Friday, January 12, 2007

Income inequality matters

The Naked Economist is one of my favorite columnists on yahoo! Finance. He brings a practical approach to otherwise theoretical matters (or is it the other way around?). In this article, he argues that income inequality (the difference between rich and poor) makes a difference to the country at large. Citing Brazil, where income inequality is very high (as measured by the Gini coefficient), there is a lot of crime (murder rate is 5x that of NYC) and slower growth than there would be if there was less inequality, as concluded in an economic study. The reason being that people spend resources that could otherwise be used to produce things on protecting things. This is a great point.

He then goes on to say, or at least suggest, that the US is headed down this path. One need to look no farther than your nearest "gated community" to see this in action. When people feel the need to put up bars, not just on their windows and doors, but on their neighborhoods, well, "Houston, we have a problem."

Give it a read. It may make you change your mind about income and wealth disparity. Or it may just make you want to move to that gated community.

Why Income Inequality Matters: The Naked Economist - Yahoo! Finance

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