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It is also vital to consider not the difference between 1990 and 2011, but the difference between the 1950s and 1960s and the 21st century. This is where the difference in the meaning of middle class becomes most apparent.

In the 1950s and 1960s, the median income allowed you to live with a single earner -- normally the husband, with the wife typically working as homemaker -- and roughly three children. It permitted the purchase of modest tract housing, one late model car and an older one. It allowed a driving vacation somewhere and, with care, some savings as well. I know this because my family was lower-middle class, and this is how we lived, and I know many others in my generation who had the same background. It was not an easy life and many luxuries were denied us, but it wasn't a bad life at all.

Someone earning the median income today might just pull this off, but it wouldn't be easy. Assuming that he did not have college loans to pay off but did have two car loans to pay totaling $700 a month, and that he could buy food, clothing and cover his utilities for $1,200 a month, he would have $1,400 a month for mortgage, real estate taxes and insurance, plus some funds for fixing the air conditioner and dishwasher.

At a 5 percent mortgage rate, that would allow him to buy a house in the $200,000 range. He would get a refund back on his taxes from deductions but that would go to pay credit card bills he had from Christmas presents and emergencies. It could be done, but not easily and with great difficulty in major metropolitan areas. And if his employer didn't cover health insurance, that $4,000-5,000 for three or four people would severely limit his expenses. And of course, he would have to have $20,000-40,000 for a down payment and closing costs on his home. There would be little else left over for a week at the seashore with the kids.

I should pause and mention that this was one of the fundamental causes of the 2007-2008 subprime lending crisis. People below the median took out loans with deferred interest with the expectation that their incomes would continue the rise that was traditional since World War II.

American history was always filled with the assumption that upward mobility was possible. The Midwest and West opened land that could be exploited, and the massive industrialization in the late 19th and early 20th centuries opened opportunities. There was a systemic expectation of upward mobility built into American culture and reality.

The Great Depression was a shock to the system, and it wasn't solved by the New Deal, nor even by World War II alone. The next drive for upward mobility came from post-war programs for veterans, of whom there were more than 10 million. These programs were instrumental in creating post-industrial America, by creating a class of suburban professionals. There were three programs that were critical:

The GI Bill, which allowed veterans to go to college after the war, becoming professionals frequently several notches above their parents.

The part of the GI Bill that provided federally guaranteed mortgages to veterans, allowing low and no down payment mortgages and low interest rates to graduates of publicly funded universities.

The federally funded Interstate Highway System, which made access to land close to but outside of cities easier, enabling both the dispersal of populations on inexpensive land (which made single-family houses possible) and, later, the dispersal of business to the suburbs.

there was consensus around the moral propriety of the programs.

the rise of the double-income family corresponded with the decline of the middle class.

But there was, I think, the crisis of the modern corporation.

Over the course of time, the culture of the corporation diverged from the realities, as corporate productivity lagged behind costs and the corporations became more and more dysfunctional and ultimately unsupportable.

In addition, the corporations ceased focusing on doing one thing well and instead became conglomerates, with a management frequently unable to keep up with the complexity of multiple lines of business.

Everything was being reinvented. Huge amounts of money, managed by people whose specialty was re-engineering companies, were deployed. The choice was between total failure and radical change. From the point of view of the individual worker, this frequently meant the same thing: unemployment.

This is where the disjuncture occurred. From the point of view of the investor, they had saved the corporation from total meltdown by redesigning it. From the point of view of the workers, some retained the jobs that they would have lost, while others lost the jobs they would have lost anyway. But the important thing is not the subjective bitterness of those who lost their jobs, but something more complex.

As the permanent corporate jobs declined, more people were starting over. Some of them were starting over every few years as the agile corporation grew more efficient and needed fewer employees. That meant that if they got new jobs it would not be at the munificent corporate pay rate but at near entry-level rates in the small companies that were now the growth engine.

As these companies failed, were bought or shifted direction, they would lose their jobs and start over again. Wages didn't rise for them and for long periods they might be unemployed, never to get a job again in their now obsolete fields, and certainly not working at a company for the next 20 years.

American society on the whole was never egalitarian. It always accepted that there would be substantial differences in wages and wealth. Indeed, progress was in some ways driven by a desire to emulate the wealthy. There was also the expectation that while others received far more, the entire wealth structure would rise in tandem. It was also understood that, because of skill or luck, others would lose.

What we are facing now is a structural shift, in which the middle class' center, not because of laziness or stupidity, is shifting downward in terms of standard of living. It is a structural shift that is rooted in social change (the breakdown of the conventional family) and economic change (the decline of traditional corporations and the creation of corporate agility that places individual workers at a massive disadvantage).

The inherent crisis rests in an increasingly efficient economy and a population that can't consume what is produced because it can't afford the products. This has happened numerous times in history, but the United States, excepting the Great Depression, was the counterexample.

In political debates, someone must be blamed. In reality, these processes are beyond even the government's ability to control. On one hand, the traditional corporation was beneficial to the workers until it collapsed under the burden of its costs. On the other hand, the efficiencies created threaten to undermine consumption by weakening the effective demand among half of society.

The United States was built on the assumption that a rising tide lifts all ships. That has not been the case for the past generation, and there is no indication that this socio-economic reality will change any time soon.

If we move to a system where half of the country is either stagnant or losing ground while the other half is surging, the social fabric of the United States is at risk, and with it the massive global power the United States has accumulated.

The left would argue that the solution is for laws to transfer wealth from the rich to the middle class. That would increase consumption but, depending on the scope, would threaten the amount of capital available to investment by the transfer itself and by eliminating incentives to invest. You can't invest what you don't have, and you won't accept the risk of investment if the payoff is transferred away from you.

The right will argue that allowing the free market to function will fix the problem.

In other words, it may give more efficiency on the whole and grow the economy as a whole, but by itself it doesn't guarantee how wealth is distributed.

The GI Bill was designed to limit unemployment among returning serviceman; it inadvertently created a professional class of college graduates.

The VA loan was designed to stimulate the construction industry; it created the basis for suburban home ownership.

The Interstate Highway System was meant to move troops rapidly in the event of war; it created a new pattern of land use that was suburbia.

The United States has been a fortunate country, with solutions frequently emerging in unexpected ways.

It would seem to me that unless the United States gets lucky again, its global dominance is in jeopardy. Considering its history, the United States can expect to get lucky again, but it usually gets lucky when it is frightened.

And at this point it isn't frightened but angry, believing that if only its own solutions were employed, this problem and all others would go away.

And the isolation is only going to get worse. Increasingly, the people who run the country were born into that world. Unlike the typical member of the elite in 1960, they have never known anything but the new upper-class culture. We are now seeing more and more third-generation members of the elite. Not even their grandparents have been able to give them a window into life in the rest of America.

Meanwhile, the formation of the new upper class has been driven by forces that are nobody's fault and resist manipulation. The economic value of brains in the marketplace will continue to increase no matter what, and the most successful of each generation will tend to marry each other no matter what.

The only thing that can make a difference is the recognition among Americans of all classes that a problem of cultural inequality exists and that something has to be done about it. That "something" has nothing to do with new government programs or regulations.

There remains a core of civic virtue and involvement in working-class America that could make headway against its problems if the people who are trying to do the right things get the reinforcement they need—not in the form of government assistance, but in validation of the values and standards they continue to uphold. The best thing that the new upper class can do to provide that reinforcement is to drop its condescending "nonjudgmentalism."

Under the current policy, the cost of maintaining this infrastructure falls to the federal government, but funding for major construction and rehabilitation projects on inland waterways is split equally between federally appropriated funds and money from a trust, the Inland Waterways Trust Fund, which currently secures revenue through a 20 cent tax on commercial barge operators' fuel.

Unlike the fund for inland waterways, the Harbor Maintenance Trust Fund has a surplus.

Because the trust fund is supplied from taxes on traded goods, ports that have higher traffic contribute more to the fund, but these ports are often not the ones that require the most dredging maintenance.

A total of $8 billion in projects, including flood prevention and port expansion projects, would be approved under the new House bill, while $12 billion in projects would be eliminated.

The U.S. Army Corps of Engineers estimates that it will cost $125 billion or more to revamp the entire inland waterway system. Some estimates show that just maintaining the status quo of unscheduled delays for the more than 200 locks on U.S. inland waterways would require an investment of roughly $13 billion dollars by 2020, averaging out to more than $1.5 billion annually.

The agricultural, coal, petroleum and fertilizer industries rely heavily on U.S. rivers to transport goods. Each year, more than 600 million metric tons of cargo, valued at roughly $180 billion, is handled along inland waterways managed by the U.S. Army Corps of Engineers.

According to the American Society of Civil Engineers, costs attributed to delays reached $33 billion in 2010 and are projected to rise to $49 billion by 2020.

 Since a single 15 barge tow is equivalent to roughly 1,000 trucks or more than 200 rail cars, shifting traffic from rivers to road or rail likely will increase congestion on these transportation routes.

However, as U.S. government funding for infrastructure spending has dropped significantly in recent years, increases in user fees, tolls or private funding likely will be needed to fully pay for all current and future necessary improvements to the U.S. inland waterways.

What The Spirit Level shows is that more equal societies enjoy better physical and mental health, lower homicide rates, fewer drug problems, fewer teenage births, higher maths and literacy scores, higher standards of child wellbeing, less bullying in schools, lower obesity rates, and fewer people in prison.

This left us with 23 rich market societies. We took our data from the best sources, such as the World Health Organisation, the United Nations and the World Bank. To double-check our findings, we then repeated our analyses for the 50 US states, to see if more unequal states showed the same consistent tendency to have more of these health and social problems. In almost 30 different cross-national analyses, we show the same tendency for one problem after another to be significantly worse in societies with bigger income differences.

Our critics also ignore the fact that these relationships have been widely demonstrated by other researchers. For example, as early as 1993 in the Criminal Justice Review, Hsieh and Pugh reviewed 34 studies of income inequality and violent crime and found a consistent correlation between the two—the authors estimated that it would need 58 new studies which found no effect in order to overturn this result. But studies since then have continued to confirm the link.

In the 1992 presidential campaign candidates spent more time answering questions from "ordinary people"—citizens in town-hall forums, callers on radio and TV talk shows—than they had in previous years. The citizens asked overwhelmingly about the what of politics: What are you going to do about the health-care system? What can you do to reduce the cost of welfare? The reporters asked almost exclusively about the how: How are you going to try to take away Perot's constituency? How do you answer charges that you have flip-flopped?

Earlier in the month the President's performance had been assessed by the three network-news anchors: Peter Jennings, of ABC; Dan Rather, of CBS; and Tom Brokaw, of NBC. There was no overlap whatsoever between the questions the students asked and those raised by the anchors. None of the questions from these news professionals concerned the impact of legislation or politics on people's lives. Nearly all concerned the struggle for individual advancement among candidates.

The CBS Evening News profile of Clinton, which was narrated by Rather and was presented as part of the series Eye on America, contained no mention of Clinton's economic policy, his tax or budget plans, his failed attempt to pass a health-care proposal, his successful attempt to ratify NAFTA, his efforts to "reinvent government," or any substantive aspect of his proposals or plans in office. Its subject was exclusively Clinton's handling of his office—his "difficulty making decisions," his "waffling" at crucial moments. If Rather or his colleagues had any interest in the content of Clinton's speech as opposed to its political effect, neither the questions they asked nor the reports they aired revealed such a concern.

The natural instinct of newspapers and TV is to present every public issue as if its "real" meaning were political in the meanest and narrowest sense of that term—the attempt by parties and candidates to gain an advantage over their rivals.

Whether or not that was Clinton's real motive, nothing in the broadcast gave the slightest hint of where the extra policemen would go, how much they might cost, whether there was reason to think they'd do any good. Everything in the story suggested that the crime bill mattered only as a chapter in the real saga, which was the struggle between Bill and Newt.

"In some ways it's not even the point," she replied. What mattered was that Clinton "looked good" taking the tough side of the issue. No one expects Cokie Roberts or other political correspondents to be experts on controlling terrorism, negotiating with the Syrians, or the other specific measures on which Presidents make stands. But all issues are shoehorned into the area of expertise the most-prominent correspondents do have:the struggle for one-upmanship among a handful of political leaders.

When the Clinton Administration declared defeat in 1994 and there were no more battles to be fought, health-care news coverage virtually stopped too—even though the medical system still represented one seventh of the economy, even though HMOs and corporations and hospitals and pharmaceutical companies were rapidly changing policies in the face of ever-rising costs.

In interviews and at the news conferences he conducted afterward Bradley did his best to talk about the deep problems of public life and economic adjustment that had left him frustrated with the political process. Each of the parties had locked itself into rigid positions that kept it from dealing with the realistic concerns of ordinary people, he said.

Every one of Woodruff's responses or questions was about short-term political tactics. Woodruff asked about the political implications of his move for Bill Clinton and Newt Gingrich. Bradley replied that it was more important to concentrate on the difficulties both parties had in dealing with real national problems.

Regardless of the tone of coverage, medical research will go on. But a relentless emphasis on the cynical game of politics threatens public life itself, by implying day after day that the political sphere is nothing more than an arena in which ambitious politicians struggle for dominance, rather than a structure in which citizens can deal with worrisome collective problems.

Fourteen prominent journalists, pollsters, and all-around analysts made their predictions

One week later many of these same experts would be saying on their talk shows that the Republican landslide was "inevitable" and "a long time coming" and "a sign of deep discontent in the heartland."

As with medieval doctors who applied leeches and trepanned skulls, the practitioners cannot be blamed for the limits of their profession. But we can ask why reporters spend so much time directing our attention toward what is not much more than guesswork on their part.

Why not imagine, just for a moment, that your journalistic duty might involve something more varied and constructive than doing standups from the White House lawn and sounding skeptical about whatever announcement the President's spokesman put out that day?

The list could go on for pages. With a few minutes' effort—about as long as it takes to do a crossword puzzle—the correspondents could have drawn up lists of other subjects they had never before "had time" to investigate. They had the time now. What they lacked was a sense that their responsibility involved something more than standing up to rehash the day's announcements when there was room for them on the news.

How different the "Better safe than sorry" calculation seems when journalists are involved! Reporters and pundits hold no elected office, but they are obviously public figures. The most prominent TV-talk-show personalities are better known than all but a handful of congressmen.

If an interest group had the choice of buying the favor of one prominent media figure or of two junior congressmen, it wouldn't even have to think about the decision. The pundit is obviously more valuable.

Had Donaldson as a journalist been pursuing a politician or even a corporate executive, he would have felt justified in using the most aggressive reportorial techniques. When these techniques were turned on him, he complained that the reporters were going too far.

Few of his readers would leap to the conclusion that Will was serving as a mouthpiece for his wife's employers. But surely most would have preferred to learn that information from Will himself.

ABC News found that eight out of 10 approved of the president's speech. CBS News said that 74 percent of those surveyed said they had a "clear idea" of what Clinton stands for, compared with just 41 percent before the speech. A Gallup Poll for USA Today and Cable News Network found that eight in 10 said Clinton is leading the country in the right direction. Nielsen ratings reported in the same day's paper showed that the longer the speech went on, the larger the number of people who tuned in to watch.

The difference between the "welcoming committee" and the congressional committees headed by fallen Democratic titans like Tom Foley and Jack Brooks was that the congressmen can be booted out.

the fact that no one takes the shows seriously is precisely what's wrong with them, because they jeopardize the credibility of everything that journalists do.

when all the participants then dash off for the next plane, caring about none of it except the money—when these things happen, they send a message. The message is: We don't respect what we're doing. Why should anyone else?

GURGAON, India

In Gurgaon, economic growth is often the product of a private sector improvising to overcome the inadequacies of the government. To compensate for electricity blackouts, Gurgaon’s companies and real estate developers operate massive diesel generators capable of powering small towns. No water? Drill private borewells. No public transportation? Companies employ hundreds of private buses and taxis. Worried about crime? Gurgaon has almost four times as many private security guards as police officers.

Gurgaon was widely regarded as an economic wasteland. In 1979, the state of Haryana created Gurgaon by dividing a longstanding political district on the outskirts of New Delhi. One half would revolve around the city of Faridabad, which had an active municipal government, direct rail access to the capital, fertile farmland and a strong industrial base. The other half, Gurgaon, had rocky soil, no local government, no railway link and almost no industrial base. As an economic competition, it seemed an unfair fight. And it has been: Gurgaon has won, easily. Faridabad has struggled to catch India’s modernization wave, while Gurgaon’s disadvantages turned out to be advantages, none more important, initially, than the absence of a districtwide government, which meant less red tape capable of choking development. By 1979, Mr. Singh had taken control of his father-in-law’s real estate company, now known as DLF, at a moment when urban development in India was largely overseen by government agencies. In most states, private developers had little space to operate, but Haryana was an exception. Slowly, Mr. Singh began accumulating 3,500 acres in Gurgaon that he divided into plots and began selling to people unable to afford prices in New Delhi.

Mr. Singh had become the company’s India representative after befriending Jack Welch, then the G.E. chairman. When Mr. Welch decided to outsource some business operations to India, he eventually opened a G.E. office inside a corporate park in Gurgaon in 1997. “When G.E. came in,” Mr. Singh said, “others followed.”

Ordinarily, such a wild building boom would have had to hew to a local government master plan. But Gurgaon did not yet have such a plan, nor did it yet have a districtwide municipal government. Instead, Gurgaon was mostly under state control. Developers built the infrastructure inside their projects, while a state agency, the Haryana Urban Development Authority, or HUDA, was supposed to build the infrastructure binding together the city.

From computerized control rooms, Genpact employees manage 350 private drivers, who travel roughly 60,000 miles every day transporting 10,000 employees.

The city’s residential compounds, especially the luxury developments along golf courses, exist as similarly self-contained entities.

“We pretty much carry the entire weight of what you would expect many states to do,” said Pramod Bhasin, who this spring stepped down as Genpact’s chief executive. “The problem — a very big problem — is our public services are always lagging a few years behind, but sometimes a decade behind. Our planning processes sometimes exist only on paper.”

Not all of the city’s islands are affluent, either. Gurgaon has an estimated 200,000 migrant workers, the so-called floating population, who work on construction sites or as domestic help.

Meanwhile, with Gurgaon’s understaffed police force outmatched by such a rapidly growing population, some law-and-order responsibilities have been delegated to the private sector. Nearly 12,000 private security guards work in Gurgaon, and many are pressed into directing traffic on major streets.

Sudhir Rajpal, the wiry, mustachioed commissioner of the new Municipal Corporation of Gurgaon, has a long to-do list: fix the roads, the sewers, the electrical grid, the drainage, the lack of public buses, the lack of water and the lack of planning. The Municipal Corporation was formed in 2008, and Mr. Rajpal, having assumed the city’s top administrative position a few months ago, has been conducting a listening tour to convince people that government can solve their problems. It is not an easy sell.

“The drains are broken and accidents are happening,” shouted one man. “Yet no one is answerable! There are problems and problems. Whatever water we get is dirty, but we have nowhere to complain.”

“Every day some agitation is taking place,” he said, shouting above the din of traffic. “People are not satisfied.” If people should be satisfied anywhere in India, Gurgaon should be the place. Average incomes rank among the highest in the country. Property values have jumped sharply since the 1990s. Gurgaon’s malls offer many of the country’s best shops and restaurants, while the city’s most exclusive housing enclaves are among the finest in India. Yet the economic power that growth has delivered to Gurgaon has not been matched by political power. The celebrated middle class created by India’s boom has far less clout at the ballot box than the hundreds of millions of rural peasants struggling to live on $2 a day, given the far larger rural vote, and thus are courted far less by Indian politicians.

First, the inequality of personal well-being is sharply down over the past hundred years and perhaps over the past twenty years as well.

by broad historical standards, what I share with Bill Gates is far more significant than what I don’t share with him.

Compare these circumstances to those of 1911, a century ago. Even in the wealthier countries, the average person had little formal education, worked six days a week or more, often at hard physical labor, never took vacations, and could not access most of the world’s culture.

when average people read about or see income inequality, they don’t feel the moral outrage that radiates from the more passionate egalitarian quarters of society. Instead, they think their lives are pretty good and that they either earned through hard work or lucked into a healthy share of the American dream.

There’s a great deal of hostility toward various government bailouts, but the idea of “undeserving” recipients is the key factor in those feelings. Resentment against Wall Street gamesters hasn’t spilled over much into resentment against the wealthy more generally.

their constituents bear no animus toward rich people, only toward undeservedly rich people.

in the United States, most economic resentment is not directed toward billionaires or high-roller financiers—not even corrupt ones. It’s directed at the guy down the hall who got a bigger raise.

The high status of the wealthy in America, or for that matter the high status of celebrities, seems to bother our intellectual class most. That class composes a very small group, however

Income inequality has been rising in the United States, especially at the very top.

income growth at the very top

greater inequality throughout the distribution

When it comes to the first trend, the share of pre-tax income earned by the richest 1 percent of earners has increased from about 8 percent in 1974 to more than 18 percent in 2007. Furthermore, the richest 0.01 percent (the 15,000 or so richest families) had a share of less than 1 percent in 1974 but more than 6 percent of national income in 2007. As noted, those figures are from pre-tax income, so don’t look to the George W. Bush tax cuts to explain the pattern. Furthermore, these gains have been sustained and have evolved over many years, rather than coming in one or two small bursts between 1974 and today.1

Caution is in order, but the overall trend seems robust. Similar broad patterns are indicated by different sources, such as studies of executive compensation. Anecdotal observation suggests extreme and unprecedented returns earned by investment bankers, fired CEOs, J.K. Rowling and Tiger Woods.

But that slower wage growth has afflicted large numbers of Americans, and it is conceptually distinct from the higher relative share of top income earners. For instance, if you take the 1979–2005 period, the average incomes of the bottom fifth of households increased only 6 percent while the incomes of the middle quintile rose by 21 percent. That’s a widening of the spread of incomes, but it’s not so drastic compared to the explosive gains at the very top.

The broader change in income distribution, the one occurring beneath the very top earners, can be deconstructed in a manner that makes nearly all of it look harmless. For instance, there is usually greater inequality of income among both older people and the more highly educated, if only because there is more time and more room for fortunes to vary.

Economist Thomas Lemieux at the University of British Columbia estimates that these demographic effects explain three-quarters of the observed rise in income inequality for men, and even more for women.2

Attacking the problem from a different angle, other economists are challenging whether there is much growth in inequality at all below the super-rich. For instance, real incomes are measured using a common price index, yet poorer people are more likely to shop at discount outlets like Wal-Mart, which have seen big price drops over the past twenty years.3 Once we take this behavior into account, it is unclear whether the real income gaps between the poor and middle class have been widening much at all.

And so we come again to the gains of the top earners, clearly the big story told by the data.

If wages go up, that person will respond by seeking less work or by working less hard or less often. That person simply wants to “get by” in terms of absolute earning power in order to experience other gains in the form of leisure—whether spending time with friends and family, walking in the woods and so on. Luck aside, that person’s income will never rise much above the threshold.

It’s not obvious what causes the percentage of threshold earners to rise or fall, but it seems reasonable to suppose that the more single-occupancy households there are, the more threshold earners there will be, since a major incentive for earning money is to use it to take care of other people with whom one lives.

The funny thing is this: For years, many cultural critics in and of the United States have been telling us that Americans should behave more like threshold earners. We should be less harried, more interested in nurturing friendships, and more interested in the non-commercial sphere of life. That may well be good advice.

Their data do not comprise the entire U.S. population, but from partial financial records they find a very strong role for the financial sector in driving the trend toward income concentration at the top.

The authors also relate that they shared their estimates with a former U.S. Secretary of the Treasury, one who also has a Wall Street background. He thought their estimates of earnings in the financial sector were, if anything, understated.

Finance aside, there isn’t much of a story of market failure here, even if we don’t find the results aesthetically appealing.

When it comes to professional athletes and celebrities, there isn’t much of a mystery as to what has happened.

We may or may not wish to tax the wealthy, including wealthy celebrities, at higher rates, but there is no need to “cure” the structural causes of higher celebrity incomes.

Most of the time investors will do well by this strategy, since big, unexpected moves are outliers by definition. Traders will earn above-average returns in good times. In bad times they won’t suffer fully when catastrophic returns come in, as sooner or later is bound to happen, because the downside of these bets is partly socialized onto the Treasury, the Federal Reserve and, of course, the taxpayers and the unemployed.

Does that kind of pattern sound familiar? It happens in finance, too. Betting against a big decline in home prices is analogous to betting against the Wizards. Every now and then such a bet will blow up in your face, though in most years that trading activity will generate above-average profits and big bonuses for the traders and CEOs. To this mix we can add the fact that many money managers are investing other people’s money.

And let’s say the whole thing does blow up in your face? What’s the worst that can happen? Your bosses fire you, but you will still have millions in the bank and that MBA from Harvard or Wharton.

They gain on the upside, while the downside, past the point of bankruptcy, is borne by the firm’s creditors.

In short, there is an unholy dynamic of short-term trading and investing, backed up by bailouts and risk reduction from the government and the Federal Reserve. This is not good.

But more immediate and more important, it means that banks take far too many risks and go way out on a limb, often in correlated fashion. When their bets turn sour, as they did in 2007–09, everyone else pays the price.

The more one studies financial theory, the more one realizes how many different ways there are to construct a “going short on volatility” investment position.

In some cases, traders may not even know they are going short on volatility. They just do what they have seen others do. Their peers who try such strategies very often have Jaguars and homes in the Hamptons. What’s not to like?

If you’re wondering, right before the Great Depression of the 1930s, bank profits and finance-related earnings were also especially high.8

The moving-first phenomenon sums to a “winner-take-all” market. Only some relatively small number of traders, sometimes just one trader, can be first. Those who are first will make far more than those who are fourth or fifth.

Since gains are concentrated among the early winners, and the closeness of the runner-ups doesn’t so much matter for income distribution, asset-market trading thus encourages the ongoing concentration of wealth. Many investors make lots of mistakes and lose their money, but each year brings a new bunch of projects that can turn the early investors and traders into very wealthy individuals.

Still, every now and then Goldman will go bust, or would go bust if not for government bailouts. But the odds are in any given year that it won’t because of the advantages it and other big banks have.

In any given year, this practice may seem tolerable—didn’t the bank earn the money fair and square by a series of fairly normal looking trades?

It remains to be seen whether the new financial regulation bill signed into law this past summer will help.

The bill does have positive features.

What about controlling bank risk-taking directly with tight government oversight? That is not practical. There are more ways for banks to take risks than even knowledgeable regulators can possibly control

It’s also not clear how well regulators can identify risky assets.

It’s no longer obvious that the system is stable at a macro level, and extreme income inequality at the top has been one result of that imbalance. Income inequality is a symptom, however, rather than a cause of the real problem.

Once a financial crisis arrives, politicians will seek to limit the damage, and that means they will bail out major financial institutions.

One worry is that banks are currently undercapitalized and will seek out or create a new bubble within the next few years, again pursuing the upside risk without so much equity to lose.

A second perspective is that banks are sufficiently chastened for the time being but that economic turmoil in Europe and China has not yet played itself out, so perhaps we still have seen only the early stages of what will prove to be an even bigger international financial crisis.

A third view is perhaps most likely. We probably don’t have any solution to the hazards created by our financial sector, not because plutocrats are preventing our political system from adopting appropriate remedies, but because we don’t know what those remedies are.

They are sitting on money rather than lending it out. The biggest risk today is how few parties will take risks, and, in part, the caution of banks is driving our current protracted economic slowdown. According to this view, the long run will bring another financial crisis once moods pick up and external scrutiny weakens, but that day of reckoning is still some ways off.

The alternative has been a shift to a balance-of-power strategy in which the United States relies on the natural schisms that exist in every region to block the emergence of regional hegemons and contain unrest and groups that could threaten U.S. interests.

The new strategy can be seen in Syria, where rather than directly intervening the United States has stood back and allowed the warring factions to expend their energy on each other, preventing either side from diverting resources to activities that might challenge U.S. interests.

On one side, there are those who consciously support the Syria model for the United States as not necessarily the best moral option but the only practical option there is.

On the other, there are those who argue on behalf of moral interventions, as we saw in Libya, and removing tyrants as an end in itself.

for all the rhetoric, the United States is by default falling into a balance-of-power model.

Russia emerged as a problem for the United States after the Orange Revolution in 2004, when the United States, supporting anti-Russian factions in Ukraine, succeeded in crafting a relatively pro-Western, anti-Russian government.

The Russian response was to use its own covert capabilities, in conjunction with economic pressure from natural gas cutoffs, to undermine Ukraine's government and to use its war with Georgia as a striking reminder of the resurrection of Russian military capabilities.

Washington had two options. One was to allow the balance of power to assert itself, in this case relying on the Europeans to contain the Russians. The other was to continue to follow the balance of power model but at a notch higher than pure passivity.

The next step was the lowest possible level of involvement to contain the Russians and counter their moves in the Middle East.

Russia is not a global power, and its military has many weaknesses, but it is by far the strongest in the region and is able to project power in the former Soviet periphery

The only correlation of forces that matters is what exists at a given point in time in a given place. In that sense, the closer U.S. forces get to the Russian homeland, the greater the advantage the Russians have.

Instead, the United States did the same thing that it did prior to the Orange Revolution: back the type of intervention that both the human rights advocates and the balance-of-power advocates could support.

it appeared that it was the Germans who were particularly pressing the issue, and that they were the ones virtually controlling one of the leaders of the protests, Vitali Klitschko.

Although Germany's move should not be dismissed, its meaning was not as clear as it seemed. In her cell phone call, Nuland is clearly dismissing the Germans, Klitschko and all their efforts in Ukraine.

This could mean that the strategy was too feeble for American tastes (Berlin cannot, after all, risk too big a confrontation with Moscow). Or it could mean that when the Germans said they were planning to be more assertive, their new boldness was meant to head off U.S. efforts. Looking at this week's events, it is not clear what the Germans meant.

This is a touchy issue for human rights advocates, or should be. Yanukovich is the elected president of Ukraine, winner of an election that is generally agreed to have been honest (even though his constitutional amendments and subsequent parliamentary elections may not have been). He was acting within his authority in rejecting the deal with the European Union. If demonstrators can unseat an elected president because they disagree with his actions, they have set a precedent that undermines constitutionalism. Even if he was rough in suppressing the demonstrators, it does not nullify his election.

A pro-Western, even ambiguous, Ukraine poses a profound strategic problem for Russia.

It creates a real strategic challenge for the Russians and forces them on the defensive. Second, it reminds Russia that Washington has capabilities and options that make challenging the United States difficult.

even if the play fails, the United States will have demonstrated that it is back in the game

The mere willingness of the United States to engage will change the expectations of Central Europe, cause tensions between the Central Europeans and the Germans and create an opening for the United States.

Of course, the question is whether and where the Russians will answer the Americans, or even if they will consider the U.S. actions significant at all.

if the United States ups the ante in Central Europe, Russian inroads there will dissolve.

If the Russians are now an American problem, which they are, and if the United States is not going to revert to a direct intervention mode, which it cannot, then this strategy makes sense.

The public interception of Nuland's phone call was not all that embarrassing. It showed the world that the United States, not Germany, is leading the way in Ukraine. And it showed the Russians that the Americans care so little, they will express it on an open cell phone line. Nuland's obscene dismissal of the European Union and treatment of Russia as a problem to deal with confirms a U.S. policy: The United States is not going to war, but passivity is over.

Maybe sometimes it’s the questions that are biased, not the answers,” he said, flashing a friendly smile.

That question has been central to Ioannidis’s career. He’s what’s known as a meta-researcher, and he’s become one of the world’s foremost experts on the credibility of medical research.

He charges that as much as 90 percent of the published medical information that doctors rely on is flawed.

“I take all the researchers who visit me here, and almost every single one of them asks the tree the same question,” Ioannidis tells me, as we contemplate the tree the day after the team’s meeting. “‘Will my research grant be approved?’” He chuckles, but Ioannidis (pronounced yo-NEE-dees) tends to laugh not so much in mirth as to soften the sting of his attack. And sure enough, he goes on to suggest that an obsession with winning funding has gone a long way toward weakening the reliability of medical research.

“I assumed that everything we physicians did was basically right, but now I was going to help verify it,” he says. “All we’d have to do was systematically review the evidence, trust what it told us, and then everything would be perfect.” It didn’t turn out that way. In poring over medical journals, he was struck by how many findings of all types were refuted by later findings. Of course, medical-science “never minds” are hardly secret. And they sometimes make headlines, as when in recent years large studies or growing consensuses of researchers concluded that mammograms, colonoscopies, and PSA tests are far less useful cancer-detection tools than we had been told; or when widely prescribed antidepressants such as Prozac, Zoloft, and Paxil were revealed to be no more effective than a placebo for most cases of depression; or when we learned that staying out of the sun entirely can actually increase cancer risks; or when we were told that the advice to drink lots of water during intense exercise was potentially fatal; or when, last April, we were informed that taking fish oil, exercising, and doing puzzles doesn’t really help fend off Alzheimer’s disease, as long claimed. Peer-reviewed studies have come to opposite conclusions on whether using cell phones can cause brain cancer, whether sleeping more than eight hours a night is healthful or dangerous, whether taking aspirin every day is more likely to save your life or cut it short, and whether routine angioplasty works better than pills to unclog heart arteries.

“I realized even our gold-standard research had a lot of problems,” he says.

This array suggested a bigger, underlying dysfunction, and Ioannidis thought he knew what it was. “The studies were biased,” he says. “Sometimes they were overtly biased. Sometimes it was difficult to see the bias, but it was there.” Researchers headed into their studies wanting certain results—and, lo and behold, they were getting them. We think of the scientific process as being objective, rigorous, and even ruthless in separating out what is true from what we merely wish to be true, but in fact it’s easy to manipulate results, even unintentionally or unconsciously. “At every step in the process, there is room to distort results, a way to make a stronger claim or to select what is going to be concluded,” says Ioannidis. “There is an intellectual conflict of interest that pressures researchers to find whatever it is that is most likely to get them funded.”

He chose to publish one paper, fittingly, in the online journal PLoS Medicine, which is committed to running any methodologically sound article without regard to how “interesting” the results may be. In the paper, Ioannidis laid out a detailed mathematical proof that, assuming modest levels of researcher bias, typically imperfect research techniques, and the well-known tendency to focus on exciting rather than highly plausible theories, researchers will come up with wrong findings most of the time.

The article spelled out his belief that researchers were frequently manipulating data analyses, chasing career-advancing findings rather than good science, and even using the peer-review process—in which journals ask researchers to help decide which studies to publish—to suppress opposing views.

Ioannidis was putting his contentions to the test not against run-of-the-mill research, or even merely well-accepted research, but against the absolute tip of the research pyramid. Of the 49 articles, 45 claimed to have uncovered effective interventions. Thirty-four of these claims had been retested, and 14 of these, or 41 percent, had been convincingly shown to be wrong or significantly exaggerated. If between a third and a half of the most acclaimed research in medicine was proving untrustworthy, the scope and impact of the problem were undeniable. That article was published in the Journal of the American Medical Association.

When a five-year study of 10,000 people finds that those who take more vitamin X are less likely to get cancer Y, you’d think you have pretty good reason to take more vitamin X, and physicians routinely pass these recommendations on to patients. But these studies often sharply conflict with one another. Studies have gone back and forth on the cancer-preventing powers of vitamins A, D, and E; on the heart-health benefits of eating fat and carbs; and even on the question of whether being overweight is more likely to extend or shorten your life. How should we choose among these dueling, high-profile nutritional findings? Ioannidis suggests a simple approach: ignore them all.

the odds are that in any large database of many nutritional and health factors, there will be a few apparent connections that are in fact merely flukes, not real health effects—it’s a bit like combing through long, random strings of letters and claiming there’s an important message in any words that happen to turn up.

nd these problems are aside from ubiquitous measurement errors (for example, people habitually misreport their diets in studies), routine misanalysis (researchers rely on complex software capable of juggling results in ways they don’t always understand), and the less common, but serious, problem of outright fraud (which has been revealed, in confidential surveys, to be much more widespread than scientists like to acknowledge).

And so it goes for all medical studies, he says. Indeed, nutritional studies aren’t the worst. Drug studies have the added corruptive force of financial conflict of interest. The exciting links between genes and various diseases and traits that are relentlessly hyped in the press for heralding miraculous around-the-corner treatments for everything from colon cancer to schizophrenia have in the past proved so vulnerable to error and distortion, Ioannidis has found, that in some cases you’d have done about as well by throwing darts at a chart of the genome.

Though scientists and science journalists are constantly talking up the value of the peer-review process, researchers admit among themselves that biased, erroneous, and even blatantly fraudulent studies easily slip through it.

Of those 45 super-cited studies that Ioannidis focused on, 11 had never been retested. Perhaps worse, Ioannidis found that even when a research error is outed, it typically persists for years or even decades. He looked at three prominent health studies from the 1980s and 1990s that were each later soundly refuted, and discovered that researchers continued to cite the original results as correct more often than as flawed—in one case for at least 12 years after the results were discredited.

Medical research is not especially plagued with wrongness. Other meta-research experts have confirmed that similar issues distort research in all fields of science, from physics to economics (where the highly regarded economists J. Bradford DeLong and Kevin Lang once showed how a remarkably consistent paucity of strong evidence in published economics studies made it unlikely that any of them were right).

Ioannidis initially thought the community might come out fighting. Instead, it seemed relieved, as if it had been guiltily waiting for someone to blow the whistle, and eager to hear more. David Gorski, a surgeon and researcher at Detroit’s Barbara Ann Karmanos Cancer Institute, noted in his prominent medical blog that when he presented Ioannidis’s paper on highly cited research at a professional meeting, “not a single one of my surgical colleagues was the least bit surprised or disturbed by its findings.” Ioannidis offers a theory for the relatively calm reception. “I think that people didn’t feel I was only trying to provoke them, because I showed that it was a community problem, instead of pointing fingers at individual examples of bad research,” he says. In a sense, he gave scientists an opportunity to cluck about the wrongness without having to acknowledge that they themselves succumb to it—it was something everyone else did.

The irony of his having achieved this sort of success by accusing the medical-research community of chasing after success is not lost on him, and he notes that it ought to raise the question of whether he himself might be pumping up his findings.

Tatsioni doesn’t so much fear that someone will carve out the man’s healthy appendix. Rather, she’s concerned that, like many patients, he’ll end up with prescriptions for multiple drugs that will do little to help him, and may well harm him. “Usually what happens is that the doctor will ask for a suite of biochemical tests—liver fat, pancreas function, and so on,” she tells me. “The tests could turn up something, but they’re probably irrelevant. Just having a good talk with the patient and getting a close history is much more likely to tell me what’s wrong.” Of course, the doctors have all been trained to order these tests, she notes, and doing so is a lot quicker than a long bedside chat. They’re also trained to ply the patient with whatever drugs might help whack any errant test numbers back into line.

patients often don’t even like it when they’re taken off their drugs, she explains; they find their prescriptions reassuring.

Already feeling that they’re fighting to keep patients from turning to alternative medical treatments such as homeopathy, or misdiagnosing themselves on the Internet, or simply neglecting medical treatment altogether, many researchers and physicians aren’t eager to provide even more reason to be skeptical of what doctors do—not to mention how public disenchantment with medicine could affect research funding.

being wrong in science is fine, and even necessary

By Mielke and Zahran's estimates, if we adopted the soil standard of a country like Norway (roughly 100 ppm or less), it would bring about $30 billion in annual returns from the cognitive benefits alone (higher IQs, and the resulting higher lifetime earnings).

Estimates here are even more difficult, but Mark Kleiman suggests that a 10 percent drop in crime—a goal that seems reasonable if we get serious about cleaning up the last of our lead problem—could produce benefits as high as $150 billion per year.

There's a flip side to this too. At the same time that we should reassess the low level of attention we pay to the remaining hazards from lead, we should probably also reassess the high level of attention we're giving to other policies. Chief among these is the prison-building boom that started in the mid-'70s.

There's always an excuse not to spend more money on a policy as tedious-sounding as lead abatement—budgets are tight, and research on a problem as complex as crime will never be definitive—but the association between lead and crime has, in recent years, become pretty overwhelming. If you gave me the choice, right now, of spending $20 billion less on prisons and cops and spending $20 billion more on getting rid of lead, I'd take the deal in a heartbeat. Not only would solving our lead problem do more than any prison to reduce our crime problem, it would produce smarter, better-adjusted kids in the bargain. There's nothing partisan about this, nothing that should appeal more to one group than another. It's just common sense. Cleaning up the rest of the lead that remains in our environment could turn out to be the cheapest, most effective crime prevention tool we have. And we could start doing it tomorrow.

Barry Lynn’s 2011 book, “Cornered,” which carefully detailed the rising concentration and consolidation of nearly every American industry since the nineteen-eighties.

The press confuses oligopoly and monopoly with some regularity. The Atlantic ran a recent infographic titled “The Return of the Monopoly,” describing rising concentration in airlines, grocery sales, music, and other industries.

Back in the mid-century, the Justice Department went after oligopolistic cartels in the tobacco industry and Hollywood with the same vigor it chased Standard Oil, the quintessential monopoly trust.

In the late nineteen-seventies, another high point of enforcement, oligopolies were investigated by the Federal Trade Commission, and during that era Richard Posner, then a professor at Stanford Law School, went as far as to argue that when firms maintain the same prices, even without a smoke-filled-room agreement, they ought to be considered members of a price-fixing conspiracy.

the United States has nowadays nearly abandoned scrutiny of oligopoly behavior, leaving consumers undefended. That’s a problem, because oligopolies do an awful lot that’s troubling.

efforts by an entire industry to keep out would-be newcomers, a pervasive problem.

Meanwhile, the idea that an industry is nominally “competitive” should not provide excessive protection from regulatory oversight.

, to quote T-Mobile, “[t]his is an industry filled with ridiculously confusing contracts, limits on how much data you can use or when you can upgrade, and monthly bills that make little sense.”

The choice to build the bridge is a choice between this bridge or that skyscraper as well as any other alternative use of those resources. Each alternative use would have different benefits (and unseen costs).

This is not a mere question of engineering the strongest or even the most cost-effective structure to get across the Hudson, this is a question of what is the strongest or most cost-effective possible future version of New York City.

“We are building the world’s 20th search engine at a time when most of the others have been abandoned as being commoditized money losers. We’ll strip out all of the ad-supported news and portal features so you won’t be distracted from using the free search stuff.”

“Our goal always has been to index all the world’s data.” Talk about anemic goals, come on Google, show some ambition!

Our gut might first tell us that it is technical.

Sure, all this data is now hanging out in one place for free, but to make a useful index you need to determine how much people value different data. We need data about the data.