On Addressing the Puzzle of Extreme Income Inequality: A Response to Agarwal and Holmes

Tsui, Enderle and Jiang offer their response to Agarwal and Holmes's contribution to the dialogue on income inequality. They provide some clarifications of possible misunderstandings by them of their essay titled, Income Inequality in the United States. Particular focus is given on the three major objections raised by Agarwal and Holmes to the ideas in their essay. These are the idea that heterogeneity in ability and motivation is the primary of not the only cause of income inequality, that the government should not be involved in reducing income inequality in order to protect political equality, and that it is more useful to study poverty, income mobility, and value creation.