{"id":8144,"date":"2026-05-03T10:30:26","date_gmt":"2026-05-03T05:00:26","guid":{"rendered":"https:\/\/sketharaman.com\/blog\/?p=8144"},"modified":"2026-06-04T22:05:28","modified_gmt":"2026-06-04T16:35:28","slug":"law-of-conservation-of-inequality","status":"publish","type":"post","link":"https:\/\/sketharaman.com\/blog\/2026\/05\/03\/law-of-conservation-of-inequality\/","title":{"rendered":"Law of Conservation of Inequality"},"content":{"rendered":"<blockquote><p>The law is erected on many fictions and perhaps the (biggest fiction of them) &#8230; all is that humans are rational. &#8211; Defence Attorney Sandy Stern, <em>The Last Trial<\/em> by Scott Turow, pp 529-530.<\/p><\/blockquote>\n<p>Like law, like economics.<\/p>\n<p>Economics is grounded on the assumption that human beings behave in a rational manner. Well, humans often don&#8217;t, which bestows economics with a unique distinction according to NNT:<\/p>\n<blockquote class=\"twitter-tweet\">\n<p dir=\"ltr\" lang=\"en\">Some fields work in theory but not in practice. Some fields work in practice but not theory.<br \/>\nThe uniqueness of economics is that it works in neither theory nor practice.<\/p>\n<p>\u2014 Nassim Nicholas Taleb (@nntaleb) <a href=\"https:\/\/twitter.com\/nntaleb\/status\/2050559706167427389?ref_src=twsrc%5Etfw\">May 2, 2026<\/a><\/p><\/blockquote>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<p>Equality is another foundational assumption of economics.<\/p>\n<p>Inequality will scuttle economists&#8217; models &#8211; and render them jobless. Therefore, economists decry inequality as evil.<\/p>\n<p>To drive home their point, many economists spread FUD (<em>Fear, Uncertainty, Doubt<\/em>) that inequality will lead to public revolt and social unrest.<\/p>\n<p>I disagree. There&#8217;s no recent history of rebellion caused by economic inequality (<em>subject to one caveat that we&#8217;ll see shortly<\/em>). That&#8217;s because of two reasons:<\/p>\n<ol>\n<li>Lack of motivation<\/li>\n<li>Lack of agency<\/li>\n<\/ol>\n<p>Let me explain.<\/p>\n<p><strong>Lack of motivation<\/strong><\/p>\n<p>Most normies view inequality as the natural order of things in the world. Accordingly, human \/ consumer behavior maxis don&#8217;t think of inequality as evil. As a marketing professional, I&#8217;m one and I don&#8217;t.<\/p>\n<p>Right from the start of my professional career, I&#8217;m exposed to power law curve behavior in many areas e.g.<\/p>\n<ul>\n<li>5% of cold calls lead to 100% of deals<\/li>\n<li>20% of customers contribute 80% of revenues<\/li>\n<li>20% of SKUs drive 80% of profits<\/li>\n<li>10% of Americans own 90% of stocks<\/li>\n<li>2% of the 500 companies on S&amp;P 500 represent 40% of its value<\/li>\n<li>10% of Americans drive 50% of US retail spend.<\/li>\n<\/ul>\n<blockquote class=\"skr-bq-noline-right\">\n<div style=\"background-color: #fafafa; padding: 15px 30px;\">The rich has 14.4x the income of the poorest but only 4.3x the consumption. Therefore, you can eliminate a vast majority of inequality if you switch from measuring inequality by consumption instead of income. &#8211; <a href=\"https:\/\/capitalgains.thediff.co\/p\/measuring-inequality?_bhlid=07f68067c7e3ca28346ea861231ee1a7850da60a\" target=\"_blank\" rel=\"noopener\"><em>The Many Mistakes you can Make when Measuring Inequality<\/em><\/a> by Byrne Hobart.<\/div>\n<\/blockquote>\n<p>Per my favorite MAGA writer <a href=\"https:\/\/capitalgains.thediff.co\/p\/measuring-inequality\" target=\"_blank\" rel=\"noopener\"><strong>@byrnehobart<\/strong><\/a>, there&#8217;s tons of athletic inequality, beauty inequality, etc. in the world but it&#8217;s not common for normies to break atheletes&#8217; knees or throw acid on the face of beautiful people, so why is it obvious that the poor want to rob \/ kill the rich and launch a revolt to protest against inequality?<\/p>\n<p>Per my <em><strong>Law of Conservation of Inequality<\/strong><\/em>,<\/p>\n<blockquote><p>Inequality can neither be created nor destroyed, it can only be transformed from one form to another.<\/p><\/blockquote>\n<p>An example of transformation is from income \/ wealth inequality in capitalism to power inequality in communism \/ socialism.<\/p>\n<p>As Byrne Hobart points out, the only way to solve for income inequality is to create power inequality:<!----------START----------><!--BLOCKQUOTE, NO LHS LINE, GRAY--><\/p>\n<blockquote class=\"skr-bq-noline\">\n<div style=\"background-color: #fafafa; padding: 15px 30px;\">The rich world has debates over policies to mitigate inequality. &#8230; these are really policies to shift inequality, moving power from rich people to legislators. &#8230; if you&#8217;re worried about entrenched power, you should probably skew things towards wanting higher wealth inequality: last year&#8217;s Forbes 400 had 14 new entrants and 22 returning members, for an annual turnover of 9%. Meanwhile, in the last election cycle, 97% of incumbents who ran were reelected&#8230; The half-life of political power is longer than the half-life of financial power.<\/div>\n<\/blockquote>\n<p><!----------END----------><\/p>\n<p>And it&#8217;s not that power inequality of a communism \/ socialism has done a stellar job of resolving income inequality. On the rare occasion that it has worked as advertised, it&#8217;s by <em>lowering everybody&#8217;s income<\/em>. Not surprisingly, per capita income in capitalisms is way higher than that in any communist or socialist country.<\/p>\n<p><a href=\"https:\/\/gtm360.com\/blog\/wp-content\/uploads\/2026\/04\/CHURCHILL-QUOTE-CAPITALISM-SOCIALISM-fi.jpg\" target=\"_blank\" rel=\"noopener\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-14323 size-full\" src=\"https:\/\/gtm360.com\/blog\/wp-content\/uploads\/2026\/04\/CHURCHILL-QUOTE-CAPITALISM-SOCIALISM-fi.jpg\" alt=\"\" width=\"630\" height=\"296\" \/><\/a><\/p>\n<p>Another way to look at this is from the ground-up.<\/p>\n<p>My <strong>ABCD<\/strong> (<em>Ayah Bai Cook Driver<\/em>)&#8217;s networth is probably not many more orders of magnitude lower than mine than mine is lower than a billionaire&#8217;s. I&#8217;m not envious about a billionaire&#8217;s networth and am clear that the same system (Unbridled Capitalism) than enabled a billionaire to become what he is has also enabled me to become whatever I am. Therefore, I&#8217;ve no angst about inequality and no motivation to revolt against billionaires.<\/p>\n<p>Why should my ABCD think any differently?<\/p>\n<p>Some might argue that I&#8217;ve crossed a certain level of standard of living but my ABCD has not. But I&#8217;d counter that by arguing that standard of living is highly subjective. End of the day, what matters is a sense of satisfaction or contentment. That can happen at very low SoL or it might not happen even at a very high SoL.<\/p>\n<p><strong>Lack of agency<\/strong><\/p>\n<p>If you don&#8217;t agree with my above argument that the poor lack any reason to revolt against the rich, then, for the sake of argument, let&#8217;s assume poor are motivated to revolt &#8211; but I still maintain that there won&#8217;t be any revolts.<\/p>\n<p>That&#8217;s because revolt requires <em>agency<\/em> apart from motivation. If J6P (<em>see footnote 1<\/em>) had that much agency, he&#8217;d have generated more EVA (<em>Economic Value Added<\/em>), earned more money, and income inequality would&#8217;ve come down.<\/p>\n<p><strong>Capitalism v. Communism \/ Socialism<\/strong><\/p>\n<p>In the absence of motivation and \/ or agency, it&#8217;s not surprising that inequality in income or wealth has rarely caused unrest or rebellion among the <em>hoi polloi<\/em>.<\/p>\n<p>I must hasten to add that the above statement is only true in a capitalism \/ democracy but not in commie \/ soccie \/ marxie dictatorships.<\/p>\n<p>In a democracy, people have the agency to do anything they want to improve their lot. Because of that, J6P doesn&#8217;t blame the state or the rich for their underachievements and ensuing plight.<\/p>\n<p>But in a dictatorship, people have severe restrictions on freedom, so they&#8217;re <em>not<\/em> free to do anything they want to improve their lot (<em>see footnote 2<\/em>). As a result, it&#8217;s very easy for J6P to blame the state and the rich for their underachievements and ensuing plight.<\/p>\n<p>Not surprisingly, the most notorious of all rebellions in our lifetime have happened in autocracies e.g. <em>Arab Spring<\/em> in Middle East, <em>Tiannamen Square<\/em> in China. I&#8217;m hard pressed to think of a single case of economic inequality-driven unrest or revolt in modern times in democracies like India, USA, etc. If you know of any, please share in the comments below.<\/p>\n<p>End of the day, the choice is between even distribution of poverty and uneven distribution of prosperity. Choose wisely. There&#8217;s no Utopia in which there&#8217;s even distribution of prosperity.<\/p>\n<p><!-- START FOOTNOTES --><\/p>\n<div style=\"margin-top: 20px;\">\n<p><strong style=\"text-decoration: underline;\"><br \/>\nFOOTNOTES:<br \/>\n<\/strong><\/p>\n<ol style=\"margin: 8px 0 0 0; padding-left: 20px;\">\n<li><em>J6P<\/em> stands for <em>Joe Six Pack<\/em> or <em>Jane Six Pack<\/em> i.e. <em>Common Man<\/em> or <em>Common Woman<\/em>\u00a0respectively.<\/li>\n<li>Students are not free to pursue engineering in China. The government forces most students to join vocational training colleges (the equivalent of India&#8217;s ITI), thus condemning them to a lifetime of lack of upward mobility. To some extent, this is also true in Germany, where <em>Fachhochschule<\/em> students comfortably outnumber <em>Technische Universit\u00e4t<\/em> students.<\/li>\n<\/ol>\n<\/div>\n<p><!-- END FOOTNOTES --><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The law is erected on many fictions and perhaps the (biggest fiction of them) &#8230; all is that humans are rational. &#8211; Defence Attorney Sandy Stern, The Last Trial by&hellip;<\/p>\n","protected":false},"author":1,"featured_media":8144,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5,1],"tags":[],"class_list":["post-8144","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-b1-integrated-marketing","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/posts\/8144","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/comments?post=8144"}],"version-history":[{"count":2,"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/posts\/8144\/revisions"}],"predecessor-version":[{"id":8147,"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/posts\/8144\/revisions\/8147"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/posts\/8144"}],"wp:attachment":[{"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/media?parent=8144"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/categories?post=8144"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sketharaman.com\/blog\/wp-json\/wp\/v2\/tags?post=8144"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}