Is Inequality So Bad?

Should we be worried that in the U.S. the top 1 percent claim 21 percent of the national income? Should we be more concerned that the middle is lagging, or that the very top is soaring? Until recently, economists mostly ignored such questions. The exceptions were generally of leftish tilt—that is, they favored more equal distribution. James K. Galbraith, an economist at the University of Texas at Austin and son of the famous John Kenneth, fits that pattern. Inequality and Instability, his latest book, is the product of years of study in a field that was, he laments, a “backwater.” It rejects the conventional view that inequality is the justifiable price that societies pay for flexible markets. Rather, Galbraith points a finger at the financial sector for broadening the income gap and thereby destabilizing the economy. (He posed for his author’s photo in Zuccotti Park during last year’s Occupy Wall Street campout.) With President Obama proposing a millionaires’ tax and even Republicans haranguing Mitt Romney for the sin of getting rich, his timing is certainly good: Inequality is shaping up to be a defining theme of the election year.