Optimist Economy Podcast

Episode: $79 Trillion Worth of Income Inequality
Hosts: Kathryn Anne Edwards & Robin Rauzi
Date: January 27, 2026

Episode Overview

In this Season Two opener, economist Kathryn Anne Edwards and co-host Robin Rauzi take a deep dive into the roots, measurement, and real-world meaning of income inequality in the United States, centered around the attention-grabbing statistic that $79 trillion in income over the past 50 years "should have" gone to the bottom 90% but instead ended up with the top 1%. The episode explores what this figure actually means, the pitfalls of inequality measurement, why the statistic went viral, and what future solutions and optimism can be found amid these gloomy numbers.

Key Discussion Points & Insights

1. Setting the Stage: Announcements & Inside Jokes

• [00:33] Recap of hiatus and show updates: hats, a growing merch store, welcoming new listeners to the show's running jokes and "optimist vocabulary."
• Retcons (“retroactive continuity”): Corrections from previous episodes, including Social Security payroll tax details—"I was wrong for, like, months about who Max was… I like to advertise just how wrong I got a student's name." (Kathryn, [04:15])

2. Terms & Conditions – Defining Pareto, Utility, and Economic Jargon

• [05:53] Robin looks up “Pareto Principle” (the 80/20 rule); Kathryn discusses Vilfredo Pareto and the principle’s roots in describing inequality.
• Explores the difference between Pareto distribution and Pareto improvement (“making someone better off without making anyone else worse off”).

"His name is attached to a lot of what he did. And one of them is this distribution, and we think of him in inequality and the other is this idea of how he worked with preferences and utility… We don't have happiness, we have utility." (Kathryn, [07:25])

3. The Big Pilcrow: Anatomy of a $79 Trillion Talking Point

[09:42]

a. Origins & Virality of the Statistic

• The $79 trillion figure is frequently cited by politicians and commentators (Bernie Sanders, Robert Reich, Heather Cox Richardson), often incorrectly.

"I wrote that report that it's based on… I'm still shocked how famous this number is and what kind of life it has had..." (Kathryn, [10:47])

• Kathryn’s favorite media gaffe:

"Rolling Stone… he keeps pushing me and pushing me and he's like, but where did the money go? Like, where did the income go? And I was like, the top ate it." (Kathryn, [12:28])

b. How the Statistic Was Created—Measurement is Everything

• The process of measuring inequality is filled with methodological choices—who to count, what kinds of income to include, whether to measure pre- or post-tax dollars, etc.

"When you're looking at income over time, you are entering a minefield… Any one of these choices, if you go in the other direction, you're gonna have a different result in the end." (Kathryn, [14:25])

• The pitfalls of "top coding"—public survey data caps high incomes for privacy, making it impossible to accurately measure what's happening at the very top.

"Most of the income growth has happened above the top code… All the action is above what we can measure." (Kathryn, [20:40])

c. Data Repair: Combining Survey & IRS Data

• Solution: Merge public survey data with tax records using the World Inequality Database to estimate what high earners really earn.

4. The Counterfactual: What If Incomes Grew With the Economy?

[22:44]

a. Explaining the Counterfactual

• The study imagines an alternative history: what if everyone’s income grew at the same rate as overall economic growth since the 1970s?

“The reason why we chose growth in the economy is… is the economy and its growth generating income growth for everyone in it?” (Kathryn, [24:12])

• Incomes tracked with GDP after WWII, but diverged starting in the late 1970s.

b. Concrete Findings

• Median full-time, full-year prime-age worker:
  • 1975 (inflation-adjusted): $42,000
  • 2018 (actual): $50,000
  • 2018 (if kept pace with GDP): $92,000
• Top 1% would have earned $200K less; instead, rapid income growth benefited only them.

"If you look at full time, full year prime age workers… if that had grown with the economy… they'd be making a little over $90,000 a year. And instead they're making around $50,000 a year." (Kathryn, [25:07])

• The missing income: Adding the difference for all Americans, year after year, results in $79 trillion lost to the bottom 90%.

"The first time we published the report, it was around $50 trillion. And then when we updated it later, it was around 70… 80 trillion." (Kathryn, [28:19])

5. Breaking Down Group Inequality

• The report dissects inequality by education, race, gender, and geography.
• High school or less-educated workers, rural residents, and certain racial groups lost out disproportionately.
• Women's income growth was mostly through greater work hours, not higher pay per hour.

"For people who had a high school degree or less… not just did their income not keep pace with just inflation… sometimes they didn't even… they were really losing ground." (Robin, [32:32])

6. Policy Implications and the “Optimist” Perspective

[37:48]

• Flawed economic “common sense” dominated for decades: economic growth benefits all (trickle-down).

"For so long, the history was we just need more business growth. We just need more tax cuts…" (Kathryn, [38:59])

• Kathryn’s hopeful take: The fact that we’re openly talking about the problem is the first step—"We are not at the beginning of this problem, we are at the end of it."

“You cannot design a good solution if you don't adequately and correctly diagnose the problem… At least it's seen as a problem.” (Kathryn, [40:07])

Notable Quotes & Memorable Moments

• “The top ate it.” (Kathryn, [12:28])
  Her now-famous, tongue-in-cheek quote about where lost income went.

• On misleading talking points:
  “I don't think anyone has ever said it correctly. No one says the number correctly. I mean it's income, not wealth. It's a cumulative total over time, not an annual amount.” (Kathryn, [11:45])

• On the purpose of counterfactuals:
  “We have differences. We have a distribution. The real question is, when is that bad?... When does it become detrimental? Hard to measure, difficult to see.” (Kathryn, [23:12])

• Tough on “we can’t have nice things” logic:
  “We can't have nice things applied to people at the middle and bottom. They don't have to follow the same rules at the top. They just get to earn more money.” (Kathryn, [30:41])

Timestamps for Key Segments

• [00:33] – Season Two intro & hat store news
• [05:53] – Pareto Principle & economist terminology explainer
• [09:42] – "Big Pilcrow": $79T figure’s origin, virality, and misconceptions
• [14:25] – Measurement minefield: Defining income and inequality
• [19:56] – “Top coding” problem and IRS/tax record workaround
• [22:44] – How the counterfactual works—explaining the “what if” scenario
• [25:07] – Core findings: Median earnings if GDP-shared, group breakdowns
• [32:22] – Granularity: Inequality by education, race, gender, region
• [37:48] – Optimism & the shift to recognizing the problem
• [40:44] – Executive Orders (humorous listener & host rules)
• [43:04] – Spiritual Sponsors (pop culture, life during postpartum)

Final Reflections

Kathryn and Robin combine accessible explanations, self-deprecating humor, and rigorous economic insight to dissect one of America’s most cited and misunderstood inequality statistics. The hosts clarify common misconceptions, confront the complexity of measuring economic outcomes, and ultimately affirm that awareness and open discussion of inequality is the necessary first step toward lasting solutions.

Links:

• [Original $79 trillion RAND paper] (see episode show notes)
• [Carter Price's 2023 Update] (see episode show notes)