The Rubber Band of Economic Inequality

Published by Chris Oestereich on

I’m reading Branko Milanovic’s “The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality,” a book which puts inequality in a historical context to help us better understand our current circumstances.  In the book, he passes on an idea from John Rawls which suggests that “income distribution (should) move like a single interconnected chain.” In good times all would move up together.  In bad times all would share in the pain.

I liked this idea and thought a slightly different analogy might better fit reality. What if we replaced the chain with an elastic band? Economies are complex, imperfect systems. Expecting all actors in the system to progress or decline within strict boundaries seems a tall order, but if we gave it a little wiggle room the idea might work.

Using the elastic band as the model, you could allow the extremes to diverge, but not for long.  As tension is put on a rubber band, one of two things is likely to happen, either the band snaps back into its relaxed state, or it breaks violently. Using this idea as a guide, legislators could enact rules to obviate, mitigate and re-mediate the effects of tension on the band.  The idea would be to manage the economy in such a way that the Haves would be prevented from taking an unreasonable share of the economy’s bounty and thus preserve social order.

[bctt tweet=”The idea is to prevent the few from taking more than their share, and thus preserve social order.”]

From chain to rubber band

rubber band, John Rawls, inequality

If we put this idea into the current context we’d see a band with extremes headed in opposite directions, the majority of it moving downward while a small portion at the top strained mightily in the opposite direction. Think about what this would do to an elastic band. Putting undue tension on any part of it risks the integrity of the whole, and so it is with the social contract. Take us all in the direction which fortune dictates and order is maintained. Pull us apart and social bonds become frayed.  A bit of divergence is to be expected as the vagaries of the market are far from being predictable, but with the aforementioned plan in place an engaged government could quickly act to to bring the economy back into a reasonable alignment.

[bctt tweet=”They’ve either forgotten, are ignorant of, or don’t give a damn about, history’s lessons on inequality.”]

This is the predicament we find ourselves in today.  The  very wealthy have either forgotten, are ignorant of, or don’t give a damn about, history’s lessons on inequality. (Peter Turchin has a really nice piece on this, “Return of the Oppressed” up at  I recommend reading it right after you pick up a copy of Mr. Milanovic’s book.)

I think it’s time we get their attention and offer them one chance to quickly bring the band back into a relaxed state.  If they don’t play ball, we could just lop off the top.

This tweet from Gianpiero Petriglieri sums it up nicely for me.