Why has mainstream neoclassical economics traditionally had little to say about the causes and effects of inequality? This is the question raised in an interesting new paper by Brendan Markey-Towler and John Foster.
They suggest that the blindness is inherent in the very structure of the discipline. If you think of representative agents maximizing utility in a competitive environment, inequality has nowhere to come from unless you impose it ad hoc, say in the form of "skilled" and "unskilled" workers.
But there's an alternative, they say. If we think of the economy as a complex (pdf) adaptive system - as writers such as Eric Beinhocker, Cars Hommes and Brian Arthur suggest - then inequality becomes a central feature. This is partly because such evolutionary processes inherently generate winners and losers, and partly because they ditch representative agents and so introduce lumpy granularity. Markey-Towler and Foster write:
Inequality is a phenomenon that should arise naturally in a complex, networked economy as value‐generating connections (transactions, business relationships etc.) are formed, consolidated and broken. Concentrations of market power, skill differentials, luck and rent‐seeking can all be dealt with in such an analytical framework.
If you think that's a bit Bilderbergian, consider this new paper by Pablo Torija. He shows how, since the 1980s, western politicians have stopped maximizing the well-being of the median voter, and have instead served the richest few per cent.
If the economy is an adaptive ecosystem, it is one in which a few predators are winning at the expense of the prey.