ABSTRACT
This chapter discusses the consequences of inequality. The very foundation of the problem of inequality is the concept of social welfare. Another way to look at the problem of inequality is through social peace and cohesion. Inequality causes rebellion, but it may happen that income inequality may increase after a rebellion where it brings power to a specific apparatus or a nomenclature or a social class. In several transition economies, inequality increased after a "rebellion" that brought to power oligarchs. In particular, in the former Soviet Union, inequality increased dramatically after the 1991 August Coup, which deposed Soviet president Mikhail Gorbachev and dissolved the URSS. Roughly speaking, the first type of inequality has to do with the "external circumstances", which are beyond the personal control of individuals and allow for a disadvantage of an individual with respect to another. Neoclassical economics in general neglect economic inequality since it is considered neutral with respect to economic performance.
