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Rich get Richer: Income Inequality

The wealth gap in America has become a pressing issue, drawing attention from both politicians and economists, but it is only getting worse as we debate over which solution to implement. One major cause to consider is the higher investment returns of the wealthy. The article focuses not on the income equality established by the wealthiest and poorest Americans, but between the haves and have-mores. The argument is that the wealthiest one percent generally has more valuable investments in the stock market than the middle class. This makes sense because the rich can afford to lose more and take risks. Between 2010 and 2013, the middle class was largely selling investments while the top one percent was growing and maintaining its assets. As a result, the rich grew richer and richer while the middle class became relatively poorer.
Other types of investment the article did not mention are the investments in molding your personal worth. For example, getting a PhD, taking private classes, taking time off to study and learn a specialized skill. It is much easier for wealthier people to put aside work and invest in these activities because they already have money and not worried about it. Therefore, it is much easier for the rich to invest in these things. On the contrary, the middle class must keep working their $100k salary job to get by. As a result, the rich, by acquiring new skills, will eventually be worth more than the stagnant middle class.
The situation described here is analogous to the rich get richer process. The individual people represent the nodes in the model and the links directing to each node can represent the return investment of the person’s assets. As we run through the process, we notice that nodes with more inlinks than others will keep receiving more inlinks. It’s not that the other nodes are bad, but in this network, they are relatively unpopular and they will continue to be this way, defining the cause for income inequality.

For further reading, visit

http://www.cnbc.com/2014/11/18/heres-why-the-rich-do-get-richer.html

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