Back in November, Scientific American ran an article about a computer model that a research team at Tufts University used to simulate and research the economic processes that drive the inequalities in income and wealth of individuals, families and households in modern industrialized nations having capitalist market economies. The article was written by Prof. Bruce Boghosian, one of the leaders of this team.
By studying the results from this model after running it with a variety of hypothetical and historical data inputs, the researchers found that concentration of wealth is mostly inevitable in modern market-oriented nations. However, wealth redistribution mechanisms can mitigate the severity of concentration and prevent extreme oligarchy. A “redistribution mechanism” is something like Robin Hood; it takes from the rich and gives to the poor (or intends to, but is often misused by those who aren’t poor).
An example would be the progressive tax system, whereby the rich are subject to higher taxes on income, while the poor pay less (or nothing). The poor also benefit more than the rich from government spending on subsidized housing, subsidized health care (e.g. Medicaid), low-income tax credit cash refunds, etc. Some nations have more generous redistribution mechanisms while others have more stingy ones (redistribution is usually the province of the government, although voluntary charity and philanthropy can also have a redistribution effect). Obviously, American’s “social safety net” has been getting more and more stingy in recent decades. » continue reading …
