Income and Wealth

Income and Wealth

Income and Wealth

Income and Wealth

Synopsis

Income and wealth have long formed an important focus for economic research, with economists keen to answer the following kinds of question: Why do we pay people who work equally hard different levels of income? Why are some workers more motivated than others? How does the market economyprovide jobs that meet the expectations of experienced workers? What is the relationship between economic growth and income distribution? Why do people save? Are there any market forces which restrain the tendency towards cumulation of wealth by individuals and enhancement of inequality overgenerations?In this book, Tsuneo Ishikawa systematically examines and evaluates the economic arguments arising from these questions with the overall aim of explaining how income and wealth are produced and distributed. Using empirical data from the US, the UK, and Japan, he examines both the neo-classical andlabour market approaches to income and wealth distribution, assesses the circumstances in which each is most appropriate, and examines to what extent they can be integrated. Unusually, Ishikawa not only analyses income distribution as the consequence of economic activities, but also focuses on theprocess of obtaining income---especially on how the content of different jobs can influence employment and income distribution. In the real market economy, the tax system, social welfare, and the provision of public goods all contribute to income redistribution. Ishikawa acknowledges this, but argues that a correct understanding of how the labour market produces differences in income and wealth is vital for informed study ofthe issue of income redistribution. He suggests, furthermore, that a full understanding of income and wealth in developed market economies may be beneficial in dealing with problems of income distribution in developing economies, while drawing attention to the need for an internationalredistribution of income and wealth.

Excerpt

Income and wealth, these are the fruits of our economic activities and, in turn, are the foundation of future economic activities. the aim of this book is to explain systematically how income and wealth are produced and distributed, a subject which is of fundamental importance in economic theory.

The distribution of income and wealth is determined in a market economy as a part of price formation. Given the varied abilities and preferences and also physical resources that people possess, we may conclude that income is merely a reflection of market equilibrium and may not require further discussion. Yet economists have long been interested in the study of income and wealth as an independent field, because they have wanted to answer the following basic questions that arise in our daily lives.

Why do workers who work equally hard obtain different incomes? Is this fair?

Why do people make different levels of effort? Is it a matter of preference? Is it possible that difference in job content influences the motivation of workers?

Through their experience of work, people expect to obtain many intangibles: they acquire new knowledge and new skills, find out who they are, establish confidence in themselves, and receive trust and respect by fulfilling social responsibilities. How does the market economy provide the jobs that meet the above expectations? Also, is it possible that the market does not provide the opportunity for these jobs equally among workers?

Does economic efficiency necessitate the uneven distribution among workers of the jobs that are desirable in the sense described above?

What is the relationship between economic efficiency or economic growth and income distribution?

If workers sometimes engage in co-operative and collective activities without competing with each other, what is their reason for doing so? Moreover, what consequence does such action have on the allocation of economic resources and income distribution?

Why do people save?

If those who have more income save more than those who have less income, does the difference in wealth not increase in a cumulative way and does not an extremely unequal society emerge?

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