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Current time:0:00Total duration:8:32

Video transcript

the word inequality by its very nature at least sounds sounds a little bit unfair obviously everyone's not getting the same thing they're not getting the same income or they don't have the same wealth but a question needs to be asked is is this necessarily a bad thing and even if it is a bad thing are the ways of fixing it or trying to address it could they make matters worse in somewhere way especially for the people that you're trying to help and once again my goal here is to not tell you one way or the other but to at least give you frameworks for thinking about this so let's just think about a world where we have kind of a fixed pie economy and they're increasing inequality is clearly not doing good for for the people who have less resources so let's imagine a fixed pie economy so let's say this this this rectangle right over here represents the total national income in a given period so year one this is a total national income total national income and let's say that in year one the top 10% of earners the top 10% of earners make 1/3 of the national income so they make 1/3 of the national income this is the top 10% now let me be very clear this area right over here is not 10% of the whole rectangle this is 35% or actually this is alone I said this is 1/3 so this is going to be 33 this is 1/3 of the entire rectangle but it's the income from the top 10% income from the top 10% now that would mean that the other 90 percent other 90 percent is essentially splitting the remaining the remaining two thirds of national income between them so if you go if you take this reality and if the total pie so let's so let's do a static pie right over here so pie stays the same so pie and when I say pie talking about the square thing here I guess it doesn't look too too much like a paisa maybe I don't call it a pie so national income national income static so it's not changing right over here so then you have let me try to draw a rectangle of the same size of the same size and if you have increasing inequality in this situation then you might have the top 10% of earners by let's just say this is year ten year ten right over here maybe instead of having one third of the national income maybe they have fifty percent of the national income and I'm just picking round numbers for simplicity so this right over here is one half of national income now from the top ten percent from the top from the top ten percent so clearly if this happens the other ninety percent are now splitting only one half of the national income so this is the other other ninety percent right over here so here it's essentially a zero-sum game if you had a static economy if it was not growing at all then of course rising inequality would mean that these people right over the other ninety percent are going to have lower per capita baggage so you could say income lower per capita GDP they're going to have a lower standard of living so they're not doing good in this situation but let's think of the other way of where you do have economic growth an economic growth that's enough so even if you have some inequality the growth more than offsets that so that the the other ninety percent is still better off so let's see if we can visualize that so so economic growth economic economic growth now let's say your pie has grown dramatically over ten years and I'm just maybe I'm exaggerating a little bit for the sake of for the sake of discussion so let me draw it like this so I'll try it out the same height but now our whole economy let's say our whole economy has has doubled our whole economy has doubled here and now in this situation let's say you still have this wealth inequality growing so the top 10% in year one having one third of national income let's say that it still grows to 1/2 of national income in year ten so one half of national income so I can draw that a little bit neater so half of national income right over there half of national income so one half of national income so this is still a situation where you've had inequality increase but the half of national income that's have going to have to be split between the other other ninety percent has still grown fairly dramatically if we assume that I've drawn it pretty close to proportional so let me just copy and paste this so copy and paste so this is how much was being split amongst the other ninety percent in year one and notice it's much smaller than how much is being split by the other ninety percent and actually let me put it right over here then the other ninety percent in year ten and if we assume that the population hasn't grown by this amount it's grown by something smaller than this or maybe the population has been relatively stable then your per-capita your per capita GDP your per capita income is actually going to improve so this is a situation here where even though inequality has increased because the pie has gotten bigger these people are better off these people are better are better off and so that leads to really one of the fundamental questions especially when you're thinking about economic systems is that you have this you have this market system this capitalist system this market economy the market economy and at least in the recent history it's shown us that hey this is this leads to growth wealth creation so pi so economic growth economic growth but it also leads to inequality it also leads to inequality inequality is an inevitable byproduct in equality now the question you have you might have to ask is well look is this necessarily bad if this economic growth is enough everyone is better off it doesn't matter if some people are even more better off than other people but everyone is better off and it's important to think about if you try to just focus on inequality just focus in equality are you also going to stop this from happening another way of thinking about it if you're one of the people in this in this situation right over here that you're the other 90% would you rather stay in this world where you're in a static pie and inequality is not increasing or would you rather go to this world right over here now once again the point of my video isn't to say that this world is necessarily going to happen there could be a world where your total economic growth was less than this and the pie got bigger and these people are not as well-off but I the whole point of this is just to highlight that inequality is not necessarily always going to lead to the people I guess who are or getting less of the pie being worse off if the pie grows fast enough and the other thing to realize is well if you sometimes you might in an attempt to lessen inequality you might also stifle economic growth and that might keep everyone from being better off in this scenario right over here so once again it really depends on the context it really depends on the situation and the variables and the numbers you're looking at but I just really want to emphasize that there's no such thing as hey if there's rising inequality it's going to hurt always the other 90% it'll definitely benefit the people who are maybe in the top 10% but also because that's a byproduct of economic growth it might make these people better off as well