Branko Milanovic

These are the issues that some dominant segments of public opinion makers have tended to discard, all too easily, I believe, by arguing that all or almost all inequalities are market determined and as such should not be the object of discussion.

The market economy is a social construct, created, or rather discovered, to serve people, and thus raising questions about the way it functions is fully legitimate in every democratic society.

This way of looking at income distribution through the prism of social classes did not change much with the key turning point in the history of economics, the replacement of classical “political economy” by the “marginalist revolution” that started around 1870 and focused on individual optimization rather than on broad economic evolution of social classes, nor did it change later with the synthesis of the two strands (classical and marginalist) under the title of “neoclassical Marshallian economics” (from the Cambridge economist Alfred Marshall) and its establishment in the mainstream position. It was only in the early 1900s that the distribution of income among individuals (not among classes) attracted the attention of Vilfredo Pareto, a Franco-Italian economist who taught at the University of Lausanne in Switzerland. (His contribution is highlighted in Vignette 1.10.)