Tuesday, August 26, 2014

Smaller percentage of a growing pie

Many mainstream economists avoid the issue of income inequality by claiming it can be resolved by ‘growing the economy’ so that the entire ‘pie’ gets larger. This argument is essentially that a smaller percentage of a larger pie is more than a larger percentage of a small pie. This is true in absolute terms: 12% of 1000 (120) is greater than 15% of 750 (112.5). But if the piece of the pie held by lower wage workers continues to shrink, at some point the absolute value shrinks to some negligible amount… obviously not a cure to income inequality. So do those mainstream economists have a real fix or is it all smoke and mirrors?

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