Despite many learned men, some economists and President Obama opining on the current "income inequality" in the U.S., I believe the analysis has overlooked one important point.
That which is abundant has a marginal cost that approaches zero. For example, Google has made information abundant or abundantly available at a cost which approaches zero. Much of labor is abundantly available thanks in part due to globalization. If you do not like the price of labor in Detroit, the same work can be done by a worker in Bangladesh, Rwanda, etc. Adding to the abundance of labor is the increasing sophistication of artificial intelligence (AI) and other facets of computerization that reduce the number of jobs that require value added from thinking or critical thinking to be more accurate. Effectively globalization combined with computerization have created an abundance of low value-added labor such that the marginal cost of such labor is declining and approaching zero. Such a decline in the value of labor would explain the concentration of income in the hands of those still able to provide critical thinking and value-added. However, these fortunate souls still providing value-added may also be looking at numbered days. In the next 20-30 years many of today's professionals will be also be displaced by AI, leading to potentially greater income inequality.
The displacement of high paying jobs by AI is inevitable. Rather than focusing discussion on a concept from the late 1800s, "income inequality", we should be debating the principles and concepts for a new society where machines produce most of the value-added. In this debate we should also include a discussion of what role government needs to play. I suspect that government could be substantially down sized with AI devices replacing many government workers who contribute very little value-added.
The chances that the children in Washington will ever have this discussion has a probability that also approaches zero. However, the private sector is increasingly realizing that the current situation complexity is beyond the ability of government to address and correct. While the private sector has historically been reluctant to take a leadership role in social and political issues, I think we will see the private sector act out of necessity.
In summary, income inequality frames the wrong question. The better question is how do we see society in the future when many more jobs are done by AI devices.
(This video explains how abundance leads to a marginal cost of zero.)
The same conclusion is derived from alternative reasoning by Thomas Piketty in his new book "Capital in the 21st Century".
