Fear and loathing of income inequality is both totally understandable and ultimately misplaced.
It’s understandable because everywhere around us it seems as if top income earners ‑ those latter-day kulaks vilified as the “1 Percent” by the Occupy crowd and populist politicians ‑ are gaining while the rest of us seem barely able to hang on to a lower-middle-class standard of living.
It’s misplaced because it glosses over strong evidence that the ability to rise above your starting place ‑ the American Dream, by most accounts ‑ is better than it was 40 years ago.
There is no doubt that the spread between top earners and those below them has grown over time. The share of income earned by the top 1 percent in the United States has doubled since the early 1970s. The top 20 percent’s share has risen, too, though the increase is much smaller and has leveled off since the 1990s.
Yet it is far from clear that inequality is a bad thing when it’s the result of market forces. Think about it: Do Bill Gates’ billions take bread from your mouth, or have Microsoft products allowed you to put bread in your wallet by making you more productive and the goods and services you buy cheaper?