Brody sent a link to an interesting discussion with an economist who talked about income inequality, its implications, its causes, and who gave some references to what look like some cool stuff. Excerpt:
This [The Race Between Education and Technology] is a really wonderful book. It gives a masterful outline of the standard economic model, where earnings are proportional to contribution, or to productivity. It highlights in a very clear manner what determines the productivities of different individuals and different groups. It takes its cue from a phrase that the famous Dutch economist, Jan Tinbergen coined. The key idea is that technological changes often increase the demand for more skilled workers, so in order to keep inequality in check you need to have a steady increase in the supply of skilled workers in the economy. He called this “the race between education and technology”. If the race is won by technology, inequality tends to increase, if the race is won by education, inequality tends to decrease.
You can read the whole thing here. My feeling is that the crazy gaps — and the change in the rate of gap growth — is cancerous to a democracy; and will, in effect, transform the democracy into some quasi-democracy, which is essentially what’s already happened.
But my other gut feeling is that there might not be any other way: for the same reason that preferential link attachment in networks leads to vastly unequal linkage properties (where the most popular nodes are millions of times more influential than the average nodes), income calls out to income. You might try to dampen what happens at the upper part of the distribution, but in a world with free movement of capital and industry, the issue would just pop up somewhere else. The Republicans always talk about people and businesses chasing the lowest tax rates; mostly that’s bullshit (okay dude, enjoy the Libertarian wonderland of Somalia) but there’s a grain of truth to it.
Anyway, worth a read.