The single number economists use to measure global inequality

The Geometry of Inequality

To understand how economists arrive at a single inequality score, one must first look at a graphical tool known as the Lorenz curve. Introduced by American economist Max Lorenz in 1905, the curve charts a population along a graph. The horizontal axis represents the cumulative percentage of the population, ranked from the poorest individual to the richest, running from zero to one hundred percent. The vertical axis tracks the cumulative percentage of total national income earned by that population. If every person earned the exact same income, the resulting plot would be a straight diagonal line rising at a forty-five-degree angle: twenty percent of the people would earn twenty percent of the income, and sixty percent would earn sixty percent. In economic theory, this straight path is called the line of perfect equality.

In any real-world economy, the actual distribution dips below that straight diagonal. Because higher earners capture a disproportionate share of total revenue, the poorest thirty percent of the population might account for only ten percent of total income, causing the curve to sag downward. The Gini coefficient is simply the mathematical measurement of that sag. Graphically, it calculates the area between the straight line of equality and the bowed Lorenz curve, and divides that space by the total triangular area beneath the line of equality. If income is distributed with complete equality, the bowed curve matches the straight line, the gap vanishes, and the coefficient is zero. If one single person captures all national income while everyone else earns nothing, the curve flattens entirely along the bottom axis before spiking at the very end, maximizing the gap and producing a score of one.