One of the central issues for the topic of economic inequality is how much of its legitimate. For instance, few bat an eye at the "inequality" of a person with 25 years experience in a particular occupation making more than a person with 5 years. Experience counts for something. But what if there is an unequal distribution of skill and ability within the human population? Unequal reward would be justified would it not? Is their a skill distribution pattern that tends to prevail across a variety of human endeavors including economics? Mark Perry raises this issue in an interesting way by comparing Olympic medal distribution with income distribution.
Carpe Diem: Share of Olympic Medals = Share of Income
The chart above shows 2006 income shares from the IRS, and medal shares at the 2004 Summer Olympics. Notice the amazing similarity? For example, the top 5% of U.S. taxpayers earned 36% of all income, and the top 5% of the 74 medal-winning countries (the top three: U.S., Russia, and China; and 70% of fourth place Australia's points to total 3.7 countries) won about 33% of the total medal points (598.3 out of 1832.
Perhaps any competitive process, whether it's athletics or the economy, distributes results (medals, income) unequally? And perhaps that unequal distribution, whether it's income or Olympic medals is a natural, expected outcome of any competitive process?
The Olympic medal winners are respected and admired, despite the inequality of outcome in those competitions. We should pay the same respect to the winners of our free enterprise system - the successful workers at the top of our economic ladder.
