Inequality is very simply to include in these models, and they do. The problem is that the models often show that the median quality of life improves faster when there's somewhat more inequality in the system, which flies in the face of every socialist intuition. It's a lot easier to pretend we need state-enforced equality.
It's simple to include, but there's no denying that the 101-level economics models steer you away from thinking about inequality harder than Vin Diesel in a car chase.
Carefully omitting the fact that the economic notion of value is wealth-weighted (and you can march enough elephants through this loophole to wage a class war), drawing attention away from "rich people getting paid for being rich" dynamics by dividing out wealth wherever possible, inviting you to use averages where "rich get richer" hides "poor get poorer" -- it's a masterclass in propaganda. I have literally never in my life seen a more artful tapestry of deception than Econ 101.
101-level models in every field elide important details. That's pretty much their whole point. And it doesn't make them propaganda, it makes them a perfunctory introduction.
I cannot think of another subject whose “101” level magical thinking has affected the real world as much as economics, though. At some point the purpose of a system is what it does, and economics 101 affects the political discourse in a way I struggle to find adequate comparisons for.
No, you don't omit the leading term by accident. Not five times in a row from three different angles.
In any case, this is also matter of historical record: the purge of left-wing thought from economics and politics at the end of the New Deal Era was loud and vicious. It didn't stop at ensuring capitalist principles got top billing, it scorched the earth until even the most earnest self-examination of capitalism's largest weakness was cause for cancellation. You bury it, or you wear the scarlet letter. Most chose to bury it, and here we are.
Inequality exists on a spectrum and there is something in between Gini coefficients of zero and one.
If anything, I think economists have grossly underestimated how large increasing levels of inequality have had such a corrosive effect on our social cohesion and political systems, and that obviously does have a huge impact on eventual economic outcomes. This societal/political breakdown is not something that economists usually model well.
That does seem to be a large part of why those who were on the fence voted for Trump. So even if it's not the core, it's a large part of why he won the election.
I certainly think, that regardless of the underlying hard numbers, there's a very strong perception that life is getting harder for the average person, and that most of that is due to their money going towards things that they resent. Exactly how and what will vary from person to person and depend on their information diet and political leanings, but there's a big undercurrent of discontent with the status quo and a strong belief it's due to a relative few benefiting from it, and this especially jives poorly with any assertion that "actually, the numbers show most people are just fine!"
I would, if I had the time, like to dive deeper into this sentiment: there's a decent amount of evidence that people are better off, on average (and median, so not prone to distortion by the hyper wealthy), than ever before, and yet this isn't how the average person perceives it. What I don't know is whether this is because said evidence is wrong or misleading, because inequality matters more psychologically than the absolute wealth, whether expectations have simply grown above the growth in wealth, or whether it's because there's been a flattening of the curve where historically disadvantaged groups have gotten better off but advantaged groups have become worse off.
I don't know if anyone is really arguing for state enforced equality. Just that in a capitalist system money naturally accumulates at the top and slowly regresses into a socialist like centrally planned economy as fewer and fewer people have meaningful wealth to allocate. A little inequality is good because there's a reward mechanism for allocating resources better but a lot of inequality locks
up the economy. And the only thing to really do is tax it and recirculate it back to
the bottom.
