Matt Bruenig — The Problem With Income Inequality

To reiterate: when two sets of countries have the same market income inequality, but one set has much lower disposable income inequality, that's a good indication that simple changes in distributive institutions could do wonders for the more unequal country. When it comes to the US and the Nordics (which Winship notes are doing the best in this regard), adopting tax and transfer institutions that are similar in form to what the Nordics have should significantly improve the standard of living of those at the middle and especially those at the bottom. The further fact that economies in the Nordic countries grow at about the same rate as the US economy throws even more fuel on that fire because it indicates that, at least when they do it, there is no obvious efficiency/equality trade off involved. 

The concern about inequality has very little to do with the market distribution itself (the market is, after all, just a creature of policy, a government program like any other). Rather, the concern is that high and rising inequality signals that we are throwing away opportunities to relieve the want and humiliation of the bottom (and to a lesser extent, the middle), and are opting instead to shovel more and more of the national income to the rich for no good reason.

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The Problem With Income Inequality

Matt Bruenig