Source: http://g-mond.parisschoolofeconomics.eu/topincomes

Looking back at Irving Kristol's 1980 essay "Some Personal Reflections on Economic Well-Being and Income Distribution," as Foreign Affairs recently did, provides a useful intellectual lens from the past to focus the economic conversation today. Kristol argued that economic inequality was "but one manifestation of how nineteenth-century ideologies -- and most especially the socialist ideologies -- have so decisively shaped modern social science." Moreover, he wrote, income distribution does not really change over time so it is, as a subject for study, inconsequential.

Fortunately, economists failed to take his advice; recent studies of inequality reveal the limitation of Kristol's historical perspective. Kristol narrowly focused on one long spell of stable and relatively even distribution. But a careful look at the varying levels of inequality in different countries demonstrates just how much societal divides in wealth really matter. Countries with high inequality are far more likely

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  • ANDREW G. BERG and JONATHAN D. OSTRY are, respectively, Assistant Director and Deputy Director in the Research Department of the International Monetary Fund. The views expressed here are those of the authors and should not be attributed to the IMF.
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