The Potential Consequences of Top-End Inequality

In 2007, the wealthiest 1% of families controlled more than 23% of income in the United States for the first time since 1928 [1]. To explore the implications of such dramatic income concentration at the top of the distribution, the Tobin Project convened an interdisciplinary workshop in October 2010, focused on targeted questions raised at Tobin’s spring conference. The group explored the potential political consequences of top-end inequality, the possible effects for corporate decision makers, and the potential impact on the behavior of consumers, policymakers, and voters.

The same week, Jacob Hacker (Yale University, Political Science) and Paul Pierson (University of California-Berkeley, Political Science), co-authors of Winner-Take-All Politics (Simon & Schuster, 2010), headlined a panel discussion in Cambridge co-sponsored by the Tobin Project and the Harvard Kennedy School. Professors Hacker and Pierson, who were joined by Archon Fung (Harvard Kennedy School), Alex Keyssar (Harvard Kennedy School), and Theda Skocpol (Harvard University, Sociology), debated the implications of increasing income concentration before a standing-room-only crowd of over 160 students, faculty, and community members.

A critical question emerged from these workshops and the Tobin Project’s April 2010 Economic Inequality conference, later reported by the New York Times: Did economic inequality in the United States contribute to the financial crisis? In December 2010 and again in February 2011, the Tobin Project convened scholars to explore this more narrow question of potential links between high and rising inequality and economic instability. There remains significant disagreement among experts about how (and whether) inequality may have provoked financial instability and which kinds of inequality may have played the greatest role, with some focused on the stagnation of the middle class and others pointing to the runaway top-end of the income spectrum. 

[1] Atkinson, A. B., Piketty, T., & Saez, E. (2011). Top Incomes in the Long Run of History.Journal of Economic Literature, 49(1), 3-71.

See also: The World Top Incomes Database