Last month, China devalued its currency, slightly lowering the bottom of the range within which market forces can determine the yuan’s foreign exchange value. The central bank’s announcement triggered severe repercussions in global financial markets—but it was inaccurate and incomplete.

Income inequality in the United States has been increasing for a generation. The share of pretax income received by the top 1 percent of earners rose from 7.8 percent in 1973 to 17.4 percent in 2010. A broader and widely used measure of inequality—the Gini coefficient—indicates that inequality for…