Economists Ignored Inequality for Years. Now They Can’t Stop Talking About It.

When the economist Angus Deaton moved to the United States in 1983, he was “in awe,” as he puts it in his new book, “Economics in America.” Born in Scotland and educated at the University of Cambridge, he remembers the swell of optimism he felt upon arriving at Princeton University. It was a “splendid place to work,” especially for someone who had been poor enough as a child to appreciate the measure of security provided by an “American salary.”

But Deaton was immediately struck by the dark side of the American dream. Outside campus, the land of opportunity also turned out to be “the land of inequality.” The American safety net was meager to nonexistent. Having grown up in the early days of Britain’s welfare state, Deaton “saw the government as my friend.” He recoiled when one of his new colleagues declared that “government is theft.”

Deaton’s arrival in the United States happened to coincide with what the British economist Anthony B. Atkinson called the “Inequality Turn.” The “great compression” of wages during the previous decades was coming to an end, buffeted in the 1970s by oil shocks and stagflation. By 1983, the Thatcher and Reagan governments were pursuing a neoliberal agenda of tax-cutting and deregulation. For the middle classes, consumer debt fueled a mirage of continued prosperity, but inequality was widening. The economics profession had yet to catch up.

And catch up it has. A spate of books detail a new understanding of inequality, showing how this intellectual transformation is a rich story in its own right. In “Visions of Inequality,” a history of the changing ways economists have broached the subject since the French Revolution, Branko Milanovic notes a “long eclipse of inequality studies” from the mid-1960s to around 1990. With some exceptions, including work by Latin American economists, declining inequality had lulled the discipline into a smug sense of complacency. Both sides in the Cold War wanted to pretend that their systems had solved the problem once and for all.

Milanovic, formerly the lead economist in the World Bank’s research department and the author of several book about global inequality, describes how Western economists were in thrall to an unholy combination of extremely simplistic assumptions and extremely complex mathematical models: “It was almost as if they wanted their model world to look as different as possible from the world where people lived.”

This idealized approach was eventually overwhelmed by the unruly reality, with the neoclassical economist cloistered in his ivory tower, contemplating his quaint abstractions, becoming the stuff of caricature. The financial crisis of 2008, Occupy Wall Street, the 2014 publication in English of “Capital in the 21st Century,” the 700-page best seller by the French economist Thomas Piketty: Milanovic shows how inequality went from a subject “hovering in the background” to a pressing issue at “the forefront of people’s consciousness.”