Revisit: The utility theory and consumption function

Objective:  The objective is to clarify why GDP grows steadily while the real wage rate falls resulting in negative and enlarging individual inequality.  Even if consumption increases based on utility theory, why is inequality per capita not indispensably mitigated?  What are the true causes under the market principles that express vertical prices .

Data and methods: The data were integrated from multiple sources including the “International Financial Statistics Yearbooks,” IMF, and/or SNA data by country.  A purely endogenous methodology was used where there is no room for externalities and exogenous factors cannot be inserted, regardless of differences in all aspects of philosophy, taste/preferences, culture, history, models, systems, and behaviors.

Results:  We observed enlarging individual inequality or worsening income redistribution by country and/or area.  By using the above method, we finds that the true cause derives from the SNA structure (between balance of payments and the central government) and private sector differences (between net investments and savings).  Deficits, debts and also households directly affect these results.

Politics and economies are linked with money-making but, this is not a good excuse or reason.  The above results are natural and cannot be blamed on human activities.  Further, the method is free from any of the factors mentioned above, as shown by the author’s six neutrals under perfect competition.  Perfect competition in reality is newly depicted in the author’s long-term GDP-based database spanning 1960-2015 for 85 countries.

Evidence shows no inflation or deflation with a maximized rate of returns/profits and with minimized net investment and, given no regulation and laissez faire, only when leaders are willing to make brave decisions.