CIA4U NICK HANAUER NOTES.pdf

Another reason why the rich cannot power the economy

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Another reason why the rich cannot power the economy alone is because they simply do not have the capacity to do so. Hanauer states that as a billionaire his income can be a thousand times larger than the American median, but the ultra-rich of society only represent 1% of America’s total population. Hanauer can only purchase so many goods and services for himself as opposed to the middle-class which is composed of hundreds of millions of people representing the vast majority of Americans. Hence, it is important to have a prosperous middle-class because when the middle-class grows and has more disposable income, aggregate demand increases, which can potentially increase jobs and narrow income inequality. Ariely later discusses what inequality does society want? Ariely starts off by citing a famous philosopher called John Rawls. Rawls had a very popular notion that a just society is a society in which if you knew everything about it, you would be willing to enter it in a random place. Rawls eliminated preconceptions and biases by compelling considerations of every aspect of life and hence called this “the veil of ignorance.” Ariely then discussed a study he and his team
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conducted based off of “the veil of ignorance.” Findings suggested Americans want the top 20% of income earners to own 32% of total wealth and the bottom 20% of income earners to own 10% of total wealth. Additionally, consider that the people polled did not want a socialist/communist society where income distributions are totally equal. Finally, Ariely examines other outcomes of wealth because wealth isn’t directly correlated with income. Ariely questions healthcare, availability of prescription medication, life expectancy, education, etc. Ariely finds that society is open to changes in equality when it comes to infants and young children because they’re not responsible for their situation and deserve equal opportunity with the rest of society. Thus, this finding leads to what Ariely refers to as a desirability gap and an action gap. The desirability gap is the discrepancy between what kind of inequality we want and what kind of inequality we have. The action gap is the ways in which government and society can take these conclusions and do something about it. Ariely wraps up
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