Three Provocative Questions

Concerns about economic inequality have been voiced throughout history—Thomas Malthus, David Ricardo and Karl Marx were among the first but they had little systematic data with which they could work. In the 20th century, the advent of national income, tax return and other economic data have allowed for a more rigorous analysis of the issues surrounding inequality. Generally, the focus has been on income inequality, but wealth and consumption inequality are of much interest as well—consumption might ultimately be a more useful variable for assessing economic well-being. Estimates suggest that wealth is much more concentrated than income in the U.S. Consumption inequality is generally thought to be less than income inequality. So the ranking seems to be: The wealth distribution is the most unequal, the income distribution is somewhat less unequal, and the consumption distribution is even less unequal. Virtually all research shows that U.S. income inequality has increased over the past three decades, but there is much disagreement over the extent of the increase. Major disagreements and controversies arise from different income measurements—pre-tax vs. after-tax vs. after-tax plus in-kind benefits; annual vs. lifetime earnings. A clear message is that measurement matters