Inequality revision Flashcards
Historical Trends in Inequality
What major change did Western economies experience in the 19th century, and how was the subsequent growth distributed?
Western economies in the 19th century underwent significant changes, but the subsequent growth was not evenly distributed.
Pikettys research on inequality
According to Thomas Piketty, what historical data did he use to analyze income distribution in the early 20th century, and what did it reveal?
Thomas Piketty used historical tax records to analyze income distribution in the early 20th century, revealing notable inequality, especially in the UK in 1910.
Equality of Opportunity/Outcome
Define equality of opportunity/Outcome and provide an example of how circumstances beyond an individual’s control can impact outcomes.
Equality of opportunity means circumstances beyond an individual’s control can impact outcomes. For example, family background may limit opportunities.
Equality of outcome is a concept that advocates for a societal condition in which individuals experience relatively equal levels of well-being, success, or material resources, regardless of their varying starting points or circumstances. The focus is on reducing disparities in the final results or outcomes, aiming to ensure that everyone enjoys a similar standard of living, irrespective of the paths they took to reach that point.
Rawlsian theory
How does Rawlsian theory define justice and fairness in the context of social and economic goods?
Rawlsian theory defines justice and fairness in terms of access to primary goods, ensuring an equal society with equal rights, opportunities, income, wealth, and power.
Growth VS Equality
For much of the 20th century, what was the predominant focus of economists concerning inequality?
For much of the 20th century, the predominant focus of economists concerning inequality was on promoting economic growth. During this period, the prevailing belief among economists was that fostering greater returns from production would lead to an overall increase in income for everyone. The emphasis was on the idea that a rising tide of economic growth would lift all boats, benefiting individuals across different income levels. The focus was primarily on the pursuit of economic development as a means to enhance the standard of living for the entire population rather than directly addressing issues of income distribution and inequality.
Drivers of inequality
According to Robert Solow, why is the labor market different from most markets, and how does the social element impact it?
The labor market is different due to uncertainty in the employer-employee relationship. The social element combines with supply and demand to temper or exacerbate inequality.
If some sectors social norms make that sector adhere to limiting pay differentials and a conception of fair pay and others do not and allow for widening pay gaps, then there is a risk for inequality to rapidly increase
Iron triangle
Explain the concept of the “Iron Triangle” in the context of welfare programs.
The “Iron Triangle” is a trilemma stating that there is no way to reform a simple cash welfare program that encourages work, redistributes income, and lowers costs simultaneously.
Ordeal mechanisms and Outside Options
Provide examples of “ordeal” mechanisms and outside options discussed in the context of welfare entitlement.
“Ordeal” mechanisms include added conditionality in entitlement, such as actively seeking work, meeting job center expectations, and facing sanctions for non-compliance.
Outside options include things such as:
tax credits and child tax credits which will help people get into work. Training programmes which will help people gain skills which will help them find jobs and get off of welfare.
what is the idea of the “Leaky Bucket” and who is the person who described it in this way (A O, 1975)
Arthur Okun (1975) compared the act of redistributing from rich to poor to transporting a ”leaky bucket”. As the money is carried from one to the other some money leaks out. The question Okun then posed was: How much leakage was society willing to tolerate on the journey from rich to poor? The more ”waste” tolerated the greater weight society placed on the utility of the poor.
what are the three areas of leakage described in Arthur Okuns 1975 idea of “the leaky bucket”
The ”leakage” in redistribution comes from three main areas. One is the unavoidable administrative costs of enabling the transfer.
Then there is the distortive nature of taxation – as we have talked about previously there is a risk of an increase in taxes disincentivising workers at the higher end of the distribution.
The final cost is one of moral hazard. This is the risk that ensuring those at the bottom of the income distribution against deprivation may incentivise them to remain poor in order to qualify for the transfers.
what is the belief held by Tony Atkinson 2015
Tony Atkinson believes that the differences in society do matter and that economic growth alone would not eliminate them and therefore a more equal distribution would foster greater shared interests.
relative inequality VS Absolute deprivation
Relative Inequality is the share of a nations income that accrues to the poor relative to the rich. In the Uk this is defined as those households with disposable income below 60% of the median household that year.
Absolute depravation or absolute low income is a household with disposable income below 60% of what it was measured at in 2010/11. This is used to track how the living standards of low-income households has changed over time.
why had privatisation and outsourcing changed how social norms influence inequality
In the past the government would have had greater power to influence social norms due to them directly employing a larger proportion of the working population. privatisation and outsourcing had changed this and led to some of the power and so the influence of a social norm of fair distribution is weakened. the consequence of this is a more dispersed distribution of wages.
what are the two ways government can respond to inequality
welfare state policy
Institutional shifts
