Dynamics of Inequality

Alex Adamou and Ole Peters have published an article on the Dynamics of inequality in the Royal Statistical Society’s magazine, Significance. In it they tackle the assumption of equilibrium which is widespread in mainstream economic analyses. This assumption constrains the models that can be built and the explanations that can be given for economic phenomena. Furthermore, it is often empirically unjustified. By dropping this assumption, they derive a fundamental measure of inequality as the difference between the growth rates of the total and typical wealth (or income) in a population. For multiplicative dynamics this coincides with an established measure, the mean logarithmic deviation, first proposed by Henri Theil in 1967. In their framework, this measure has a clear economic interpretation rather than being viewed, as it is currently, an arbitrary member of a class of inequality metrics.
This open access article is available here.

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