The income gap between their two incomes had nothing whatever to do with it. If the income of the richer ancestor had been tripled, that would have had no effect on the ability of the poorer to afford anything.
No, what I see is someone repeatedly asserting things that clearly aren’t true.
If I make X, absent inflation, it matters not even a tiny little bit if my neighbor makes X[sup]5[/sup]. This has no effect on my spending power - none. And whether it increases or decreases or stays the same, it has no effect on my spending power. And you have failed to provide a single instance where it might.
Increases in the income gap are correlated with stagnant wages on the bottom. Decreases are correlated with growing wages on the bottom. I’ve already offered a model of how these things are actually correlated. The absolute value of the gap may not make a difference, but how we got to the gap does.
To summarize, the increase in the gap during the Bush years came from a combination of favorable tax treatment for the rich and improved corporate profitability, much of which came from downward pressure on wages which led to wage stagnation. The decreased gap during the Clinton years came from low unemployment which led to increasing wages. An increase in consumption led to high corporate profits and even better increase in wealth by the rich - just not as great as the increase in wages by others. If we have an economic policy that improves wages at the bottom faster than the top, we’ll see prosperity for everyone again.
You’re assuming a zero sum game here. Due to economies of scale and allocation of fixed costs over more products shipped, rising sales increases profitability. Higher profitability means more money available to invest, so you get that benefit anyhow. You won’t see it in your small example
That is Thomas Lemieux, from "“Increasing Wage Inequality,” the lead article in the June 2006 American Economic Review. Lemieux also dismisses the common view that information technology is the major cause of growing wage dispersion.
In the thread about the role of the working poor, it was demonstrated if not quite explicitly stated that the ‘market mind’ is not a sufficient basis for a world view.
Remember how that went? Eventually a proponent of a market-only point of view ends up in the paradoxical position of being able to identify virtue in a person while yet remaining powerless to judge whether or not the person is ‘good’.
So ‘How would one show it to be true?’ First you need to abandon the market-only perspective. It is inadequate to answer questions of social justice, as it is not capable of judgment. The ‘market mind’ essentially is only a type of calculator. Let the ‘market mind’ be one subroutine in a much larger consciousness.
You might avail yourself of the fields of moral philosophy, political science, and/or legal precedent. Taking law first- notice that plenty of legal acts are bullshit. It isn’t illegal to be bad, it is only illegal to be a criminal. Similarly, political science and also moral philosophy can we warped to benefit some mischievous motive or other.
So. ‘How would one show it to be true?’ First develop a sense of intellectual honesty. Keep an eye on your motives. Then, try to be comprehensive.
No, because you can’t eliminate price increases or decreases in reaction to people’s changes in income.
If a significent number of people receive wage increases, then prices will go up. So if enough of your neighbors make 5 times your income, you will find that there are things which will be prices out of your budget.
Notice he said narrowly defined groups of workers. I’ll buy what he is saying for the lowest 90%. But what people usually mean by income gap is that between the outliers in the top 5% or so and the rest of us. It is this gap which is getting much bigger.