So now that we've established that income inequality has been on the increase in many parts of the world. Although at some other parts of the world it has been declining. Let's take one step back and think about whether there is an optimal level of inequality in the world. Because you see a lot of people assume that the lowest possible level of inequality would be the optimal. But some people disagree about this. So in another words, is too little inequality good? Is too much inequality necessarily bad? And, in other words, is there an optimal level of inequality in the world? Well, the answer of course depends on a number of considerations. First, are you adopting an economic view? Or do you want to make a political argument? Or perhaps a moral one about inequality? Secondly, what's the impact of inequality on human behavior? And also whats the effect of inequality on financial markets or other types of markets such as for example consumer markets? Let's examine the case of too little inequality. Imagine a world, or an economy, in which levels of, for example income inequality were extremely low. Well some economists and policy makers and politicians argue that when we have very little inequality in terms of income. Or not enough differentiation in the rewards that people get for their jobs. Then what we see is that the incentives to invest and the incentives to acquire education or to work hard are undermined. And that's why some people, some experts, argue that extremely low levels of inequality maybe counterproductive. Now, let's consider the other extreme case, too much inequality. Clearly, we've seen over the last few years in many parts of the world. That too much inequality leads to less investment in education because people get discouraged. It also tends to undermine the work ethic. People end up spending less effort on their jobs. There's the possibility for more social conflict. And there's of course more political mobilization and the potential for political revolutions. As we saw in the Arab Spring or here in the United States or in Europe, the so called Occupy Wall Street. Or occupy, you know, the financial market's movements. So in other words, too much inequality has both economic and political consequences. And experience, our experience from the last five or ten years. Clearly demonstrates that too much inequality is certainly very bad for the economy. Is very bad for the political system, and is very bad for society. >> I'm in Davos, Switzerland this is where the world economic forum meets once a year. It's a meeting of global leaders from the economy, business, politics, culture, education. It's a meeting that has been heavily criticized for being elitist. >> Now we get to the last question that I posed at the beginning, is there an optimal level of inequality? Well, one can certainly calculate what might be for different countries around the world. The optimal level of inequality, so that you have incentives for people to work hard. But everybody gets a fair share of the income. But the point here is that inequality is the result of very complex forces. So it's very difficult to plan or to implement an optimal level of inequality even if we could calculate it in any precise way. Also keep in mind that inequality patterns shift very quickly over the course of economic developments. And that makes planning for an optimal level for inequality really hard. But most importantly the argument that I want to make is that the problem with inequality or rising inequality is that it tends to squeeze the middle class. And that's going to be the topic the of the next segment.