Recover Table 7.2 (Inequality of capital ownership) of Piketty (2014) (to be found online).Piketty, Thomas. 2014. Capital in the Twenty-First Century. Harvard University Press.Reproduce the calculation behind the 0.33 Gini coefficient for the group “Low inequality (never observed; ideal society?)”.What general relationship can one establish between the Gini coefficient and Piketty’s favorite measure of inequality? Explain.What limitation to Piketty’s critique of capitalism could Sala-i-Martin (2006) put forward? Explain.

What general relationship can one establish between the Gini coefficient and Piketty’s favorite measure of inequality? Explain.

What limitation to Piketty’s critique of capitalism could Sala-i-Martin (2006) put forward? Explain.

Hacker and Pierson on Economic InequalityVarious scholarly examinations have attempted to explain the widening of the inequality gap over the last generation, and one such study resulted in the book, Winner-Take-All Politics: How Washington Made the Rich Richer – And Turned its Back on the Middle Class (2010), by political scientists Jacob Hacker and Paul Pierson. Please read this book, consult the resources posted on our course site for context, answer ONE of the questions listed below, and reply to at least one classmate. Together we should be able to get a better handle on the topic of economic inequality. Be sure to completely answer the question you choose and provide citations when you paraphrase or quote Hacker and Pierson. You may also wish to supplement this source with other course materials (optional). Have fun!Questions (choose ONE):What is Hacker and Pierson’s argument, and how does it differ from the dominant explanation for economic inequality trends in the United States?According to Chapter 2, how was the winner-take-all economy made?What is the history of “drift” and “mastery” in democratic capitalism during the first half of the twentieth century?Why do the authors argue that the real shift in recent U.S. political history occurred in 1978, not 1968?How did powerful corporations advance their agenda against workers during the Carter and Reagan years?What happened to the influence of mass membership organizations that once brought ordinary voters into politics?How did the Republican and Democratic parties recast themselves during the 1980s and set the stage for the unleashing of the winner-take-all economy?After 1990, how did Republicans contribute to the new winner-take-all economic and political order, and how did Republican Phil Gramm typify winner-take-all politics?Over the course of the 1990s, why did Democrats first accommodate and eventually embrace the winner-take-all economy, and how does Democrat Charles Schumer typify winner-take-all politics?Hacker and Pierson write that in 2008, President Obama “raised huge amounts from wealthy donors and relied on ‘bundlers’ who could assemble networks of big-money contributors” (304), but in Chapter 10, the authors cast him as a committed reformer stymied by an obstructionist Congress engaged in winner-take-all politics. Are the authors having it both ways or not? In other words, is it possible for a true reformer to make it to the top of either major political party today given the necessity of big-money backing?Do the authors offer viable suggestions for moving from drift to renewal and reversing the winner-take-all economy and politics?

The passage below is accompanied by a set of questions. Choose the best answer to each question.The first regularity we observe when we try to measure income inequality is that inequality with respect to capital is always greater than inequality with respect to labor. The distribution of capital ownership and income from capital is always more concentrated than the distribution of income from labor.Two points need to be clarified at once. First, we find this regularity in all countries in all periods without exception, and the magnitude of the phenomenon is striking. To give an idea of the order of magnitude in question, the upper 10 percent of the labor income distribution receives 25–30 percent of total labor income, whereas the top 10 percent of the capital income distribution owns more than 50 percent of all wealth…Second, this regularity is by no means foreordained, and its existence tells us something important about the nature of the economic and social processes that shape the dynamics of capital accumulation and the distribution of wealth. For example, suppose that at a given point, labor incomes reflect not only permanent wage inequalities among different groups of workers (based on the skill level and hierarchical position of each group) but also short-term shocks (for instance: wages and working hours in different sectors might fluctuate considerably from year to year or over the course of an individual’s career). Labor incomes would then be highly unequal in the short run, although this inequality would diminish if measured over a long period. A longer-term perspective would be ideal for studying the true inequalities of opportunity and status that are unfortunately quite difficult to measure.In a world with large short-term wage fluctuations, the main reason for accumulating wealth might be precautionary (as a reserve against a possible negative shock to income), in which case inequality of wealth would be smaller than wage inequality… All of this is logically possible but clearly not very relevant to the real world, since inequality of wealth is always and everywhere much greater than inequality of income from labor…If wealth is accumulated primarily for life-cycle reasons (saving for retirement, say), then everyone would be expected to accumulate a stock of capital more or less proportional to his or her wage level in order to maintain approximately the same standard of living after retirement. In that case, inequality of wealth would be a simple translation in time of inequality of income from labor and would as such have only limited importance, since the only real source of social inequality would be inequality with respect to labor.Such a mechanism is plausible, and its real-world role is of some significance, especially in aging societies. In quantitative terms, however, it is not the primary mechanism at work. Life-cycle saving cannot explain the very highly concentrated ownership of capital we observe in practice, any more than precautionary saving can. The very high concentration of capital is explained mainly by the importance of inherited wealth and its cumulative effects. The fact that the return on capital takes on extreme values also plays a significant role in this dynamic process…

The first regularity we observe when we try to measure income inequality is that inequality with respect to capital is always greater than inequality with respect to labor. The distribution of capital ownership and income from capital is always more concentrated than the distribution of income from labor.Two points need to be clarified at once. First, we find this regularity in all countries in all periods without exception, and the magnitude of the phenomenon is striking. To give an idea of the order of magnitude in question, the upper 10 percent of the labor income distribution receives 25–30 percent of total labor income, whereas the top 10 percent of the capital income distribution owns more than 50 percent of all wealth…Second, this regularity is by no means foreordained, and its existence tells us something important about the nature of the economic and social processes that shape the dynamics of capital accumulation and the distribution of wealth. For example, suppose that at a given point, labor incomes reflect not only permanent wage inequalities among different groups of workers (based on the skill level and hierarchical position of each group) but also short-term shocks (for instance: wages and working hours in different sectors might fluctuate considerably from year to year or over the course of an individual’s career). Labor incomes would then be highly unequal in the short run, although this inequality would diminish if measured over a long period. A longer-term perspective would be ideal for studying the true inequalities of opportunity and status that are unfortunately quite difficult to measure.In a world with large short-term wage fluctuations, the main reason for accumulating wealth might be precautionary (as a reserve against a possible negative shock to income), in which case inequality of wealth would be smaller than wage inequality… All of this is logically possible but clearly not very relevant to the real world, since inequality of wealth is always and everywhere much greater than inequality of income from labor…If wealth is accumulated primarily for life-cycle reasons (saving for retirement, say), then everyone would be expected to accumulate a stock of capital more or less proportional to his or her wage level in order to maintain approximately the same standard of living after retirement. In that case, inequality of wealth would be a simple translation in time of inequality of income from labor and would as such have only limited importance, since the only real source of social inequality would be inequality with respect to labor.Such a mechanism is plausible, and its real-world role is of some significance, especially in aging societies. In quantitative terms, however, it is not the primary mechanism at work. Life-cycle saving cannot explain the very highly concentrated ownership of capital we observe in practice, any more than precautionary saving can. The very high concentration of capital is explained mainly by the importance of inherited wealth and its cumulative effects. The fact that the return on capital takes on extreme values also plays a significant role in this dynamic process…