The discussion over economic inequality in the United States seems to have captured the public imagination, at least on the political left. President Obama has called it “the defining challenge of our time,” and Secretary Clinton has deemed it “a cancer.” Given the shorthand manner in which politicians sometimes refer to policy matters it is not always clear if Obama and Clinton are referring specifically to inequality, the ratio or distribution of wealth in society, or to raw poverty—the fact that millions of Americans live in impoverished circumstances. There is a keen difference in which of these two approaches one takes to the challenge of alleviating misery. Here, I’ve devised a simple test to understand the issue:

Scenario one: A two-class society.  Imagine a society in which half the population earns $15,000 a year and the other half earns $150,000 a year.  In other words, half are in poverty and half are doing well.  Consider some permutations in this scenario.