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Principles of Economics- Mankiw (5th) 445

Principles of Economics- Mankiw (5th) 445 - CHAPTER 20...

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CHAPTER 20 INCOME INEQUALITY AND POVERTY 457 person would be no more than four times the income of the poorest person. Al- though the measurement of inequality is difficult, it is clear that our society has much more inequality than Plato recommended. One of the Ten Principles of Economics discussed in Chapter 1 is that govern- ments can sometimes improve market outcomes. There is little consensus, how- ever, about how this principle should be applied to the distribution of income. Philosophers and policymakers today do not agree on how much income inequal- ity is desirable, or even whether public policy should aim to alter the distribution of income. Much of public debate reflects this disagreement. Whenever taxes are raised, for instance, lawmakers argue over how much of the tax hike should fall on the rich, the middle class, and the poor. Another of the Ten Principles of Economics is that people face tradeoffs. This principle is important to keep in mind when thinking about economic inequality. Policies that penalize the successful and reward the unsuccessful reduce the in-
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