When I was taught economics (1999-2002 and 2007-08), the Gini coefficient was considered a reliable statistic. There are other measures (e.g. the ratio of incomes for those at the 20th and 80th percentile) which show a similar pattern.

Wilkinson and Pickett’s groundbreaking study on inequality uses measures of income inequality rather than wealth so I don’t think you can dismiss it out of hand.

But I would be interested to see the data you cite. The latest ONS breakdown on wealth did not contain any longitudinal information. But if true it is certainly a scandal that should be addressed.

Best wishes,

Will

As a working class person, I have no problem with people earning what may be considered excessive sums. Although a libertarian, I realise that my ideal society will never exist and government services will always exist, so the more people earn, the more they pay in tax, which means more money for the public services. Without the steep rise you refer too, there wouldn’t have been as much money for public services. If a government borrows money, the supply of loanable funds decreases, crowding out private investment, which can cause unemployment. So if a steep rise increases tax revenue for increased spending, we should be happy.

For me, the key question is not whether the Laffer curve exists but where the peak is and whether it is symmetrical. Controlling for rises in income, you could probably plot the tax rate and yield to get a sense of the curve. Would you accept that the peak could be around 60%?

Sunder – happy to put that kind of graph in place if you have a sense of where we would find it.

It might legitimately be said that while the New Labour income distribution is a fair bit better for the bottom 40% and less good for the top 40%, it is not as different as many might have hoped. It shows political choices make significant differences, but that the choices have sometimes not been as different as they might have been.

This also reflects the ‘running up the down escalator’ point about governmeent’s mitigating pressures towards inequality. Adding a post or further graph specifically on the distributional impact of the tax/benefit choices which governments made would demonstrate an even greater contrast, and highlights the Cameron dilemma. (It would be nice to think it is at least a dilemma!)

Anyway, my job in life is to expose the hypocrisy of left wing politics through ‘evidence based analysis.’ I am an advocate of the Austrian School of Economics, developed by Menger, Von Mises, Hayek and Rothbard. The Chicago and Keynesian Schools both failed to predict and explain this crisis because they rely on computer models. Here is another example of socialist hypocrisy. Those on the Left have been some of the most eloquent critics of the use of computer modelling in economics. They have rightly explained that these models are useless because computers cannot predict human behaviour because there are far too many unexpected external variables than cannot be replicated in a model. However, the same socialists swear by the climate change models, championing them as infallible. The inputs on the models are as fallible as the humans inputting them. The Austrian School eschews computer modelling and complex mathematics. Their creed is Praxeology. Their dismissal of modelling and mathematics means that it is a heteredox economic school, but that dosen’t discount its important contributions to economic debate, such as the Socialist Calculation Problem, as propounded by Professor Von Mises in a classic 1921 paper.

I may have branched out from the original subject matter, but I believe the points I make are important. I hope Mr Straw and his comrades enjoy my company, because I will be stalking this blog forthwith.