Chapter objective: Understand how inequality, risk and redistribution shape our lives.
1) Describe the extent of economic inequality in the United States.
2) Assess the prevalence and implications of poverty.
3) Understand the rationale for publicly-provided social insurance.
4) Survey the important components of the social safety net.
5) Be prepared to join the debate about income redistribution.
Look around you, and you’ll see tall people and short people; fat people and thin people; folks who can run fast, and those who run slowly. Inequality is everywhere. Keep looking, and you’ll also see rich people and poor people. These economic differences—inequality in income, spending or wealth and your position in the pecking order—shape and constrain the different roles you will play in the economy.
Different views about inequality underpin our most contentious public policy debates, which often boil down to how much greater equality should be traded off for greater efficiency. Too often these debates yield heat rather than light. But beyond national politics, the same issues recur with both the workplace and our families, where we must balance competing pressures for equality and efficiency. This is a debate that you’ll have no choice but to join. Making the right tradeoff requires that you arm yourself with both the key facts about inequality and a framework for thinking about inequality.
Understanding inequality is also central to making sound financial decisions. Sure, you’ve probably seen statistics describing the healthy average incomes of college graduates. But few people actually earn the average income. Instead, some enjoy fabulous riches, while others battle poverty. Your economic life also involves enormous risk, and it’s likely that your career will involve both periods of plenty and periods of deprivation. As such, we’ll also examine how government social insurance and safety net programs help counter some of these risks and protect you against poverty.
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