This raises a bigger question: do these changes in the US distribution of incomes matter? I would suggest that they should do so even to non-egalitarians, for three reasons.

First, income mobility does not offset the rising inequality. As the two Northwestern university authors note, “not only are half the penthouse dwellers still there a decade later, but the differential opulence of the penthouse keeps increasing relative to the basement”. The chances of leaving the basement are low. Moreover, intergenerational opportunity is also adversely affected.

Second, the failure of an economy to generate rising incomes for a majority over decades causes frustration. US individualism may contain this reaction. Most cultures cannot.

Third, politics inevitably become more populist: the US “right” has become “pluto-populist” – an alliance of free-marketeers, nationalists and social conservatives – and the “left” is increasingly “protecto-populist” – an alliance of protectionists, dirigistes, social liberals and anti-nationalists. This endangers both intellectual coherence and sensible policymaking.

So long as the distribution of incremental incomes remains as skewed as it has been in recent decades, politics in the US are likely to remain at least as fractious as they are today. Moreover, so long as this trend continues, many other high-income countries will reject the US economic model. No simple solutions exist. But the return of the “gilded age” is a big event, for the US and the world.

An interesting article for one of the high priests of the conventional wisdom.