Heterogeneity is one of the three aspects of structural complexity discussed in the previous chapter. Focusing on this theme directs attention to the way in which the population is divided into groups that make the operations of the economy and government more information intensive and complicated. This chapter analyzes changes in both demographic and economic heterogeneity. For the latter I give particular attention to inequalities of income and wealth that act to stratify the population into clusters with quite different needs and interests. Through a variety of mechanisms discussed in the following sections, these changes in this heterogeneity have an important impact on the performance and operation of the economy.

For the four decades following World War II, I document the increasing demographic heterogeneity, as defined by ethnicity, family structure, and age. These appear to be relatively recent trends; in the four decades before World War II, it seems likely that the situation was different. Only heterogeneity of the population defined by education has remained the same or declined. This trend, however, has not had the expected result either of raising the average level of literacy or of decreasing the variation of literacy skills in the population. I also document the increasing economic heterogeneity, especially the rising inequalities of income and wealth since the midor late 1970s and examine some possible causes. These trends in inequality also appear to be a post–World War II phenomena.