by Ike Brannon
Cato Institute
April 09, 2014
Regulation
If income inequality in the United States is growing, how much should we do to reverse it? The answer to that question requires answering two further questions: how much would dampening inequality also dampen economic growth, and how important is a more egalitarian society compared to a wealthier one? Modeling the economy as having a stable, measurable tradeoff between inequality and economic growth ignores the forces that have hastened inequality. Perhaps the best way to understand these forces and what our economic response should be is to focus on how those same forces affected one particular market: professional basketball. The National Basketball Association’s explosion in popularity has created a few spectacularly rich people, but the typical NBA player is far from wealthy and most of the wealth created has gone to people who don’t play the game. Taxing the resulting inequality away is easier said than done.



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