Friday, March 27, 2015

My Guesses about the Causes of Growth in Inequality

Income and wealth inequality seems to a hot topic lately. Here are my guesses about the causes of the growth in inequality

I agree with those on the left that a lot of income and wealth is random. 
But to me that does not mean that it can be changed. 
I for one am not sure what caused the increase in inequality though I have heard many of the theories, none seems to work. I think it might be multiple things like: 
  • Growth of finance (maybe Vanguard and the EMH will turn this around). 
  • Investors and management have discovered that better people raise profits and have started bidding good people's compensation up. 
  • Bigger markets for sports and entertainment. They are now worldwide markets. 
  • Anti-trust causes in sports. Monopoly sports leagues paid athletes much less, even with more teams and lower seat prices?
  • Software network effects. 
  • Growth in healthcare and providers influencing regulation.
  • Taxes were very high in the 1950 & 60s and that might have had some effect, but the rich did not pay much more of their income in taxes then than they do now. So I do not think that was so important.  If taxation had a big effect it could mostly be a  a measurement effect in that I bet a lot more income was hidden then. 

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