Skip to content
Subscriber Only
Businessweek
Economics

The Gatsby Curve: How Inequality Became a Household Word

Two French economists plotted the income gap. Gatsby made it famous

Alan Krueger stuck his head into the office in Washington, D.C., where the Council of Economic Advisers keeps its pool of research assistants and offered a deal. Krueger, then the council’s chairman, needed a name for a graph. He offered a bottle of wine to the researcher who could come up with the best one. The winner: “The Great Gatsby Curve.” That was in 2011. Krueger admits now that he’s not sure he ever delivered the wine.

On Dec. 4, President Obama gave a speech about income inequality in Washington. A family in the richest 1 percent, he said, has more than 288 times the wealth of the median family. The likelihood that a child can escape her parents’ circumstances is lower in America than in “most of our wealthy allies—countries like Canada or Germany or France.” Although the president didn’t pull out any graphs, Obama borrowed two ideas for his speech that make inequality easier to understand: the 1 percent and the Gatsby Curve. In part, the president—and the pope in Evangelii Gaudium, an Apostolic Exhortation released on Nov. 24—are able to talk about income inequality because two groups of economists spent the better part of a decade coming up with easily digestible ways to describe it.