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Contemporary Economics and Inequality

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Dynamic Models and Inequality

Part of the book series: Contributions to Economics ((CE))

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Abstract

Despite that classical economists and their contemporaries in other social sciences were significantly focused on inequality in economic distribution and the question of inequality indeed played the central role, social scientists in the last century and economists paradoxically the most, partly overlook the question of how wealth (in its broadest sense) is distributed. Fortunately, this trend is dramatically changing. A proponent of these classical economists and their contemporaries was Adam Smith who had been convincing us that the demand of those who live by wages increases with the increase of aggregate wealth. By this he has inspired many thinkers of political economy. Empirical findings however do not correspond to such trickle-down idea. This fact causes that research on inequality comes to the forefront of social sciences’ interest. Recent development in economics indicate that inequality is slowly becoming the most burning issue throughout the whole spectre of economic disciplines.

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Notes

  1. 1.

    Since we seek general laws of contemporary inequality and their market connectedness, we omit vast of problems related to types of distributions (not only to widely used Lognormal distributions and the whole family of Pareto distributions), whose success in use is heavily fixed on particular circumstances. For more details on functional forms in modelling economic distributions see e.g. Kleiber and Kotz (2003).

  2. 2.

    Differences in results can be significant according to used method. For instance, GDP of India in 1990 was estimated about 15% higher by PWT (GK) than in case of WB (EKS).

  3. 3.

    The relationship between growth of real disposable income and respective income decile in the United States is perfectly clean—the higher the income decile, the higher the growth of disposable household income and vice-versa. To mention a continental European country, the same development can be observed e.g. in Belgium and a bit surprisingly also in relatively egalitarian countries like Finland or the Czech Republic.

  4. 4.

    To complete the mosaic, individual income taxes make up less than half of the US federal revenues.

  5. 5.

    Empirical challenge of Piketty’s work (2014) was also held by Magness and Murphy (2015), however their corrections are rather formal with no change in general trends.

  6. 6.

    For more details on variances in income and consumption inequality see well known Krueger and Perri (2005), Deaton and Grosh (2000) or the study of Aguiar and Bils (2015). The conclusion is intuitive since the consumption is, for obvious reasons, smoother than income. Hence, we can again conclude that inequality in consumption tends to be lower than inequality in income.

  7. 7.

    This idea is frequently assigned to J. A. Schumpeter, however the first who elaborated the issue was Marx and Engels—we read in Communist Manifesto that old industries are destroyed and replaced by new industries as a result of the very motive to survive (2008 [1848]), which basically represents the antagonistic character of society on macro-level.

  8. 8.

    This model is presented in more details in the Chap. 6.

  9. 9.

    Upon closer inspection it must be admitted that the effect is not corresponding with early twentieth century data.

  10. 10.

    This paper is one of the very few which endeavours to theorize the ‘trickle-down’ idea.

  11. 11.

    To challenge authors’ partial conclusion, Korzeniewicz and Moran completely neglect political aspects of the economic success in South Korea and Taiwan.

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Authors and Affiliations

  1. Department of Economics, Faculty of Economics, University of Economics, Prague, Czech Republic

    Robin Maialeh

  2. Unicorn Research Centre, Prague, Czech Republic

    Robin Maialeh

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Maialeh, R. (2020). Contemporary Economics and Inequality. In: Dynamic Models and Inequality. Contributions to Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-46313-7_2

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