ABSTRACT
We live in a vastly unequal world in which people face radically different opportunities to live flourishing lives. More typically though, economists have historically only been concerned about inequality – if at all – to the extent that it promotes or hinders economic growth, efficiency, or the maximizing of aggregate utility in society. Changes in technology, a shifting structure of production, differential levels of, and rates of return to, human capital might explain some of the unequal outcomes across occupational groups as wages fail to keep in line with price increases. The first important thing to learn from the framework of market failures is that there is an economic cost to inequality, from which it follows those egalitarian policies, can lead to improvements and growth. Focusing on market failures also helps us understand the persistence of inequality over time since the path of income distribution may be influenced by a combination of market failures and initial inequalities in wealth.
