The Stock Market vs. the Labor Market

Couple things here.

First, corporate profits are aberrantly high for a number of reasons, none of which are likely to be permanent. John Hussman, an analyst whom I respect deeply, has a good discussion of this from the perspective of stock valuations, but the basic point is relevant here. [http://www.hussmanfunds.com/wmc/wmc130408.htm]

Second, while I agree that this is "the story" in a purely journalistic sense, it's important not to get too carried in discussions about relative income distributions and miss the forest for the trees, as it were.

Income inequality is not an informationally useful statistic on its own. Income inequality can be thought of as a measure of the strength of incentives in a system. Those incentives can be good or bad on their own. In 3rd world nations, income inequality is a reflection of the strong incentive to be corrupt and steal. In the closed system of Goldman Sachs, income inequality (among employees) is a measure of the incentive to achieve annual performance targets. In the context of the public education system, it is a measure of the incentive to achieve seniority and bureaucratic promotions. In startups it reflects the incentive to get acquired or IPO. Et cetera.

In the United States, when people say that income inequality is too high, what they're usually thinking is that the wrong things are being incentivized and rewarded. That's a fine discussion to have, and I would agree that certain industries [health care jumps immediately to mind] suffer from deep and severe incentive problems that are reflected when you look at income distributions within those sectors.

But the problem is not the income distribution; it's the fact that income is being distributed unequally for the wrong reasons. That is the conversion people should be having.

"Trade only happens if its mutually beneficial for BOTH parties"

That is not true. People often trade out of need, and a lot of time, desperation. It is not mutually beneficial. That notion is so wrong I am not sure how to begin refuting it.

> For me, once I understood the (technological, economic) reasons for the difference it became less of a moral issue and more of a practical issue.

keywords: "For me"

Everyone seems to lose their empathy for the poor and unfortunate once they become successful themselves. But I bet before you landed your sweet coffeescript gig, that you were pretty empathetic.

It's not a practical issue. It's purely a moral one. We all enter the earth on unequal footing. The system rewards luck and pedigree more than it rewards effort and hard work. The very conditioning brought upon youth by poverty makes it so unlikely that they'll ever aspire to the heights of the upper class, or even the middle class. Access to education is still not equal, neither is access to food, clothing, or shelter. Try getting homework help from your parents when they are on drugs.

Don't forget it's a moral issue, just because you've experienced some relative prosperity. Society is selfish to boot.

> Herein lies the problem with the job creators argument. It is not fundamentally wrong, but it is wrong for the current level of inequality. We are past the optimum and, for society and the economy to gain efficiency, inequality must be reduced.

Are you suggesting we get rid of the unemployed? That would certainly increase "society efficiency", I think (not sure how we measure that again). But if we want to reduce society to numbers, its easier to get larger swings in variables if we have smaller population sets to work with. We don't have to get rid of everybody to meet optimal efficiency numbers, because the process of getting rid of people will definitely provide job opportunities for others.

"It takes a special sort to see all the gains in wealth go to the investor and manager class and argue that this is the proper order of things."

I don't think anyone sees it as the proper order of things. For one thing, only central planners even think in those terms. For another, there is no obvious policy that will have a better overall result in a large country like the US -- remember, every policy has unintended consequences and doesn't always turn out like you plan.