Changes in Income Distribution during the Great Depression

Changes in Income Distribution during the Great Depression

Changes in Income Distribution during the Great Depression

Changes in Income Distribution during the Great Depression

Excerpt

This volume contributes significantly to our knowledge of the changes in income distribution. Is there a tendency for incomes to become more, or less equally distributed as time goes on? In particular, are short term fluctuations in general prosperity-booms and depressions -- accompanied by a change in the relative income shares of various population groups; and if so, in what direction? These questions call for thorough empirical study.

The ethical implications of such questions are clear; since Karl Marx or the biblical prophets we have felt uneasy about the concomitance of growing wealth and growing concentration of income. There are also economic implications, as changes in income distribution may mitigate or accentuate changes in prosperity itself. Under given conditions of technology and tastes a certain level of employment corresponds to each level of total demand for consumer and investment goods. And since profitable investments cannot be made in the absence of demand for final goods, employment cannot remain on a high level when consumers' demand persists on a low. The aggregate demand of consumers depends in turn not only on their total income but also on the share of those who out of an added income of a given amount, save little compared with the share of those who save much. The nonsavers are the poor rather than the well-to-do. Hence, changes in income distribution can affect employment and the severity of employment fluctuations. The presumable effect of income redistributions on economic stability has not been studied conclusively, even in theory. In a few passing remarks, Mr. Mendershausen shows that the theory would have to take into account how each individual's current savings are affected not only by his current but also by his past and his expected future income. The empirical study of fluctuations of individual income is all the more necessary. Figures on aggregate national income hide vital details of shifts in internal structure.

These details have their importance for the study of single commodity markets no less than for the study of total consumption and employment. The nouveaux riches and the anciens riches of the same current income level do not use their money in similar ways; no more than do the nouveaux pauvres and the anciens pauvres. Prediction of demand for a given commodity or group of commodities and a given level of total national income will have to be based, however roughly, not only on some assumed distribution of incomes . . .

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