Does Income Inequality Matter for the Economy?

The answer seems to be … not much.

… Jencks, a renowned professor of social policy at Harvard, abandoned his 10-year-old project of writing a book about the consequences of inequality on the nation’s health and opportunity, on its politics and crime. Why?

“I came to see a book with six or seven chapters that all said the same thing: It’s hard to tell,” he told me.

What does he conclude from this?

“The most common moral arguments for and against inequality rest on claims about its consequences,” Professor Jencks wrote more than a decade ago. “If these claims cannot be supported with evidence, skeptics will find the moral arguments unconvincing. If the claims about consequences are actually wrong, the moral arguments are also wrong.”

…

Mr. Jencks describes the state of the debate between friends and foes of inequality in these terms: “Can I prove that anything is terrible because of rising inequality? Not by the kind of standards I would require. But can they prove I shouldn’t worry? They can’t do that either.”

In short, don’t dismiss income inequality as a potential problem, but forget about assuming that it is a problem.