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The Price of Inequality: How Today's Divided Society Endangers Our Future Paperback – April 8, 2013
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The Price of Inequality: How Today's Divided Society Endangers Our Future 1/E by Joseph E. Stiglitz
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The wonderful thing about Stiglitz, besides his Nobel Prize in economics, is that he writes very well, he cites a ton of examples, and he refers to studies and facts in abundance, but with a simple clarity. He is also very much aware of something called "behavioral economics". If you don't know what that is - look it up. Another Nobel prize winner, Daniel Kahnneman, in a book called Thinking, Fast and Slow, clearly explained that when it comes to economic decisions, we are definitely NOT rational animals. Any theoretical approach to how economics SHOULD work is doomed. We don't actually operate that way.
Stiglitz takes the most recent history, casts the economic thought back to the founders - Adam Smith and others - and explains clearly the path of perdition that we are upon. You may think an unequal society is not a good idea, not fair, not whatever. What you need to grasp that it is a very dangerous way to run a society - VERY dangerous. We are destroying our own efficiency and productivity by this mindless path of downsizing government, reducing taxes, and failing to invest in ourselves - in our children, our infrastructure, our health, etc. Economics is not that complicated. If you take wealth OUT - rent seeking - we all lose. We only all gain if you invest in us, ourselves, our infrastructure. Taking wealth out is a lose / lose.
It is a as clear as a bell to me - but HOW on earth can we get the balance of our citizenry and our elected wonks to understand this? They are not rational about elections either.
So READ THIS, please. And see if you can't get a few others to do the same. We owe it to the kids and grandkids. This way evil lurks.
Personally, though, I would have liked to have seen more specific examples of some of the points that he makes, especially with regard to the role of the media
He seems to have made a conscious effort to make the subject more understandable to the general reader (the non-economist), being conscious that it really is a subject that everyone needs to hear about.
The book is divided into 10 chapters. Chapter 1- America's 1 pct problem presents the backgdrop of the distribution of wealth in the US how it has changed over the last 30 years, how the middle class is shrinking and how mean and median GDP are diverging. Chapter 2 - Rent Seeking and the Making of an Unequal Society discusses what is happening to the distribution of income through the recession and how the growing inquality has been created and is not the function of natural market forces. Other high income countries have different distributional outcomes than ours and ours is the worst. The author then discusse show wealth creates power and facilitates changes to the rules of the game to extract rents is an age old problem. Chapter 3 - Markets and Inequality discusses how markets can be modified politically to facilitate better outcomes for those with the power to change market structures. Chapter 4 - Why it matters discusses what the repurcussions of income inequality can be. It is not a standard economic subject but it is an extremely important one (one that was Marx put focus on for example). Chapter 5- Democracy in Peril is a discussion of the failing democracy in the US and how money is influencing politics. The Supreme Court decision to allow corporations to fund campaigns is an example. Chapter 6 - 1984 is upon us will probably create much protest. It discusses how humans dont have rational expectations and respond to questions via framing and how money can change social norms through the shaping of debate to promote beliefs that benefit the 1% as natural outcomes of the most fair state. Chapter 7 - Justice for All discusses how the legal system is not egalitarian and how outcomes for the poor are skewed against them given a lack of resources to maneouvre through the justice system. Chapter 8 - The Battle of the Budget is a discussion of the budget, how we got here and how to think about the problem. Chapter 9 - A macroeconomic policy and a central bank by and for the 1 pct is a condemnation of the central bank. It makes the case that the central bank is an instrument of the 1 percent and its policies promoted the interests of the 1%. I find this chapter quite biased and i think if the author was to argue a point he should discuss the need for macroprudential central banking instead of inflation targetting. Monetary policy cannot substitute for much fiscal failings. The way forward- Another world is possible is an overview of the book with short policy directions to consider.
All in all this book is excellent. It discusses civic duty and justice, it discusses human nature and sociology and it discusses real economics. It gives accounts about how distribution of profits between labour and capital is a function of the institutional and legal regimes, it is not the natural consequence of economic order. It discusses how much invention is founded on public ideas and dwindling public research has an impact on our productivity. This book is political, economic and philosophical and it is well reasoned on all accounts. This puts together a lot of ideas and it does it very well. It is a must read for a well reasoned account of what is happening in the US. One doesnt have to agree with many points, but to ignore such literature would be ignoring important information necessary for productive discourse.