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Charles Wheelan, Ph.D. The Naked Economist

Charles Wheelan, Ph.D., The Naked Economist

Why Income Inequality Matters

by Charles Wheelan, Ph.D.

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Posted on Tuesday, January 9, 2007, 12:00AM

The holiday season was very joyous on Wall Street. CEOs and lots of others took home some of the biggest checks ever.

I like a $50 million bonus as much as the next guy (although the most I can recall getting was $1,000), but those huge paydays beg a larger social and economic question: Does income inequality matter?

Mind the Gap

I'm not asking if we should care about the well-being of our poorest citizens. We should. This is a more subtle question: Should we care about the size of the gap between the rich and poor?

If we succeed in raising the incomes of the poor, does it matter if incomes at the top are rising even faster, making us a more unequal society overall?

By coincidence, I was in Brazil in December while those giant Wall Street bonuses were being handed out. Brazil has one of the largest gaps between rich and poor on the planet. Having experienced that gap firsthand -- from the slums run by drug traffickers at one end to the lovely apartments with bulletproof doors at the other -- I'm convinced that income inequality does matter.

If the gap between rich and poor gets too large, and if those at the bottom feel they have no meaningful route to the riches at the top, then the fabric of society will fray, or even come unraveled entirely.

Violence Literally Doesn't Pay

Life gets pretty scary -- no matter how much money you've got -- when a segment of society decides that they're no longer going to play by the rules.

Shortly before I arrived in Brazil, a British tour bus was hijacked and robbed in broad daylight on the way from Rio's international airport to a ritzy beach area. While I was there, two Supreme Court justices were carjacked on the same road.

Overall, the murder rate in Brazil is five times that of New York City. As in the United States, much of that violence is poor-on-poor, although the toll redounds everywhere. The New York Times reported recently on a World Bank study concluding that if Brazil had the much lower homicide rate of Costa Rica, Brazil's GDP would have been three to eight percent higher in the 1990s.

As one economist explained in the article, "You have money spent on guarding stuff rather than making stuff." And when international investors look around the globe, they choose safer places.

The Gini Out of the Bottle

Is this violence a direct result of income inequality? Almost certainly not. Brazil has a history of slavery and colonization that was far more brutal than the U.S. It would require a team of sociologists, historians, economists, and criminologists to explain the roots of violence in Brazil. Based on my knowledge of academics, I don't think they would come to a conclusion anyway.

Still, one can't spend time in Brazil without wondering about income inequality at home. Let's take a look at some numbers.

The most convenient statistic for measuring income inequality is called a Gini coefficient, which measures a country's distribution of income from 0 (absolute equality, with each person sharing the same amount of wealth) to 1 (absolute inequality, with one person controlling all of the nation's wealth).

Here's what that statistic looks like for a handful of countries, including contemporary and historic figures for the U.S.:

  • Japan: .25
  • Sweden: .25
  • India: .33
  • The United States 1970: .39
  • The United States 2005: .47 (Note that a small fraction of the increase over time is due to a change in the methodology for calculating the Gini coefficient; still, income inequality has climbed steadily by this measure over the past four decades.)
  • Brazil: .58

A Reason to Get Up in the Morning

So what? Obviously income inequality is just one statistic; it doesn't reflect the size of the pie, only how it's divided. The Soviet Union was a very equal place -- equally poor.

In fact, there are some really good things about income inequality, namely that it motivates risk, hard work, and innovation. I'm sure Wall Street bankers are motivated by a love of their work -- but a $50 million bonus can also help you get out of bed in the morning.

As a matter of fact, high salaries motivate not only the people who get them, but also the people who would like to get them in the future -- a phenomenon that economists refer to as a "tournament effect."

Thus, a $50 million bonus for a Wall Street CEO also inspires that ambitious guy in the mailroom to get out of bed if he thinks he's got a shot at being CEO someday. Even my undergraduate economics students work harder because they need good grades in order to get coveted investment banking jobs.

A Bigger Pie, or a Bigger Slice?

What's the problem, then? I think there are at least two reasons to be cognizant of income inequality in the U.S.:

  1. Is there still really a path from rags to riches?

    I've spent enough time in inner-city schools to wonder if we're really providing an opportunity for the motivated and gifted to make their way from the projects to Wall Street.

    Yes, it happens -- you can watch Will Smith do it at your local multiplex in The Pursuit of Happyness, which is inspired by a true story. But how often does it not happen?

    I'm convinced that part of what's going on in Brazil is that the socioeconomic ladder is broken. There's no real path from favela to bulletproof apartment, and some people with guns have decided that they don't want to play by the rules made by the people in those apartments.

    Income inequality doesn't motivate anything good when there's no hope of sharing in the pot of gold.

  2. There's a very interesting strain of economic research showing that our sense of well-being is determined more by our relative wealth than by our absolute wealth.

    In other words, we care less about how much money we have than we do about how much money we have relative to everyone else. In a fascinating survey, Cornell economist Robert Frank found that a majority of Americans would prefer to earn $100,000 while everyone else earns $85,000, rather than earning $110,000 while everyone else earns $200,000.

    Think about it: People would prefer to have less stuff, as long as they have more stuff than the neighbors.

    The point -- and this is still a nascent field -- is that a nation may be collectively better off (using some abstract measure of well-being) with a smaller, more evenly divided pie than with a larger pie that's sliced less equitably. Reasonable people can and should argue about that.

    What's clear, however, is that one key difference between poverty in 1900 and poverty in 2007 is that even the poorest households -- in Brazil or the U.S. or anywhere else -- can turn on the television and see how the other half lives. It's one thing to be poor; it's another to be continually reminded exactly how poor you are.

    At a minimum, we should question whether a bigger pie is always better.

Name Your Poison

There's no right answer as to how society ought to look. That's a matter of personal philosophy. Indeed, I still find a thought experiment proposed by philosopher John Rawls as relevant as anything that economics can offer.

Rawls argued that decisions about economic justice should be made behind a "veil of ignorance." How would you want the world to look if you were going to be born tomorrow but didn't know the economic station into which you would be born?

If you were going to be born somewhere in America tomorrow -- in the projects of Chicago or perhaps into one of those families that brought home $50 million this bonus season -- what would you want the economic landscape to look like today?

Would you want a distribution of income that looked more like Sweden's, or Brazil's? It's worth thinking about.

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  • Pradeep - Friday, March 30, 2007, 4:07PM ET  Report Abuse

    • Overall: 3/5

    I would like to see an article from the author that differentiaties income inequality in a literate society versus income inequality in a illiterate society. In a county like India, though the govt claims high literacy level (people who know how to sign are declared literates), 70% of population are illiterate. SO what does inequality in income mean in such societies against those in the US where most of the population is educated?

  • Michael D - Saturday, March 24, 2007, 9:06PM ET  Report Abuse

    • Overall: 3/5

    The question of whether the economic inequality is good or bad for the society is not just a matter of personal philosophy, as the author has put it. Consider social efficiency. Besides having the incentive to work, the society needs to be productive. We compete with other countries, and as declining dollar indicates - not very successfully. What is the productivity of money invested in gold or, worse, real estate as opposed to money invested in active business? The observation that it's more favorable investment is an alarming sign that the economy is idling. How productive are the rich people who earned enough and stopped working, living on the interest from their investments? How productive are the poor people sitting on the welfare? It is the lawmaker's responsibility to keep inequality under control through proper taxation and to steer the society back into the productive mode.

  • T - Monday, March 19, 2007, 9:08PM ET  Report Abuse

    • Overall: 5/5

    Thought provoking!

  • jeff - Friday, March 16, 2007, 11:30PM ET  Report Abuse

    • Overall: 4/5

    Remarkable that this topic is commonly addressed and debated in the print media, particularly the net, but very rarely gets any serious television airtime. Too bad.

  • JaredK - Thursday, March 15, 2007, 7:44AM ET  Report Abuse

    • Overall: 1/5

    You miss a big point on Brazil. It is not inequality but the reason behind the inequality. If the economic system is corrupt and you have know the right people in the government to be rich (or remain rich), then inequality matters. However, if the economic system is a meritocracy like it is in the United States, then inequality does not matter.

  • Yahoo! Finance User - Tuesday, March 6, 2007, 1:22PM ET  Report Abuse

    • Overall: 5/5

    It is good to see an economist who reads philosophy. I may not always agree with this guy 100%, but he is right often enough for me to respect him even when I don't agree with him.

  • Yahoo! Finance User - Thursday, February 22, 2007, 5:40PM ET  Report Abuse

    • Overall: 3/5

    I've read many other articles on the same subject, and this is pretty much like the others. It is always an interesting topic, but I still come away with several questions unanswered. First is it the social problems (crime, corruption, etc.) that leads to the inequality or vice versa? It sounds as if he thinks inequality comes first, but I'm not sure I see convincing evidence in the article that this is the case. Also, my understanding is that violent crimes in the USA have declined in the past couple of decades, despite the fact that inequality has increased. So are we really becoming more like Brazil or less?

  • Yahoo! Finance User - Wednesday, February 21, 2007, 2:28PM ET  Report Abuse

    • Overall: 1/5

    Wheelan has confused income and wealth, something a PhD should not do. The GINI numbers come right out of Wikipedia (look up 'GINI coefficient') and relate to income not wealth as stated in the article. There is a big difference between income and wealth and Wheelan should know what it is. This article is nothing more than a poorly veiled endorsement of socialism over capitalism. Would it really be that great if everybody had the same income? For the complacent ones I suppose so. For the aggressive ones I suspect not. So what is the perfect GINI score for a society then, Wheelan, because it will never be 0 and can never be 1. It's just another red herring and a phony reason to flog ourselves because their score is supposedly better than our score. Income equality doesn't motivate anything good when there is no hope of improving one's position in life. To say that a bigger pie is not always better is also saying that a bigger pie is almost always better. Is a bigger pie the problem or is jealousy and envy the problem? The more that can be shared among us all is better for all of us. Otherwise you're back to wealth or income distribution - something found in more socialist and less capitalist societies and espoused by those who probably have enough but have come to realize that they chose a dead end route to riches or that they have came up short in the talent category and will never make the super big time. So they suggest to take from those who have made it and give to those who haven't because they're resentful of those above them, feel guilty for not helping those below them, and won't be affected in the middle anyway. Robbing one group for the benefit of another is wrong no matter what the situation. Ideally, all employees of an organization would share fairly - but not necessarily equally - in the overall performance of the organization. For example, all employees from bottom to top could be given a variable compensation percentage based on the same salary or longevity or duty or any combination of other characteristics deemed appropriate and beneficial to the organization. More like expanded profit sharing. Whether they choose to spend their income now rather than add to their wealth for later is up to them. But don't come back whining later when the rich get richer and the poor stay poor. So Wheelan, buddy, as long as you want to take from some and give to others, send me 10% of your salary if it will make you feel better. After all, it's only my share of your earned income, which I would wager is far greater than mine.

  • Frank - Tuesday, February 20, 2007, 10:06PM ET  Report Abuse

    • Overall: 4/5

    This is a good article with some very interesting points. I would however argue that it's less of a concern when the path from the poorest of the poor to the richest of the rich is extremely narrow -- it should be. However, the path for the least among us to the ever shrinking portion of society we called the middle class, defined by a certain level of living comfort and security, should be wide and made available to all who's willing to work for it. If this is not the case, that should be more of a concern. And at the same time, I would argue that incomes (usually composed of welfare money) of the poor (and able) should not be raised to a point that is comfortable. I think discomfort is also necessary in motivating people to become contributors rather than burdens to society.

  • SILVIA - Saturday, February 17, 2007, 12:31AM ET  Report Abuse

    • Overall: 3/5

    "Brazil has a history of slavery and colonization that was far more brutal than the U.S." I'm not sure this is true; I'd have to do some research. What I had heard (from my father- sorry no sources), was that since the slave trade in South America was run by missionaries, slaves were not separated from their families as they were in North America. Up here, traders did not want slaves to rebel and thus separated them so they would not speak the same language and be able to communicate with one another and organize. The missionaries needed language to spread their faith. Imagine being a slave, having lost your home, family, everything, thrown together with others with whom you could not speak. My father said that the blues evolved from the soft crying/singing/mourning of slaves in the evening who could only find through music a way to mourn and share their pain. But I am sure that these legacies directly affect the quality of life and "mobility" of many many Americans. The legacy of slavery in particular (and racism, oppression in general)-- and the utter devastation it wreaked on the family structure and psyche of the ancestors of countless Americans, and the way that this trauma is transmitted intergenerationally*, and expressed today in child abuse, mental illness, physical disease, addiction, and crime-- is vastly underestimated. Our failure to acknowledge and come to terms with our past (i.e. talk about it) has a great deal to do with what keeps people down. * as we know from Psychology, particularly attachment research: see the work of Mary Main at UC Berkeley. Otherwise the article is excellently written, but (perhaps unavoidable for a short piece on Yahoo) too simplistic for many reasons explained well by other commentators.

  • Yahoo! Finance User - Thursday, February 15, 2007, 2:02PM ET  Report Abuse

    • Overall: 5/5

    Having lived overseas in some pretty poor areas, I find this article to be right on target. One reviewer warned of the dangers of a small group of people (whom the reviewer identified as the government) deciding for the rest of us. To this sentiment I can only reply that last I checked the government is still all of us (by the people, for the people).

  • TimR - Tuesday, February 13, 2007, 2:59PM ET  Report Abuse

    • Overall: 2/5

    Wheelan makes two important errors here. One point which should be obvious to a Ph.D economist is that the Gini coefficient is misleading to use in comparing countries with vastly different population sizes or with different degrees of homogeneity in non-economic terms. Comparing Sweden or Japan to the U.S. using the Gini is unfair on both counts. The other error, which many leftists make, is to confuse the word 'distribution' used in a statistical sense with 'distribution' used as the target of a government action. That is, the statistical distribution of income in Sweden does probably look just like the way the government wants to 'distribute' it, but in a free market society, the statistical distribution of income doesn't mean that a single controlling group like the government should decide who deserves to get what. Even if it might be popular to the ones who 'get' at the expense of those who 'gave' involuntarily.

  • Yahoo! Finance User - Tuesday, February 13, 2007, 1:22PM ET  Report Abuse

    • Overall: 4/5

    I enjoy a balanced report with meaningful arguements. As for the comment from a reader about victors and spoils... This was certainly not the case in Japan or Germany after WWII. The "spoils system" ignores the benefit of economic contributions of the losers.

  • Heidi - Sunday, February 11, 2007, 11:48AM ET  Report Abuse

    • Overall: 4/5

    The perpetuation of wealth by the concept of “keeping up with the Jones’,” is a long-standing practice. Just look at neighborhoods anywhere and you can see it. This probably has and probably will always be part of the desire for wealth; therefore, a driving factor in our economy. On the other hand, I disagree with Wheelan on the point of violence being perpetuated by the inequality of the economy. I have seen the length one will go to have enough. The wider the gap the more unbalanced the economic scale will become. At some point, this scale will become so unbalanced that a reaction will become inevitable. If we look at history, we can see the likely the outcome. Revolutions have come about by far less of a span between the wealthy and poor than what we have now. The expanse between the wealthy and poor continues to become larger every year. As a society, we think that pacifying the poor will keep them complacent, and this too has been shown throughout history to work; however, this is never more than a temporary fix. In the American society, we continue to placate the poorest people with Government help that is usually provided by taxes from the middle class. The wealthiest Americans get one tax break after another, while the gap between wealth and poverty continue to grow. I believe the inevitable outcome, if no intervention is found that will work, is a deterioration of the system that we now know. One way or another, when one group holds the majority of the wealth and another group drowns in the desolation and misery of poverty.

  • thomas - Wednesday, February 7, 2007, 5:21PM ET  Report Abuse

    • Overall: 5/5

    time to do something about it.

  • Yahoo! Finance User - Wednesday, February 7, 2007, 1:53PM ET  Report Abuse

    • Overall: 4/5

    American Dream: make more than the neighbor, or have the same as the Hollywood star you saw on TV? Why do we need to have our bathroom faucets made out of gold? I am not saying lets be Communists... but there needs to be some sort of a balance... The American Dream is impossible right now because only the select few get to work harder and prosper (more). The rest of us work harder and keep being stuck in the same 15% lower end income. Working smarter than harder should be rewarded appropriately... but should someone that works for Wall Street get a 50 billion bonus comparing to someone that lets say works for a bank that might make 0.000000001% of that? The scale of how much we get compensated for chasing the American dream should be a little bit more balanced than that.

  • MaryD - Tuesday, February 6, 2007, 3:32PM ET  Report Abuse

    • Overall: 1/5

    The most uncnvincing article I have ever read. I might argue equally well that in a situation of great violence (a war for example), one side may win. (The other side may or may not continue shooting). History shows:"To the victor belongs the spoils." This produces a coefficient of something close to 1. Thus, it is violence that causes inequality, and not the other way around. As in my argument, your argument has pronounced what is cause and what is effect with no substantiation. That equality is of value is an economic delusion. That delusions (whether about economy or not) are harmful is an economic truth. If a sacred totem animal of a tribal society suddenly dies, producing terminal hysteria and chaos and conviction of imminent doom, then it is DELUSIONS that caused the society's downfall, not the absence of the animal. The same is true if "equality" dies or ceases to exist. As something of an educator to the public, you should be careful not to endorse delusions that are already deeply entrenched.

  • punch_drunk_13 - Sunday, February 4, 2007, 9:43PM ET  Report Abuse

    • Overall: 4/5

    This Wheelan guy is always thinking. He would make a good professor. Too bad America has no place for good thinkers like him in its government.

  • Russ - Friday, February 2, 2007, 8:06PM ET  Report Abuse

    • Overall: 5/5

    meaningful and accurate

  • Justin - Friday, February 2, 2007, 5:18PM ET  Report Abuse

    • Overall: 3/5

    I lived in Brazil for a few years, and it is easy enough to see the reason for the poverty there is because of their lack of capitalistic freedom. The government controlls everything, if you want to have a cocoanut stand then you have two choices, go through months of expensive paperwork or pay of the local law enforcment. Too much buracracy and socialist thinking. This socialistic thinking is much of the reason for the US disparity, look into the ideas of Milton Freidman for more details.

  • Hills of WV - Friday, February 2, 2007, 9:41AM ET  Report Abuse

    • Overall: 4/5

    Let's remember that the other economies brought forth in the article are either not capitalist, and can therefore redistribute income, or are corrupt, and therefore place obstacles in the way of their people. I have moved all over the income scale trying to improve my station and evetually rise to the top 20% of earners. Right now, I'm in the bottom 15%, but my path to wealth is clear, and with more hard work and discipline, I will achieve the American dream. Without income inequality, there is no American dream.

  • Shax - Friday, February 2, 2007, 3:35AM ET  Report Abuse

    • Overall: 4/5

    That hit the nail on the head. Government printing money is the reason rich get richer while poor get poorer. When government prints money, the middle class (people working on a wage) gets impoverished -- prices go up wages stay flat. The rich (owners of assets) get richer, they borrow money to purchase assets, their assets maintain value, but their debts disappear when the currency loses value. This is the core reason why the gap widens. Brazil is a prime example, a country that went through several hyperinflation periods, with the government intentionally destroying the value of the currency.

  • Yahoo! Finance User - Wednesday, January 31, 2007, 3:59PM ET  Report Abuse

    • Overall: 5/5

    This is a topic that has been in my mind for quite sometime. The more I think about it, the less certain I am. I have been taking the philosophical exit lately. Do we wnat to be Sweden? May be not. But do we want to be Brazil? It sure looks like we are headed that way in terms of income divide. Does hard work, risk adn innovation correlate to income growth? I am not so sure anymore. Its all a monster tsunami! Some gyuys boat gets carried over to the other side and lots of other vessels get crushed..Sheer timing and so called happenstance.

  • Catalina - Tuesday, January 30, 2007, 2:16PM ET  Report Abuse

    • Overall: 5/5

    I lived in Brazil as a child to age 15 and experienced on my own the racial, social and economic divide between the favelas and as you word it "the bulletproof apartments". Personally, iI feel t is deplorable that poverty should exist in this day and age, having walked through the favelas and talked with favela residents in Sao Paulo. I have lived a very comfortable middle class life most of my life, with a few years of near poverty, The consequential social cost of historical wrongdoing and the continued income divide which has a racial, historical and social component that is not totally clear, except to say, hinges to a great extent on the logical goal of Europeans to improve their condition. The problem arises when that embetterment comes at the expense of a different group of Human Beings, such as were the African slaves. There are many examples of exceptions, certainly "Pele" can be counted as one of the most famous African Brazilians to escape the norm. Historically Brazil chose to "whiten" its population by openly inviting Europeans from Italy, GErmany, France and the like to enter its borders during the 19th century as written by my Maryland University Published Author and History Professor Winthrop, thus creating a more mixed population or the "Mullato escape hatch", meaning the lighter skinned mulatto had better chances economically than their darker African descendants whom had lost their ties to their former lands, and contrary to the new 19th century European who came as a free citizen with more rights than the African slaves or their descendants. History serves as a measure of where we have been, and where and how we want to proceed from here as humanity, if we are to advance as a civilization, it is necessary to let go of old thinking and embrace what is a reality, that we live in a world, especially in the United States with human beings from every corner of the globe, and their contributions and ours collectively is what makes this a great nation. Creating a path for success is not only morally right it is necessary for the advancement of humanity. There is no justification for the existance of famine or death from preventable diseases or undue suffering because of income inequalities. Creating a path for a more equanimous global society, where individuals matter, we can make great strides in the advancement of medicine and technology to further our intellectual pursuits and the embetterment of human kind in our lonely blue planet. To the contrary we will continue to wallow in our misery, both allowing others to continue to suffer from alack of basic resources, further delaying our advancement in a "Star Trek" fashion.

  • Yahoo! Finance User - Tuesday, January 30, 2007, 11:31AM ET  Report Abuse

    • Overall: 4/5

    We need more articles helping people understand the CAUSE of the Widening Gap, which is INFLATION, and the CAUSE of inflation being: 1. The ending of the 'gold standard' in the early 70's (directly against the constitution, but OK'd by our U.S. Supreme court who's main existence is to uphold the Constitution) creating a fully 'fiat' (promises only) currency with no 'hard' backing. 2. The Federal Reserve's creation of excess money and credit via 'Reserve Banking' (reserves against loans now at less than 1%), too low interest rates creating cheap money, and a 24/7 running of the printing presses. Also, the 'acceptable rate of inflation' mantra that has been sold to the American people (2-3%)! The Fed Resv was created to keep inflation at ZERO. That was their only purpose. 3. The Government - a. The FEDERAL DEFICIT sponsored by the Keynesian Economic Model belief that you can deficit spend into prosperity indefinitely. (How can I be poor, I still have people willing to lend me money to buy more stuff? Or I can tap my now increased mortgage - due to inflation - to buy more stuff, or I can indefinitely sell more US dollars - with interest - to other countries to build more gov't stuff and keep my own country's economy going, and if all else fails, I can drop $100 bills from helicopters to keep the spending going... "Helicopter Ben Bernake".) I don't know about you, but continual borrowing never works out for me as an individual (of course I can't just go raise taxes paid to me, or create money out of thin air and lend it to someone else to 'monetize' it, in order to pay my bills). b. CPI Hedonic adjustments making that "acceptable 2-3% inflation rate" really run at about 9-10% without telling people the whole truth. c. We just raised the minimum rate almost 40% to help the lowest paid be able to afford to live. OK, that will help for about 1-3 years until the costs fully make it through this INFLATION (excess money/credit, deficit spending) driven system, then we'll be right back where we are. Until inflation (money creation) is held steady at ZERO, the minimum wage is only a short term band aid, and actually becomes part of the problem. * Have you noticed that the Dollar Index has lost 30% of its value in the last 4 years?? That's right, our dollars will buy 30% LESS. INFLATION is the great economic killer. It kills the currency by devaluing it. Those at the middle and bottom ends of the economic scale that spend those dollars everyday are poorer, but those on the higher ends (whose investments increase in value through inflationary function as well as interest/investment growth) realize a greater return, lending to the ever widening GAP between Rich and Poor, and a squeeze on the middle class.

  • Yahoo! Finance User - Wednesday, January 24, 2007, 4:41PM ET  Report Abuse

    • Overall: 5/5

    Very interesting article. Dr. Whelan concisely explains some of the benefits of societal inequality, for example increased motivation & productivity (why become the boss with the associated hassles if you get the same pay!). However what he states as a necessary condition for this inequality, namely social mobility, seems to be on a backward slope here in the U.S. Income matters more than ever as it helps get into good schools, pay for tutors etc. This is one of the trends behind the shrinking middle class (including technology and migration). Certainly more insightful than some of the recent dirge in the Economist magazine (Jan20th-26th, P.4) where they argue executives deserve $50M pay-packages as otherwise they wouldn't be motivated to make the hard decisions, yeah right!!

  • Kent - Wednesday, January 24, 2007, 11:33AM ET  Report Abuse

    • Overall: 5/5

    Another terrific article from Professor Wheelan. He does not claim to have all the answers - but gives you enough information to come to your own conclusions. I look forward to his article every month.

  • Yahoo! Finance User - Tuesday, January 23, 2007, 6:48PM ET  Report Abuse

    • Overall: 5/5

    The issue here is not greed of individuals but rather about whether we all benefit with an increasingly stratified society. If the middle class disappears, and we are left with wealthy people and working poor, we will suffer as a society. The dynamic of our society is towards increased inequality and the U.S. has a very regressive tax structure which makes this worse. Warren Buffett has lately been noting how our regressive tax structure does not make sense. We all need to think and vote about whether we want more or less stratification, but this is a powerful trend and is, I believe, basically a done deal in the U.S. The challenge is to be on the right side of the split as the middle erodes.

  • Bill Smith - Tuesday, January 23, 2007, 6:20AM ET  Report Abuse

    • Overall: 4/5

    I think it has to do with greed and laziness also but we may have this backwards. It is the wealthy that want more profit with less effort. Just ask them. They want to never work. They want their family to never work. This is the definition of lazy. Greed as well, is defined by their endless appetite for bigger yachts and faster cars. Also, they have more money, but pay less for interest rates on credit cards. You actually save money because you have more of it. You earn more interest on savings with larger amounts of money. I can understand a desire to make a ton of money and "not working in a sewage plant", but come on why can't these people make some money and get out so that someone else can get some? Make enough to be comfortable, say a few million, and retire and never "work" again. Notice I mention make money and not EARN money, as well as quotes around "work". These people don't earn anything, and they don't deserve it. $50 million bonus huh? Why on Earth would someone need that much money, and What do you think they would 'do' for that money? Kinda makes ya wonder, doesn't it? When the economy collapses the people at the bottom might not be very kind and forgiving to the people at the top. Take a look at the way business works: Costs $10 to make a product you pay someone $5 to make it for you sell it for $20 you keep $5 for not even being there. Imagine someone at the bottom making $200/week if they are lucky. You can't possibly live well on that, so you have to sacrifice things like eating decent food, living in a nice neighborhood, in a nice house, with a dependable vehicle, you know "luxuries" Most rich people pass their riches to their heirs, continuing the process (and discriminations) while furthering this gap between top and bottom. Credit is the perfect example that reminds me of indentured servants of times past. You don't have the cash for a $3 gallon of milk so we'll give you credit so that it will cost you $3.25, which will grow by 25% each month until finally that gallon of milk costs $50 so you will continually be indebted to the rich for life. If you don't keep up that credit rating, then we will raise your interest rate and eventually you won't be able to buy anything. Pretty neat huh? Greedy, lazy rich, soul-less criminals.

  • Yahoo! Finance User - Monday, January 22, 2007, 7:19PM ET  Report Abuse

    • Overall: 4/5

    Great article. I think it has to do a lot with greed. If we are on the bottom of the list, I'm sure we want equality for all since we are the one who gains the most. If we are at the top (say 5%), then equality is not what we want because that means we have to sacrifice what we have earned. There's no easy solution to this. We as a human, have a tendency to become lazy, to enjoy something good, with the least effort (maximum profit with minimal cost, maximun result with minimal effort). And we are getting concerned more with where we are relatively compared to each other instead of where we are (just like the article explained). As long as we are still egoistic, then we will be having this forever. A new paradigm change is required where we no longer care about where we are compared to each other, but what we can achieve IF we all have the same consciousness. Ex: teamwork (between all level or all countries). This is taken from the book Conversation With God book 2. The idea was to eliminate currency/money, and replace with credit/debit points with total transparency where everybody knows how much everybody else is making. Not for one country, but for the whole world. I know this is impossible for the current age, but maybe we'll get there someday. One can only hope...

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