UYal's blog

🔹 1. A Curve That Reads the World

Some people work endlessly to make a living.
Others grow richer in their sleep.

There’s a simple yet powerful way to visualize this imbalance:
The Lorenz Curve.

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🔹 2. What Is the Lorenz Curve?

The Lorenz Curve is a graph used to represent the distribution of income or wealth within a society.

• X-axis: Cumulative share of the population (from the poorest 0% to the richest 100%)
• Y-axis: Cumulative share of income or wealth they hold
• If everyone had the same income → a straight 45° line (perfect equality)
• In reality → a downward-bending curve (the more it bends, the greater the inequality)

If we added a Z-axis for time, the curve would look like it’s sinking over decades.

• Gray dashed line: Perfect equality
• Orange curve: Realistic inequality (mostly labor-based income)
• Red curve: Deepening inequality (compound-based wealth over time)

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🔹 3. Why Does the Curve Bend More Over Time?

✅ (1) Compound Returns – Time Works for the Rich
Assets grow themselves: interest, dividends, rent, capital gains…
The wealthy don’t just work—they let money work for them.

Meanwhile, laborers have a limited resource: their own time and body.

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✅ (2) Shift from Labor Income → Capital Income

• In the past: People lived mainly on wages
• Now: A growing share comes from assets – stocks, real estate, financial products
• But capital income is only available to those who already own capital

This shift widens the gap naturally.

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🔹 4. The Lorenz Curve Is Sinking Deeper

What was once a gently curving line has now become much more concave.
Why?

• Compound interest
• Asset-based income
• Intergenerational transfers (inheritance, family wealth)

And to quantify this inequality, we use a number:
👉 The Gini Coefficient.

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🔹 5. Inequality in Numbers, Not Just Feelings

The Lorenz Curve is not just a curve.
It reflects your time, your starting line, and your chances.

In the next post, we’ll dive into the Gini coefficient—
how to measure inequality in numbers,
and how much inequality a society can take before it breaks.

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