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Defending the One Percent

In: Social Issues

Submitted By Alejavida
Words 1161
Pages 5
The article “Defending the one percent” by N. Gregory Mankiw (Journal of Economics Perspective-volume 3, number 27-Summer 2013-Pages 21-34) is an attempt to analyze some reasons for not having an equal distribution of income, regarding special attention to the one percent of the people with the highest income. This issue has been debated for decades and has kept the attention of many economists. Since this disparity leads to inequality, the role the Government has been subject of analysis in order to stablish the level of involvement and the mechanism to solve the problem via taxation.
The paper starts pointing out an example of disruption of a utopic economy where a new entrepreneurial idea has come up. In this case, everyone wants the new product, but there is only one provider; therefore, the demand exceeds the supply and the entrepreneur ended up being richer that the others. This unequal redistribution of well-being started as a voluntary exchange, so there are two questions the author brings up, related to contribution of the entrepreneurial to the alteration of the public policy and whether or not this policy should remain unchanged. This is a reflection of what has been happening in the United States where the income has grown, but not in a uniform way across the income distribution, which leads to the question for policymakers to make taxation more progressive.
The second issue in the paper is related to inefficiency as a result of inequality. Taking as example the Pareto criterion, no-one could possibly object, since there is a way of make people better off without making others worse off. However, the author also refers to Kaldor - Hicks criterion which states that inequality is inefficient in the sense of shrinking the size of the economic pie this is assuming that if the top 1 percent earns an extra $1, in some way, that reduces the income of the

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