Page 429 - The Principle of Economics

INCOME INEQUALITY AND POVERTY
“The only difference between the rich and other people,” Mary Colum once said to Ernest Hemingway, “is that the rich have more money.” Maybe so. But this claim leaves many questions unanswered. The gap between rich and poor is a fascinat- ing and important topic of study—for the comfortable rich, for the struggling poor, and for the aspiring and worried middle class.
From the previous two chapters you should have some understanding about why different people have different incomes. A person’s earnings depend on the supply and demand for that person’s labor, which in turn depend on natural abil- ity, human capital, compensating differentials, discrimination, and so on. Because labor earnings make up about three-fourths of the total income in the U.S. econ- omy, the factors that determine wages are also largely responsible for determining how the economy’s total income is distributed among the various members of so- ciety. In other words, they determine who is rich and who is poor.
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IN THIS CHAPTER YOU WILL . . .
Examine the degree of economic inequality in our society
Consider some problems that arise when measuring economic inequality
See how political philosophers view the government’s role in redistributing income
Consider the various policies aimed at helping poor families escape poverty