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Inequality

To think about economics, one must have in one's mind a picture of the economy. A particular and necessary picture is the distribution of the world's economic goods among the people.

Visit this link for an explanation of a way of dividing the population by wealth, with graphs:
The Wealth Distribution in the United States

But here is the essential picture. Note the extreme range, which is difficult to portray: Wealth

(the graph was made before the stock market ballooned the wealth of Bill Gates, Warren Buffet, and a few others.)

The distribution of wealth and income has been changing:

Income Distribution

At some point, if the trend continues as it has since 1970, there may be a "rebellion."

Such a rebellion may be quietly political -- changing economic policies -- or it could take the form of increased crime, up to and including rioting in the streets in protest. Is there a rebellion point in income (or wealth) distribution? Might there be an "index" warning of such a point?

Here is an example of a rebellion index -- using a simple ratio to describe the inequality:

Income Rebellion

Why choose the top 5% and bottom 20%? Smaller groups, for example each being 1%, would show more dramatic numbers; however a small top group of wealthy people can remain hidden in the society. A smaller bottom group, such as 5%, is too small to organize a rebellion. Vastly more compex mathematical indices of inequality are in use. It is possible that one so simple as the Income Rebellion Index used here is not only adequate for economic theory, but much more comprehensible to the general public, whom it concerns.

An intensive study of inequality measures by Goetz Kluge tells us:

....The larger the unsatisfied demand and the unused reserves, the higher is that urge to redistribute. "The relation between inequality and rebellion is indeed a close one..." says Amartya Sen (pg. 1), "... a perceived sense of inequity is a common ingredient of rebellion in societies ..." This statement could give us a hint how to analyze measured and perceived inequality using an empirical approach.

Amartya Sen is the 1998 Economics Nobel Memorial Prize winner, known for his studies of poverty and famine.

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