This it?
http://www.technologyreview.com/featuredstory/531726/technology-and-inequality/
Frankly, I think that the data shows - relatively clearly - that inequality rises naturally with a rising economy. You can change the slope, you can artificially re-distribute, but you can't disconnect the two.
And, more importantly, the economy rises
faster than the inequality. Meaning that the scenario you outlined (though not necessarily the proportions themselves) is true: in a rising economy, everyone sees gains, it's just that the rich gain faster.
That has nothing to do with whether it is "good" or "bad", but it is important for understanding how it works/why it exists.
People tend to think inequality is "bad" because it is an affront to their sense of fairness. That's all it is -- and it is beaten-in to them by politicians and, perhaps, upbringing that drove-into them that mindset. I was brought-up well-off, but my parents were frugal. I didn't have the best toys and was the only guy on the junior high wrestling team who wore sneakers instead of wrestling shoes (I did get a quality new trumpet before any of my peers though, but that was only because the starter one I got initially was such a piece of crap it really held me back).
What bothers me about the "debate" is that that it is being driven largely by dishonesty. We've been discussing that for years here:
https://www.physicsforums.com/threads/income-wealth-and-statistics.545541/
https://www.physicsforums.com/threads/we-should-give-free-money-to-the-homeless.730492/page-2
[discussed in detail in the above threads] "The rich get richer while the poor get poorer" is a common refrain of politicians. It's false, at least in the way that most people intuitively understand what "richer" and "poorer" mean. But the clever, ambitious, dishonest politician doesn't need to accept that. All they need to do is re-define "poverty" to be tied to inequality. Then they can have their cake and eat it too: the poor make more money, can buy more stuff, have less food insecurity, but we can still say they are "poorer" because Bill Gates is getting richer
faster. That's exactly what the OECD did for measuring poverty.
Of course, while that is a useful lie, it is also one that its tough to keep going. When the economy does well, poverty goes up. When the economy goes poorly, poverty goes down. Even impressionable, jealous non-rich people won't buy something like that. So they had to add a correction to the re-definition to avoid that problem at certain times.
From your article:
Since the 1950s, economics has been dominated by the idea—notably formulated by Simon Kuznets, a Harvard economist and Nobel laureate—that inequality diminishes as countries become more technologically developed and more people are able to take advantage of the resulting opportunities.
It's very surprising to me how naive that is. Being able to take advantage of opportunities has nothing to do with "equality". That's mobility, not equality. It doesn't change the fact that a janitor is still a janitor and that's a low-paying job.
Worse, mobility has nothing to do with technology -- if anything, they are inversely corellated. Computers are expensive and a poor kid might not have a computer at home, so that technology would work to separate kids by income. More important though is things like quality, government provided education. That is also independent of technology (and something we do poorly because of poor laws).
Next sentences:
Many of us suppose that our talents, skills, training, and acumen will allow us to prosper; it is what economists like to call “human capital.” But the belief that technological progress will lead to “the triumph of human capital over financial capital and real estate, capable managers over fat cat stockholders, and skill over nepotism” is, writes Piketty, “largely illusory.”
Here, again, they mix together separate things. Yes, if you have talents and you acquire skills, training, and acumen you will prosper. The implication that you won't is totally nonsensical. There is nothing that corellates better to income than education. But again: still nothing to do with technology.
The article is a little tough to read so I'll have to finish later. But my take on the issue:
1. We allow politicians to frame issues, which often means the questions we care about are posed as lies. We need to stop accepting that. Issues need to be discussed with honesty in order to understand them. So, more specific:
2. We need to stop accepting being lied to about poverty. Poverty barely exists in Western countries. Whether the "real" rate is 2% or 5% I'm not sure, but it isn't helpful for understanding the issue to define someone as "poor" because they make less money than 2/3 of their friends. Similarly
3. We need to stop accepting being lied to about inequality. Inequality isn't poverty. If I give you $1,000 and give the person next to you $2,000, you just got richer, not poorer. If people start recognizing that a rich person getting richer does
not mean they are going to have more trouble making ends meet.
Sorta similar to (but backwards from) the politicians who are selling these lies, I think these issues are among the most important issues facing us right now. Much of the reason why our economic mobility isn't as good as it should be and we have perpetually under-achieving classes is that people are belieiving these lies. They believe that no matter how hard they try, they can't get ahead, so they don't try. If, instead, we convince them that they
can get ahead (because it is true), more people will try and will succeed.
Now, none of that addresses your question. That was all about the framing of the issue. In order to properly answer the question, we first have to ensure we're playing with an honest/full deck and analyzing the true reality. So:
Suppose I could wave a magic wand, and double the income of everyone in the bottom half, and triple it for everyone in the top half. This would benefit everybody, at the cost of increasing inequality. Would this not be a good thing?
Well, mathematically that is a "positive" thing, but "good"? That's a matter of judgement/opinon.
Let's start with the opposite: is it a bad thing? I would argue that an improving situation can't really be called "bad". Indeed, in a broader sense, I'd say that life overall in the west is spectacularly "good" by historical standards. That's not exactly what you were asking, but maybe that's the point...
What if it could be
better? What if a different set of laws were possible that enabled the bottom half's income to rise by 2.5x while the top half's increases by 3x? Mathematically, that would have to be considered "better". Do we have that choice?
See, that's what is missing from the dialogue because so much of the debate is framed with lies. If we accept the fact that inequality rises with rising prosperity for everyone, then we can start exploring the difference between good, better and best options: how different options affect the slopes of all of those "good" options. Or, even, we can discuss the option of trading some of that prosperity for more equality if we feel like that would be a nice thing to do.
But maybe I'm jumping ahead of what kind of dialogue is really possible. As long as people keep believing "the rich get richer while the poor get poorer" and political organizations screw with statistics and definitions to make that "true", it is tough to have a serious dialogue about what we can really do.
