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Playing With Numbers

August 29, 2008

Suppose A makes 1 dollar, B makes 2 dollars, and C makes 3 dollars. Then A finds gold and now makes 6 dollars. If you use the methodology that produced the graph in this post inequality has risen. That’s because the top third of the income distribution saw income rise from 3 to 6, a 100% increase; while the bottom two-thirds rose from 3 to 5, just a 66% increase.

In other words every time an average Joe strikes it rich, he or she contributes to rising inequality. OTOH every time a rich dude (or duderita) loses his (or her) shirt, that reduces inequality. So rising overall inequality, means that more people make it big compared to people going bankrupt.

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From → Economics, Inequality

One Comment
  1. Rudy permalink

    Super example!

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