Income Inequality -- It Ain't necessarily So

Mark Twain said, "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so."

Of course we "all know" that income equality in the United States has been getting worse. Except that's not quite true. The chart below shows the Gini Coefficient for individuals, households and families since 1994. The Gini Coefficient is a measure of inequality where a value of 0 indicates perfect equality (everyone has the same income) and a value of 1 indicates perfect inequality (one person has all the income, while everyone else has none). 



As you can see, that measure for individuals (the people who actually get a paycheck) has not changed.  But that seldom gets reported because it contradicts the narrative of The Rich getting richer. What's reported is the coefficient for households.

If income equality for individuals hasn't changed, how can inequality for households go up? Simple. People with very high income earning potential are increasingly likely to form and maintain families. At the opposite end of the scale people with low earning potential are increasingly likely to be in single earner households.

So rising inequality has nothing to do with economics and everything to do with how people choose to form families or households. If you want to reduce inequality get married to someone with high earning potential and don't split up.

There is no such thing as an enduring monopoly -- Part II

Last week I commented on how, despite the wailing and gnashing by government over the "Microsoft Monopoly", competitors managed not only to survive, but acquire a significant share of the OS market.

For the past couple of years, our intrepid government has been riding to rescue us from the"Big Beer" monopolies. In one of the largest divestures of all time, DOJ forced Anheuser-Busch InBev to divest Modelo's entire U.S. business, including beer brands such as Corona, as well as its most advanced brewery.

Meanwhile, back in the real-world marketplace . . . . 




Just as a couple of grad students with a little venture capital (aka Google) eroded Microsoft's share of the OS and office productivity markets (and changed how we use them), thousands of entrepreneurial brewers are doing the same (and changing tastes in beer).

The DOJ's anti-trust office is nothing but a collection of lawyers who justify their existence by convincing a gullible public that they can ward off the evil spirits of monopoly. In Africa they call them Witch Doctors. Look — the patient got better while I danced around him with my rattles and administered my magic potions!

There is no such thing as an enduring monopoly

One of the great myths that "everyone knows" is that absent government intervention, companies will create enduring monopolies that allow them to extract non-economic rents from consumers. That thinking was behind the hysterical actions of the government in the 90s to "break the Microsoft monopoly".  Far more powerful than government is the action of the markets themselves. Monopolies are simply not something that can be sustained without government assistance (e.g. the Post Office). It wasn't the government that cracked the Windows-Intel "monopoly". It was Google's Android OS. I predict it won't be long before government mounts a "Break the Google monopoly" campaign.