Theories
Static model: A theoretical framework that assumes systems remain in equilibrium and do not change over time, often used to analyze stable and predictable phenomena.
outdated
Escalation model: inequality will keep increasing unless society intervenes.
Development model: inequality rises and falls in response to development
Cyclical Model
the rise and fall of inequality repeats over time
Polarization model
inequality is high in the periphery but low in core
This results in a stark divide between developed and developing regions, influencing global economic dynamics.
Convergence Model:
inequality levels are moving closer together
Static Model
Alfredo Parado:
A prominent economist known for his work on income distribution and the implications of economic policies on social equity.
The Pareto principle
80/20 rule: A concept suggesting that 80% of effects come from 20% of causes, highlighting the unequal distribution of resources and outcomes in various systems.
reforms are futile and temporary
distributions recalibrate: this principle suggests that when resources are reallocated or managed more effectively, the focus should be on identifying the critical 20% that will yield the greatest impact on desired outcomes. By applying the Pareto principle, organizations can prioritize their efforts on the most influential factors, ensuring that their strategies are both efficient and impactful.
Escalation model
Thomas Piketty
inequality will increase indefinitely unless society intervenes
Piketty’s formula:r>g, where r represents the rate of return on capital and g represents the rate of economic growth, suggests that when the return on capital outpaces economic growth, wealth concentration intensifies, leading to greater inequality.
cumulative advantage:
a phenomenon where those who are already wealthy or successful continue to gain more resources and opportunities, thus widening the gap between them and those who are less advantaged. This theory emphasizes the importance of policy measures, such as progressive taxation and wealth redistribution, to mitigate the effects of cumulative advantage and promote a more equitable society. Furthermore, Piketty argues that without significant reforms, the societal implications of this growing inequality could lead to political instability and a decline in democratic values.
government policy required
to address these disparities includes implementing measures that promote inclusive growth, enhancing access to education and healthcare, and supporting social safety nets that protect the most vulnerable populations.
distinctiveness of the 20th century where we lowered the inequality and gini coefficient
Development Model
industrial wages> agricultural wagesThis shift is crucial in understanding the transformation of economies, as it reflects the movement of labor towards sectors that offer higher productivity and income, thereby contributing to overall economic development.
sector migration produces effect of inequality moving up and down
the kuznets curve