Crunching the numbers behind the income gap reveals effects more profound than previously thought.
For Jeanes, America’s economic ills today and during the Great Depression share a similar cause: lopsided distribution of income and wealth. In both cases, his far-ranging analysis of historical data shows that the bottom 60 percent of the population received about 25 percent of the national income—that’s below the worldwide historical median of 33 percent. A few percentage points may seem trivial, but Jeanes argues that maldistribution skewed toward the upper classes undermines capitalism. Consumption is hurt when money is removed from the lower classes since their propensity to consume is supposedly higher than that of the wealthy. Maldistribution also makes the economy more prone to booms and busts, while diminishing the efficacy of monetary policy as a corrective instrument. The heart of the book contrasts two worlds: one where the majority gets 25 percent of the income, the other, 33 percent. Jeanes theorizes that, besides being more economically vibrant, the world where the majority receives 33 percent of the income will produce better government and business leaders because intelligence—rather than income and other “not-IQ components”—will be the key factor of success. Despite his criticism of the status quo, Jeanes remains a free market advocate who rejects extreme redistribution. He suggests “adaptive taxation” as a means to prevent overtaxing the rich while ensuring that the elite are motivated to serve national interests, not just their own. Economists and other numerophiles will appreciate the author’s quest for more precise metrics on income distribution, and an accompanying website contains spreadsheets for readers to scrutinize the data themselves. Those with only a general interest, however, may find this unabridged edition a big bite to chew. Intriguing extensions on the thesis and sections on population growth and workweek length add to the book’s hefty girth, yet chapters stuffed with graphs and statistics include no executive summaries. Still, Jeanes deserves credit for putting a hot-button issue under a microscope in hopes of finding an equitable solution.
A convincing, data-driven argument for dividing the economic pie more fairly.