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What Drives Inequality?


  • Jon D. Wisman


Over the past 40 years, inequality has exploded in the U.S. and significantly increased in virtually all nations. Why? The current debate typically identifies the causes as economic, due to some combination of technological change, globalization, inadequate education, demographics, and most recently, Piketty’s claim that it is the rate of return on capital exceeding the growth rate. But to the extent true, these are proximate causes. They all take place within a political framework in which they could in principle be neutralized. Indeed, this mistake is itself political. It masks the true cause of inequality and presents it as if natural, due to the forces of progress, just as in pre-modern times it was the will of gods. By examining three broad distributional changes in modern times, this article demonstrates the dynamics by which inequality is a political phenomenon through and through. It places special emphasis on the role played by ideology – politics’ most powerful instrument – in making inequality appear as necessary.

Suggested Citation

  • Jon D. Wisman, 2015. "What Drives Inequality?," Working Papers 2015-09, American University, Department of Economics.
  • Handle: RePEc:amu:wpaper:2015-09

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    References listed on IDEAS

    1. William Easterly, 2002. "The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262550423, July.
    2. Jon D. Wisman & James F. Smith, 2011. "Legitimating Inequality: Fooling Most of the People All of the Time," American Journal of Economics and Sociology, Wiley Blackwell, vol. 70(4), pages 974-1013, October.
    3. Carmen M. Reinhart & M. Belen Sbrancia1, 2015. "The liquidation of government debt," Economic Policy, CEPR;CES;MSH, vol. 30(82), pages 291-333.
    4. Thomas Philippon & Ariell Reshef, 2012. "Wages and Human Capital in the U.S. Finance Industry: 1909--2006," The Quarterly Journal of Economics, Oxford University Press, vol. 127(4), pages 1551-1609.
    5. Bhashkar Mazumder, 2005. "Fortunate Sons: New Estimates of Intergenerational Mobility in the United States Using Social Security Earnings Data," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 235-255, May.
    6. N. Gregory Mankiw, 2013. "Defending the One Percent," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 21-34, Summer.
    7. Persson, Torsten & Tabellini, Guido, 1994. "Is Inequality Harmful for Growth?," American Economic Review, American Economic Association, vol. 84(3), pages 600-621, June.
    8. Daron Acemoglu & James A. Robinson, 2000. "Why Did the West Extend the Franchise? Democracy, Inequality, and Growth in Historical Perspective," The Quarterly Journal of Economics, Oxford University Press, vol. 115(4), pages 1167-1199.
    9. Lindert, Peter H, 1986. "Unequal English Wealth since 1670," Journal of Political Economy, University of Chicago Press, vol. 94(6), pages 1127-1162, December.
    10. Srinivasan, T.N., 1977. "Development, Poverty, and Basic Human Needs: Some Issues," Food Research Institute Studies, Stanford University, Food Research Institute, issue 02.
    11. Robert Wade, 2012. "Why Has Income Inequality Remained on the Sidelines of Public Policy for So Long?," Challenge, Taylor & Francis Journals, vol. 55(3), pages 21-50.
    12. Adam Bonica & Nolan McCarty & Keith T. Poole & Howard Rosenthal, 2013. "Why Hasn't Democracy Slowed Rising Inequality?," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 103-124, Summer.
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    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. Society? Economics? Politics? Personality? What causes inequality?
      by crowleymarkj in NEP-HIS blog on 2015-10-21 21:59:37

    More about this item


    political power; distribution; legitimation; ideology;

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • B00 - Schools of Economic Thought and Methodology - - General - - - History of Economic Thought, Methodology, and Heterodox Approaches
    • Z18 - Other Special Topics - - Cultural Economics - - - Public Policy
    • N3 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy

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