Bigger Pies and Just Deserts
Chapter 4: Why does unequal matter? The economic externalities of inequality
This chapter examines ten ways that our individual behavior is shaped by inequality, how these behaviors impact society, and how these societal changes then, in turn, impact individuals in complex ways. This includes the impact of inequality on: status-based behavior, the networking of ideas, education and health, intergenerational mobility, economic rent-seeking, discrimination, trust and conflict, democracy and civil society, and macroeconomic instability. The unifying theme of this chapter is that there are social consequences of inequality that not only impact welfare, but also impact efficiency. In other words, an unequal society will also be an inefficient one. As a result, changes in inequality within countries produce positive and negative externalities that can create poverty traps and virtuous circles that fundamentally shape the nature of our friends and families, our societies, and our economies.
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