Income Inequality [View all]

[Lionel Mandrake]

By now it's common knowledge that inequality in wealth and income has been increasing it the US over recent decades. While wealth inequality is hard to measure, income inequality is relatively easy to measure by such statistics as the percentage of income going to the top or bottom X percentage of households.

A problem with this sort of statistic is that X is arbitrary. We often hear about the bottom 10% and the top 1% or 0.1% or 0.01%, etc. No single value of X captures the whole economic picture.

There's a better way: the Gini index is familiar to people who study income inequality, but not to the general public. The Gini index is obscure because its definition is too mathematical for most people to understand. But for those who know a little calculus, it's simple and it's something well worth knowing about. If this is new to you, please take a look at

http://en.wikipedia.org/wiki/Gini_coefficient

While the Gini index is generally considered the best single measure of inequality, various refinements have been considered to describe other aspects of inequality. For example, here is an article about a way to define separate Gini indices for the poor and the rich:

http://www.maa.org/sites/default/files/pdf/upload_library/2/Jantzen-2013.pdf