On the rich getting richer and the poor getting poorer

Authors
Citation
Yb. Choi, On the rich getting richer and the poor getting poorer, KYKLOS, 52(2), 1999, pp. 239-258
Citations number
50
Categorie Soggetti
Economics
Journal title
KYKLOS
ISSN journal
00235962 → ACNP
Volume
52
Issue
2
Year of publication
1999
Pages
239 - 258
Database
ISI
SICI code
0023-5962(1999)52:2<239:OTRGRA>2.0.ZU;2-Y
Abstract
Recently, the politics of equalization has been rekindled by the increasing perception of 'the rich getting richer and the poor getting poorer (RGR)'. Though the perception involves the subject matter of economics, it has sca rcely been examined. The reason for the neglect is that most people find it rather obviously true. This paper examines the validity of the thesis of R GR, logically and empirically, and finds it wanting. For example, an implic ation of RGR, viz., increasing polarization of income and wealth distributi on, is not borne out by observation. Also, there is too much mobility acros s income strata to be consistent with RGR. RGR is at best a short term obse rvation and it is a mistake to regard it as a long term tendency. The idea of RGR rests on a faulty understanding of the way the market economy works. The fault lies in taking a static view of a dynamic economy and ignoring t he dynamo, viz., entrepreneurship. The essence of entrepreneurship is not t he ownership of currently valued assets, but the discovery of opportunities . The attempts to redress the perceived tendency of RGR through various red istributive schemes and regulations will merely handicap the entrepreneur a nd reduce mobility, Ironically, the misperception of RGR, if vented in the politics of equalization, will result in more permanent distinction between the rich and the poor.