Why Inequality is Efficient

The physical and cultural constraints that gave rise to a normal income distribution are losing their power. The difference between highway and airline networks explains why.

Most of the debate around inequality is focused on policy failures of various kinds — access to education, taxation, discrimination, and more. But beyond these, rising inequality is driven by technological change. I have extensively written about it in The New York Times and my newsletter and discussed it in my two podcasts with Scott Galloway (here and here).

I recently came across a theory that explains the essence of this technological change. By focusing on it, I do not mean to absolve or dismiss policy failures or to argue that we should simply learn to live with extreme inequality. I am working on a longer piece about potential policy solutions and approaches (subscribe, so you don’t miss it). It is time for some creative and bold initiatives, but first, let’s get to the heart of the problem.

A Tale of Two Networks

The charts below are from a 2007 paper by the physicist and network scientist Albert-László Barabási.

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