It is even possible that inequality could have _positive_ externality effects, increasing innovation and growth.

Students are not taught this idea either. Societal functioning is implicitly kept entirely separate from the economic distribution.

Surely no one believes this.

It makes zero sense that students leave their degrees thinking inequality is a pure equity issue.

Particularly in the world we live in, where the only developed country to drastically increase inequality in recent decades is also the only one undergoing a constitutional crisis.

The problem with BlueSky is that it's so dead, at least for me. Not sure if I'm missing something or if people just gave up on social media altogether. It's a shame, community is good.

In reality we're almost certainly somewhere in the middle. There is not nearly enough research on the trade-off, however.

If what really matters to people is relative incomes (think Easterlin paradox), then the social planner should minimize inequality at all costs

If what really matters is absolute incomes, then the social planner should maximize incomes. Inequality still matters (DMUI), but less.

A short bonus:

This paper relates to a broader point I find fascinating, which is that relative income concerns in a population immediately means that inequality is an externality for the social planner.

We usually talk about inequality and fairness, but I firmly believe that inequality is primarily an efficiency concern.

Unequal countries function worse than equal countries in many, many ways. The incentive benefits of inequality have to be huge to make up those costs.

The resulting efficiency cost of inequality (an increased chance of crisis) implies an inequality externality.

This adds to a long and growing literature on inequality's externality effects.

Here are a few other macro examples (there are many others):

The relevant channel is housing status - you want more because I have more and vice versa. This drives up spending and debt. The authors argue that this can explain 15% of the increase in the mortgage-to-income ratio.

I did. They sent a shipping notification a long time ago, so I'm assuming it was lost in transit somehow. Got in touch with them only recently, so I'm sure it'll get here eventually. Looking forward to it in any case!