Breaking Old News: HIERARCHY REDISTRIBUTES INCOME – US Inequality for Quants – by Blair Fix

Blair Fix CasP power law US income inequality graphic collage 2021

Watch Blair Fix talk about how corporate hierarchies create income inequality, and make the rich get richer.

“This paper explores the idea that the (re)distribution of top incomes is uniform because it is shaped by a ubiquitous feature of social life, namely hierarchy. Using a model first developed by Herbert Simon and Harold Lydall, I show that hierarchy can explain the power-law distribution of top incomes, including how income gets redistributed as the rich get richer.

Zoom in US income Inequality

For more research details go here: 10/2021 Redistributing Income Through Hierarchy – Does hierarchy mediate the growth of top incomes?

Abstract: Although the determinants of income are complex, the results are surprisingly uniform. To a first approximation, top incomes follow a power-law distribution, and the redistribution of income corresponds to a change in the power-law exponent. Given the messiness of the struggle for resources, why is the outcome so simple?

To study income is to be perplexed
In a famous 1933 speech, John Maynard Keynes lamented his discontent with capitalism:

It is not intelligent, it is not beautiful, it is not just, it is not virtuous — and it doesn’t deliver the goods. In short, we dislike it, and we are beginning to despise it. But when we wonder what to put in its place, we are extremely perplexed.

(Keynes, 1933)

Today, we might attribute a similar sentiment to researchers who study the distribution of income. Heterodox economists agree that the current distribution of income is ‘not virtuous’, and that the dominant approach to understanding income (marginal productivity theory) ‘doesn’t deliver the goods’. But when we look for a better approach to understanding inequality, we are ‘extremely perplexed’…”…

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just follow the money…

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