notes-econ-inequality

i'm disappointed to find that as of 2018 there wasn't a page here yet, since i think that wealth inequality is one of the most critical world problems. Presumably there are lots of notes about it on other pages that should be consolidated onto this page at some point.

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https://arxiv.org/abs/1802.07068 says

"The largely dominant meritocratic paradigm of highly competitive Western cultures is rooted on the belief that success is due mainly, if not exclusively, to personal qualities such as talent, intelligence, skills, efforts or risk taking....It is very well known that intelligence or talent exhibit a Gaussian distribution among the population, whereas the distribution of wealth - considered a proxy of success - follows typically a power law (Pareto law). "

they make a model and show that in their model, "almost never the most talented people reach the highest peaks of success, being overtaken by mediocre but sensibly luckier individuals"

further discussion/summary at https://www.technologyreview.com/s/610395/if-youre-so-smart-why-arent-you-rich-turns-out-its-just-chance/ :

" Pluchino and co’s model is straightforward. It consists of N people, each with a certain level of talent (skill, intelligence, ability, and so on). This talent is distributed normally around some average level, with some standard deviation. So some people are more talented than average and some are less so, but nobody is orders of magnitude more talented than anybody else. ... The computer model charts each individual through a working life of 40 years. During this time, the individuals experience lucky events that they can exploit to increase their wealth if they are talented enough. However, they also experience unlucky events that reduce their wealth. These events occur at random.

When the team rank individuals by wealth, the distribution is exactly like that seen in real-world societies. “The ‘80-20’ rule is respected, since 80 percent of the population owns only 20 percent of the total capital, while the remaining 20 percent owns 80 percent of the same capital,” report Pluchino and co.

That may not be surprising or unfair if the wealthiest 20 percent turn out to be the most talented. But that isn’t what happens. The wealthiest individuals are typically not the most talented or anywhere near it. “The maximum success never coincides with the maximum talent, and vice-versa,” say the researchers.

So if not talent, what other factor causes this skewed wealth distribution? “Our simulation clearly shows that such a factor is just pure luck,” say Pluchino and co.

The team shows this by ranking individuals according to the number of lucky and unlucky events they experience throughout their 40-year careers. “It is evident that the most successful individuals are also the luckiest ones,” they say. “And the less successful individuals are also the unluckiest ones.” "