Chapter 20

Chapter 20 focuses on income inequality and poverty. The chapter is then broken down into three main topics; The measurement of inequality, the political philosophy of redistributing income and Policies to reduce poverty. Economist use a table that contains quintiles. That is dividing the population into 5 quintiles, each with the same number of people in each quintile. Each quintile then shows the percent of total income that it brought in. In 2014, the bottom quintile received 3.6% of all income in America for that year. The lack of reduced poverty is contributed to the increase of inequality. The political philosophy of redistributing income is divided into three main categories: Utilitarianism, Liberalism and Libertarianism. Utilitarianism is when the logic of individual decision making to questions concerning morality and public safety is applied. Liberalism is when government chooses policies that are considered just. Libertarianism is the philosophy that government should punish crimes and enforce voluntary agreements but not redistribute income. There are many policies to help the poor. Some of the most well known policies are minimum wage laws, welfare, negative income taxes and in-kind transfers. While these policies are aimed to help, they have many side affects. Very high effective marginal tax rates tend to discourage the poor from escaping poverty.