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Pelkabo

A mild leftist (or a devil's advocate) might contend that real GDP per capita is not the only measure of a country's economic success. Perhaps service economies tend to concentrate wealth in the hands of those at the top of the pyramid, while relegating a larger and larger percentage of the population to low-paying service jobs.

Dave

Agreed that they would do that.

Agreed that it is plausible.

I have doubts about it being probable. For recent evidence see Hal Varian's piece in the September 21 New York Times (http://www.nytimes.com/2006/09/21/business/21scene.html?_r=1&oref=slogin). It turns out that most of the "evidence" of inequality goes away when we remove 4 of the over 3,000 counties from the U.S. data. So, it sounds like claims of increasing inequality are not robust.

Further, why the focus on income inequality? Shouldn't we be concerned about consumption inequality? Ah, but there's the rub - there isn't much, so it is hard to make an issue our of it.

laissez-faire

Surprised about this quest for equality on this site! Inequality is the only source of progress, arts and science, and innovations in consumer sector. Not "almost all" but ALL consumer products first entered markets as luxury items affordable to the rich only. Then they trickled down to the masses. The reason of eternal bleakness and grimness under communism was the absence of the rich. The only demand for arts was propaganda purposes and they got degenerate art, the only demand for innovation was in the military and they got an economy where they could send people to space but even today 36% of hospitals in Russia do not have indoor plumbing.

Dave

Ah ... well ... just playing the devil's advocate.

I'm not yet convinced of the trickle-down version of innovation just yet.

But, I will wholeheartedly agree that inequality tends to be a constant motivator. Think about it: you go to the store, and they offer products of unequal quality at unequal prices, and you rejoice when you can exploit that to get a bargain.

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