% earns ~21% of national income (2022).
- Wealth vs. Income
- Wealth (assets minus debts) is far more unequally distributed than income. US: the top 1% own 32% of wealth but receive 21% of income. The bottom 50% own just 2.6% of wealth.
- The Palma Ratio
- Income of the top 10% divided by income of the bottom 40%. Proposed by Gabriel Palma (2011), who noted that the middle 50% consistently receives ~50% of income everywhere -- all the variation is in the extremes.
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### Slide 4: The Scale of Global Inequality

- $2,300Median adult wealth globally (Credit Suisse, 2023)
- 1%Top 1% own 45.8% of all global wealth
- 2,640Billionaires worldwide (Forbes, 2024)
- $14.2TCombined wealth of all billionaires
- The world's 5 richest men have doubled their wealth since 2020 while 5 billion people have become poorer (Oxfam, 2024)
- If you earn $60,000/year, you are in the global top 1% by income
- A person in the bottom 50% globally earns ~$4,600/year (PPP-adjusted)
- Between-country inequality explains ~2/3 of global inequality; within-country inequality explains ~1/3 -- but the shares are shifting
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### Slide 5: The Elephant Curve: Who Won from Globalisation?

- Branko Milanovic's "elephant curve" (2012, updated 2016) reveals the winners and losers of the globalisation era (1988-2008).
- Big winners: The global middle class (60th-70th percentile globally), mostly in China and East Asia -- real income gains of 60-80%
- Big winners: The global top 1% -- the world's richest saw income gains of 60%+
- Big losers: The 75th-90th percentile globally -- lower-middle class and working class in rich countries (especially US, UK). Real income growth near zero for 20 years
- Poorest: The bottom 5% (mostly Sub-Saharan Africa) saw minimal gains
- "The elephant curve tells the story of our era: an Asian middle class rising, a Western middle class stagnating, and a global elite soaring."
- -- Branko Milanovic, Global Inequality (2016)
- This pattern helps explain the political upheavals of the 2010s: Brexit, Trump, and the populist surge across Europe.
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### Slide 6: Inequality Within Nations: The U.S. Case

- 1929 -- The top 1% receives ~24% of national income. The "Gilded Age" of extreme concentration
- 1930s-40s -- The "Great Compression": New Deal, progressive taxation (top rate 94%), unionisation, and WWII wage controls dramatically reduce inequality
- 1945-1975 -- The "Golden Age": top 1% share falls to ~9%. Median family income doubles. Shared prosperity
- 1980 -- Reagan revolution: top tax rate cut from 70% to 28%. Deregulation, union-busting, globalisation begin
- 1980-2024 -- The "Great Divergence": top 1% share climbs back to ~21%. CEO-to-worker pay ratio rises from 30:1 to 344:1
- 2020s -- COVID initially widens inequality (essential workers exposed, remote workers sheltered), then tight labour markets produce fastest low-wage growth in decades
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### Slide 7: Piketty's r > g

- Thomas Piketty's Capital in the Twenty-First Century (2013) became the most influential economics book of the 21st century with a deceptively simple argument.
- The Core Thesis
- r = rate of return on capital (stocks, bonds, real estate, etc.)
- g = rate of economic growth
- When r > g, wealth concentrates: those with capital see their fortunes grow faster than the economy, and faster than wage earners' incomes
- Historically, r ~ 4-5% while g ~ 1-2% (except during the anomalous 1914-1975 period of wars, revolution, and high growth)
- Implications
- Inherited wealth becomes dominant. "Patrimonial capitalism" returns
- The 1945-1975 period of equality was the exception, not the rule
- Without intervention (progressive taxes, wealth taxes), inequality will return to 19th-century levels
- Piketty proposed a global wealth tax -- dismissed as utopian but influential on policy debate
- "When the rate of return on capital exceeds the rate of growth of output and income, capitalism automatically generates arbitrary and unsustainable inequalities."
- -- Thomas Piketty, Capital in the Twenty-First Century (2013)
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### Slide 8: The Kuznets Curve: Rise Then Fall?

- Simon Kuznets (Nobel 1971) hypothesised in 1955 that inequality follows an inverted-U shape as countries develop.
- Stage 1: Pre-industrial -- low inequality (everyone is poor)
- Stage 2: Early industrialisation -- inequality rises as some workers move to higher-productivity sectors while others remain in agriculture
- Stage 3: Mature economy -- inequality falls as education spreads, social policies expand, and most workers are in modern sectors
- Evidence: Kuznets' original data (from the US, UK, Germany) supported the curve. The mid-20th century seemed to confirm it
- But since 1980: inequality has risen sharply in most rich countries, contradicting the prediction of continued decline
- Current view: The "Kuznets curve" was not an inevitable law but a description of a specific historical period shaped by deliberate policy choices (progressive taxation, unionisation, welfare states)
- Piketty's reinterpretation: the 20th-century decline in inequality was caused by wars and politics, not by the natural logic of capitalism.
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### Slide 9: Engines of Inequality: Technology

- Technological change has been a primary driver of rising inequality since the 1980s.
- Skill-Biased Technical Change
- Computers and IT complement high-skilled workers (raising their productivity and wages) while substituting for routine middle-skilled tasks (bookkeeping, assembly, clerical). Goldin & Katz (2008) call it a "race between education and technology" -- technology has been winning since 1980.
- Job Polarisation
- David Autor: employment grows at the top (managers, engineers) and bottom (janitors, food service) but hollows out in the middle (factory workers, clerks). The middle class is literally being automated away.
- Superstar Effects
- Digital technology creates "winner-take-all" markets. A few platforms (Google, Amazon, Meta) capture enormous value. A few executives and tech workers capture enormous pay. Network effects concentrate rewards.
- AI's New Threat
- Generative AI may now automate cognitive, non-routine tasks -- threatening the knowledge workers who previously benefited from computerisation. Early evidence suggests AI compresses wages (helps low-performers more than high-performers).
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### Slide 10: Engines of Inequality: Institutions and Policy

- Inequality is not just a market outcome -- it is shaped by policy choices.
- FactorDirectionMagnitude
- Declining top tax rates (70% to 37% in US)Increases inequalityLarge -- accounts for ~25% of rise in top 1% share
- Union decline (35% to 6% private sector)Increases inequalityExplains 15-33% of male wage inequality rise
- Minimum wage erosion (real value fell 30% from 1968 peak)Increases inequalitySignificant at bottom of distribution
- Financial deregulationIncreases inequalityExpanded finance sector captures rents
- Weakened antitrust enforcementIncreases inequalityRising corporate concentration transfers income to capital
- Expansion of higher educationReduces inequalityPartially offset by rising costs and student debt
- Jacob Hacker and Paul Pierson (Winner-Take-All Politics) argue that rising inequality is primarily a political story: organised wealth captured the policy process.
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### Slide 11: Engines of Inequality: Globalisation

- Trade: competition from low-wage countries (especially China) reduced wages and employment for manufacturing workers in rich countries. The "China shock" destroyed 2-2.4 million US manufacturing jobs (1999-2011)
- Capital mobility: companies can credibly threaten to move production abroad, weakening workers' bargaining power even in non-tradable sectors
- Tax competition: countries compete to attract mobile capital by lowering corporate tax rates (global average fell from ~49% in 1985 to ~24% in 2022). The OECD's 15% minimum tax (2023) is a partial response
- Immigration: low-skilled immigration may modestly reduce wages for the least-skilled native workers, though the effect is debated and small
- Offshore wealth: Gabriel Zucman estimates that 8% of global financial wealth ($7.6 trillion) is held in tax havens, primarily by the ultra-wealthy. This exacerbates measured inequality and starves governments of revenue
- "The real winners of globalisation are the very rich and the Asian middle class. The real losers are the Western working class."
- -- Branko Milanovic
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### Slide 12: Wealth Inequality: The Hidden Iceberg

- Income inequality understates the true picture. Wealth inequality is far more extreme and self-reinforcing.
- 32%Share of US wealth held by top 1%
- 2.6%Share held by bottom 50% (half the population)
- $142KMedian Black family wealth vs. $984K white (Federal Reserve, 2022)
- Wealth begets wealth: the rich invest in stocks, real estate, and businesses that appreciate. The poor hold wealth (if any) in cash and cars that depreciate
- Inheritance: roughly 35-40% of US wealth is inherited. The Estate Tax, designed to prevent dynasties, has been gutted: exemption rose from $675K (2001) to $13.6 million (2024)
- "Buy, Borrow, Die": the ultra-wealthy borrow against appreciated assets (no income tax), live on the loans, and at death get a "stepped-up basis" -- erasing all capital gains tax. Legally, many billionaires pay lower effective tax rates than their secretaries
- Housing: homeownership is the primary wealth-building vehicle for the middle class. Exclusionary zoning, redlining's legacy, and soaring prices have made this path increasingly inaccessible
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### Slide 13: The Racial Wealth Gap

- In the United States, the intersection of race and economic inequality reveals the lasting legacy of centuries of exclusionary policy.
- 1619-1865 -- Slavery: 246 years of uncompensated labour. At emancipation, Black Americans owned virtually nothing while white wealth had compounded for generations
- 1865-1965 -- Jim Crow: sharecropping, Black Codes, disenfranchisement, and racial terrorism prevented wealth accumulation. The 1921 Tulsa Race Massacre destroyed "Black Wall Street"
- 1934-1968 -- FHA/VA loans subsidised white homeownership while redlining excluded Black families. An estimated $120 billion in housing wealth was denied to Black Americans
- 1960s-70s -- Civil Rights legislation opens doors but doesn't address accumulated wealth gap
- 2008 -- Subprime crisis devastates Black wealth: median Black household wealth fell 53% (vs. 16% for white households)
- 2022 -- Median white family wealth ($285K) is 6x median Black family wealth ($44K) -- a gap barely changed in 30 years
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### Slide 14: CEO Pay and the Top 0.1%

- The explosion of executive compensation exemplifies how institutions shape inequality.
- YearCEO-to-Worker Pay Ratio (US)Average CEO Pay (top 350 firms)
- 196521:1$710K (inflation-adjusted)
- 197831:1$1.5M
- 198961:1$2.7M
- 2000366:1$21.5M (peak of dot-com bubble)
- 2023344:1$16.3M
- Stock options and performance pay link CEO compensation to share prices, creating enormous windfalls during bull markets
- Peer benchmarking: compensation consultants compare CEOs to each other, creating a ratchet effect (Lake Wobegon: every CEO must be "above average")
- Piketty & Saez: 60% of the rise in the US top 1% income share is from labour income (salaries + stock options), not capital income -- driven by executives, finance, and tech
- International comparison: Japanese CEO pay is ~50:1 worker pay; German ~70:1. The US ratio is exceptional
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### Slide 15: Social Mobility: The Great Gatsby Curve

- The "American Dream" assumes that anyone can rise through hard work. Data tells a different story.
- The Great Gatsby Curve
- Alan Krueger (2012): countries with more inequality have less social mobility
- The US, UK, and Italy: high inequality, low mobility
- Denmark, Norway, Finland: low inequality, high mobility
- If you're born poor in the US, you have a ~7.5% chance of reaching the top quintile (vs. ~11.7% in Denmark)
- Raj Chetty's Findings
- Where you grow up matters enormously. Moving a child from a low-mobility to a high-mobility neighbourhood increases lifetime earnings by ~10%
- The best predictors of upward mobility: less segregation, less inequality, better schools, more two-parent families, more social capital
- Absolute mobility is falling: 90% of Americans born in 1940 earned more than their parents. For those born in 1984, only 50%
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### Slide 16: Does Inequality Harm Economic Growth?

- The Traditional View
- Some inequality is necessary: it provides incentives for effort, innovation, and risk-taking. Arthur Okun's "leaky bucket": redistribution involves efficiency costs. A perfectly equal society would stagnate.
- The New Evidence
- IMF (Ostry et al., 2014): inequality is harmful to growth. A 1-point rise in the Gini reduces cumulative GDP growth by 5 percentage points over 5 years. Redistributive policies (if not extreme) are not harmful to growth.
- Mechanisms
- High inequality reduces human capital investment (poor families can't afford education). It creates political instability. It suppresses aggregate demand (the poor spend more of each dollar). It leads to financial crises (over-leveraged households).
- Raghuram Rajan's Thesis
- Fault Lines (2010): rising inequality in the US led to easy credit as a substitute for wage growth. This fuelled the housing bubble and the 2008 financial crisis. Inequality was a root cause of the crash.
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### Slide 17: Inequality and Health

- Richard Wilkinson and Kate Pickett's The Spirit Level (2009) documented a striking pattern: more unequal societies have worse outcomes on virtually every social indicator.
- Worse in Unequal Societies
- Life expectancy (US: 77 years vs. Japan: 84)
- Infant mortality
- Mental illness prevalence
- Drug abuse and addiction
- Obesity rates
- Teen pregnancy
- Homicide rates
- Incarceration rates
- The Mechanism
- Chronic stress: living in a highly stratified society activates stress responses at every level, not just the bottom
- Status anxiety: inequality makes social comparison more painful, driving "keeping up with the Joneses"
- Underinvestment in public goods: the rich opt out of public schools, parks, and transit, reducing quality for everyone else
- Social trust erodes: high-inequality societies have less trust, less civic participation, and weaker community bonds
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### Slide 18: Inequality and Democracy

- Concentrated economic power can undermine political equality.
- Gilens & Page (2014): analysing 1,779 US policy outcomes, they found that the preferences of the top 10% strongly predict policy, while average citizens' preferences have near-zero independent effect. "The US is an oligarchy, not a democracy"
- Campaign finance: the top 0.01% of US donors provide ~40% of all campaign contributions. Citizens United (2010) unleashed unlimited corporate spending
- Lobbying: corporate lobbying spending (~$4 billion/year in the US) dwarfs labour and public interest lobbying by 10:1 or more
- Media ownership: concentration of media in the hands of billionaires (Bezos/Post, Murdoch/Fox/WSJ) shapes the information environment
- The feedback loop: economic inequality begets political inequality, which produces policies that increase economic inequality. "The rich write the rules"
- "Of all the forms of inequality, injustice in health care is the most shocking and inhumane."
- -- Martin Luther King Jr. (1966)
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### Slide 19: Inequality Across Countries

- CountryGini (disposable income)Top 1% ShareModel
- South Africa0.63~20%Post-apartheid, extreme
- Brazil0.49~28%Latin American pattern
- United States0.39~21%Liberal market economy
- United Kingdom0.35~14%Anglo-Saxon (more redistribution)
- Germany0.30~13%Social market economy
- France0.29~12%Continental welfare state
- Japan0.33~13%Compressed wage structure
- Denmark0.28~9%Nordic model
- The Nordic countries prove that wealthy, innovative, market-based economies can coexist with low inequality. Policy matters.
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### Slide 20: The Nordic Model: A Counter-Example

- Scandinavia offers the strongest evidence that advanced economies can achieve both prosperity and equality.
- Key Features
- High taxes (~45% of GDP vs. ~27% in US)
- Universal public services: healthcare, education, childcare
- Strong unions and centralised wage bargaining
- Generous but conditional welfare (flexicurity)
- Free higher education, robust vocational training
- Results
- Gini coefficients of 0.26-0.28 (lowest in OECD)
- GDP per capita comparable to or exceeding the US
- Highest social mobility in the world
- Life expectancy 2-3 years above US
- Consistently top global happiness rankings
- Can It Be Replicated?
- Critics point to: small, homogeneous populations (though diversity is rising rapidly); unique historical conditions (strong labour movement, Lutheran work ethic); and that pre-tax inequality has been rising even in Nordics. But the model's longevity -- 60+ years -- argues against dismissing it.
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### Slide 21: Policy Toolkit: Taxation

- Taxes are the primary tool for reducing inequality. But the devil is in the design.
- Progressive Income Tax
- Top marginal rates in the US: 91% (1950s), 70% (1970s), 37% (2024). Piketty/Saez estimate the revenue-maximising top rate is ~73%. Diamond & Saez (2011): optimal top rate including all taxes is ~73%.
- Capital Gains Tax
- Currently 20% in the US (plus 3.8% surcharge) -- far below top income rates. The preferential rate disproportionately benefits the wealthy. 70% of capital gains go to the top 1%.
- Wealth Tax
- Piketty's proposal: annual tax on net wealth. Elizabeth Warren's proposal: 2% above $50M, 3% above $1B. Challenges: valuation, avoidance, capital flight. Several European countries tried and repealed wealth taxes, but Switzerland maintains one successfully.
- Inheritance/Estate Tax
- The most philosophically justified tax (Piketty: "Why should the accident of birth determine life chances?"). In practice, heavily eroded by exemptions and trusts. Only ~0.1% of US estates pay any estate tax.
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### Slide 22: Policy Toolkit: Pre-Distribution

- "Pre-distribution" (Jacob Hacker) means shaping market outcomes before taxes and transfers -- addressing inequality at the source.
- Education: universal pre-K, quality public schools, affordable college. The Heckman equation: $1 invested in quality early childhood programs returns $7-12 in reduced remediation, crime, and healthcare costs
- Labour market institutions: higher minimum wages, easier unionisation, portable benefits, enforcement of labour standards
- Antitrust: break up monopolies and monopsonies that transfer income from consumers and workers to shareholders. Revive enforcement (as the Biden DOJ began with tech companies)
- Corporate governance: worker representation on boards (German-style codetermination), limits on stock buybacks, stakeholder capitalism
- Housing policy: end exclusionary zoning, build social housing, expand renter protections. Vienna's social housing (covering 60% of residents) keeps housing affordable
- Financial regulation: curb financialisation, limit predatory lending, regulate shadow banking
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### Slide 23: Policy Toolkit: Redistribution

- Cash Transfers
- The US EITC lifts 6 million from poverty. The expanded Child Tax Credit (2021) cut child poverty by 46% in 6 months -- then Congress let it expire. Brazil's Bolsa Familia and Mexico's PROGRESA show global effectiveness.
- Universal Public Services
- Healthcare, education, childcare, and transit funded publicly and available to all. These are "the social wage" -- they equalize living standards even when incomes differ. The NHS, for all its problems, delivers comparable health outcomes to the US at 40% of the cost.
- Social Insurance
- Unemployment insurance, disability insurance, public pensions. These protect against risks that markets handle poorly. Social Security alone keeps 22 million Americans above the poverty line.
- Baby Bonds
- Cory Booker's proposal: every child gets a government-funded savings account ($1,000 at birth, up to $2,000/year for lowest-income families). By age 18, the poorest would have ~$50,000 for education, homeownership, or entrepreneurship. Directly addresses the wealth gap.
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### Slide 24: The Billionaire Question

- Should billionaires exist? This question has moved from radical critique to mainstream debate.
- "No" Arguments
- No one "earns" a billion dollars -- it requires extracting value from workers, consumers, or the public
- Concentrated wealth = concentrated political power, incompatible with democracy
- Philanthropy is undemocratic: one person's preferences allocate society's resources
- Tax avoidance by billionaires costs governments trillions
- "Yes" Arguments
- Wealth creation is not zero-sum: entrepreneurs who build valuable companies expand the pie
- High rewards incentivise innovation and risk-taking
- Philanthropy funds research, arts, and humanitarian causes
- The problem is not billionaires per se but inadequate taxation and regulation
- ProPublica's "Secret IRS Files" (2021): revealed that Jeff Bezos, Elon Musk, and Warren Buffett paid effective tax rates of 0.98%, 3.27%, and 0.1% respectively -- while their wealth grew by tens of billions.
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### Slide 25: Global Inequality: Between Nations

- While within-country inequality has risen, between-country inequality has fallen -- mainly because of China and India.
- The Great Convergence: since 1990, per capita income in developing countries has been catching up with rich countries. China's GDP per capita rose from 2% of the US level (1980) to ~28% (2023)
- But not everywhere: Sub-Saharan Africa, parts of South Asia, and fragile states have not converged. Some have fallen further behind
- The "twin peaks" distribution: the world income distribution in 1980 had a huge hump around $500 (mostly Asian poor) and a smaller one around $20,000 (rich countries). By 2020, the big hump has shifted to $3,000-8,000 -- remarkable progress but still far from convergence
- Climate injustice: the countries that will suffer most from climate change are those that contributed least to it and have the fewest resources to adapt
- Debt: 60% of low-income countries are in debt distress or high risk. Debt service diverts resources from health, education, and development
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### Slide 26: Inequality and the Pandemic

- COVID-19 laid bare and amplified existing inequalities.
- Within Countries
- Essential workers (disproportionately low-income, minority) faced the virus while knowledge workers stayed home. US billionaire wealth grew by $2.1 trillion during the pandemic while 8 million Americans fell into poverty.
- Between Countries
- Rich countries hoarded vaccines. By mid-2021, 75% of doses had gone to high/upper-middle income countries. Africa's vaccination rate was below 2% when rich countries were boosting.
- Education
- School closures affected 1.6 billion students. Those with internet and devices continued learning; those without fell behind. The learning loss may take a decade to recover, and will disproportionately affect poor children.
- The K-Shaped Recovery
- Markets recovered quickly (benefiting asset owners) while low-wage workers faced prolonged unemployment. The recovery was "K-shaped" -- up for the rich, down for the poor.
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### Slide 27: Philosophical Perspectives on Inequality

- John Rawls
- A Theory of Justice (1971): behind a "veil of ignorance" (not knowing your place in society), rational people would choose the "difference principle" -- inequalities are just only if they benefit the worst-off members of society.
- Robert Nozick
- Anarchy, State, and Utopia (1974): inequality is just if it arises from voluntary exchanges and legitimate acquisitions. The "Wilt Chamberlain argument": if people freely choose to pay to watch a basketball star, the resulting inequality is just.
- Amartya Sen
- "Capability approach": what matters is not income equality per se but whether people have the capabilities to live lives they have reason to value -- access to health, education, political participation, and freedom.
- Elizabeth Anderson
- "Relational egalitarianism": the problem with inequality is not unequal stuff but unequal social relationships -- domination, servility, exploitation. The goal is a society of equals, not equal bank accounts.
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### Slide 28: Inequality in the Age of AI

- Artificial intelligence may be the most powerful force reshaping inequality in the coming decades.
- Labour displacement: AI could automate 25-50% of current work tasks. Without new job creation or redistribution, this could dramatically widen inequality
- Capital concentration: AI requires massive compute infrastructure, concentrating power in a few firms (Nvidia, Microsoft, Google, Meta). The returns to AI accrue disproportionately to capital owners
- Data as the new oil: a few platforms collect and monetise the data of billions. This creates information asymmetries and new forms of exploitation
- Geographic concentration: AI talent and investment cluster in a few cities (San Francisco, Beijing, London), widening regional inequality
- Potential upside: AI could also democratise expertise (medical diagnosis, legal advice, education), reduce costs, and enable new forms of work. The outcome depends on policy choices made now
- "The question is not whether AI will change the distribution of income but whether we will let it change the distribution of power."
- -- Daron Acemoglu
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### Slide 29: Key Debates and Open Questions

- How Much Inequality Is Too Much?
- Some inequality incentivises effort and innovation. But where is the tipping point? Most economists agree that current US levels are beyond the optimum. The question is where to draw the line and how to get there.
- Growth vs. Distribution
- The old view: there's a trade-off (redistributing reduces the pie). The new evidence: inequality harms growth at high levels. But poorly designed redistribution can still have costs. The goal is "inclusive growth."
- National vs. Global
- Should we care about inequality within nations, between nations, or among all individuals globally? A policy that reduces within-country inequality (trade protection) may increase between-country inequality.
- Income vs. Consumption vs. Capabilities
- What should we equalize? Income? Wealth? Consumption (which may be more equal due to transfers)? Capabilities (Sen)? Opportunity? Each framing leads to different policy conclusions.
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### Slide 30: The View from the World Inequality Lab

- The World Inequality Lab (Paris), led by Piketty, Saez, and Zucman, maintains the most comprehensive inequality database (World Inequality Database, wid.world).
- The World Inequality Report 2022 found that the richest 10% of the global population takes 52% of total income; the poorest 50% earns just 8.5%
- Global wealth inequality is even more extreme: the top 10% own 76% of all wealth; the bottom 50% own just 2%
- Since 1995, the top 1% has captured 38% of all new wealth created globally, while the bottom 50% captured just 2%
- Carbon inequality: the top 10% of emitters produce 48% of global emissions. The bottom 50% produce just 12%. Any climate solution must address this
- The report proposes a modest progressive wealth tax (1.5% on multimillionaires, 2% on billionaires) that could raise $2.5 trillion/year -- more than enough to address global poverty and climate adaptation
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### Slide 31: Key Thinkers on Inequality

- ThinkerKey ContributionLandmark Work
- Karl MarxCapital accumulation and class conflictDas Kapital (1867)
- Simon KuznetsInverted-U hypothesis of inequality and developmentNobel 1971
- Amartya SenCapability approach; inequality of what?Nobel 1998
- Thomas Pikettyr > g; historical dynamics of wealth concentrationCapital in the 21st Century
- Emmanuel SaezTop income shares from tax dataClark Medal 2009
- Branko MilanovicGlobal inequality and the elephant curveGlobal Inequality (2016)
- Raj ChettySocial mobility and neighbourhood effectsOpportunity Insights project
- Gabriel ZucmanHidden wealth of nations; tax havensThe Hidden Wealth of Nations
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### Slide 32: Reading List

- Essential
- Thomas Piketty -- Capital in the Twenty-First Century (2013): the magnum opus on long-run wealth dynamics
- Branko Milanovic -- Global Inequality (2016): accessible and data-rich global perspective
- Angus Deaton -- The Great Escape (2013): how some escaped poverty while others didn't
- Political Economy
- Jacob Hacker & Paul Pierson -- Winner-Take-All Politics (2010): how policy created American inequality
- Joseph Stiglitz -- The Price of Inequality (2012): inequality harms economy and democracy
- Anthony Atkinson -- Inequality: What Can Be Done? (2015): concrete policy proposals
- Social Consequences
- Wilkinson & Pickett -- The Spirit Level (2009): inequality damages health and society
- Matthew Desmond -- Poverty, by America (2023): how America creates and maintains poverty
- Mehrsa Baradaran -- The Color of Money (2017): Black banking and the racial wealth gap
- Data & Methods
- World Inequality Lab -- World Inequality Report 2022: state-of-the-art global data
- Gabriel Zucman -- The Hidden Wealth of Nations (2015): offshore tax havens
- Raj Chetty et al. -- opportunityinsights.org: interactive mobility data
- 32 / 32


## Related Decks

- [Economic Crises Through History](https://shipslides.com/d/economics-economic-crises)
- [Behavioral Economics](https://shipslides.com/d/economics-behavioral-economics)
- [Central Banking](https://shipslides.com/d/economics-central-banking)
- [Development Economics](https://shipslides.com/d/economics-development-economics)