Shining the light on inequality

Posted: 25 August 2010 in Uncategorized
Tags: , , ,

When it comes to explaining the current crises of capitalism, mainstream economists and commentators have been acting like drunks who look for their keys under lamp posts because the light is better there. Now, they may be changing.

Add Barbara Kiviat and Justin Fox to the list (which includes Raghuram Rajan, Robert Reich, and Paul Krugman) who have begun to break the taboo and at least pose the question of the relationship between the growing inequality in the United States and the causes of the current crises.

The fact is, however, they’re still fumbling in the dark and they’re certainly not getting any help from mainstream economists. As Fox explains,

so far there’s nothing even remotely close to conclusive evidence that there is a link. But it does at least feel like there’s something to it. And it’s striking just how little the mainstream economic research of the past 50 years has to say about it. Inequality was seen as a side effect (unfortunate or not, depending on your political leanings) of Great Economic Forces, not something that itself had an impact.

Exactly. Mainstream economists chose to leave in the dark the idea that rising inequality was at least one of the keys to explaining the run-up to and the eventual onset of the crises that erupted in the fall of 2008.

It’s the class taboo, which neoclassical economists continue to enforce but a few honest observers are beginning to challenge.

  1. Robert says:

    My name links to a post in which I argue that the connection between inequality and recessionary conditions is explained by the Harrod-Domar growth model.

  2. […] as I’ve pointed out on this blog many times, at least some mainstream economists—such as Raghuram Rajan, Robert Reich, and Paul Krugman—have recognized the importance of class in the form of growing inequality, only then to […]

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