Sometimes, mainstream economists actually understand that there’s a problem of economic inequality. (It’s unfortunately all too rare but, on occasion, they do get it.) But then they don’t know what to do with it. They don’t understand what causes inequality or what its consequences are.
Timothy Taylor is a case in point. In one post, he demonstrates a basic understanding that U.S. income inequality is very high, it has grown increasingly worse since the mid-1970s, and that “a large share of the growth in inequality is because of growth in the share of income received by” the top one-tenth of 1 percent.
Then, in a follow-up post, on the causes of inequality, the best he can do is cite a recent report on education to argue that “a lot of the explanation for rising inequality, maybe most of the explanation” has to do with the supply and demand of skilled and unskilled labor. That’s it.*
There’s no mention of production here, no role for how enterprises are organized, no mention of coupon-clippers or banks. Mainstream economists simply can’t or don’t want to analyze how the surplus is produced and then distributed and redistributed, how some receive wages and salaries for selling their ability to work and others get a cut of the surplus created by the direct producers—how incomes are distributed not according to levels of education but rather according to the positions people occupy in the economic and social structure. And how, finally, that economic and social structure gets reproduced, thereby creating even more inequality, depending on how the surplus is appropriated by a tiny group and passed out to a few others at the top. Such an explanation is beyond their purview.
That’s the poverty of mainstream economics.
* Yes, Taylor does admit that “other factors” may play a role as well, although the best he can come up with is this:
the demand for skilled and unskilled labor is also affected by factors like the great advances in information and communications technology in recent decades, and by the ability of firms to outsource some kinds of production to other countries.
occasional links & commentary 
Inequality is the product of monopoly capitalist economic development model, notwithstanding it being called as “free market” system. If we apply true “free market” system as defined in any textbook on economics and taught to students across the world, the whole problem of inequality gets vanished. However, the ‘kept men’ a la Paul Samuelson for economists who keep loyalty to their masters for their studies, research and jobs, will use bribes to stall any attempts to implement this system by politicians. Today all democratic countries are falsely called democratic economies. In reality, these are (including the USA) run by monopoly corporations creating thereby inequality.
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