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This is why, for example, large numbers of Americans oppose the idea of an estate tax even though the current form of the tax, slated to return in 2011, is very unlikely to affect them or their estates. In narrowly self-interested terms, that view may be irrational, but most Americans are unwilling to frame national issues in terms of rich versus poor. 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. The bailout for General Motors’ labor unions wasn’t so popular either—again, obviously not because of any bias against the wealthy but because a basic sense of fairness was violated. As of November 2010, congressional Democrats are of a mixed mind as to whether the Bush tax cuts should expire for those whose annual income exceeds $250,000; that is in large part because their constituents bear no animus toward rich people, only toward undeservedly rich people.

envy is usually local. At least 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. It’s directed at the husband of your wife’s sister, because the brand of beer he stocks costs $3 a case more than yours, and so on. That’s another reason why a lot of people aren’t so bothered by income or wealth inequality at the macro level. Most of us don’t compare ourselves to billionaires. Gore Vidal put it honestly: “Whenever a friend succeeds, a little something in me dies.”

Occasionally the cynic in me wonders why so many relatively well-off intellectuals lead the egalitarian charge against the privileges of the wealthy. One group has the status currency of money and the other has the status currency of intellect, so might they be competing for overall social regard? 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, so the upshot is that growing income inequality won’t necessarily have major political implications at the macro level.

All that said, income inequality does matter—for both politics and the economy.

The numbers are clear: Income inequality has been rising in the United States, especially at the very top. The data show a big difference between two quite separate issues, namely income growth at the very top of the distribution and greater inequality throughout the distribution. The first trend is much more pronounced than the second, although the two are often confused.

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

At the same time, wage growth for the median earner has slowed since 1973. 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. Since America is becoming both older and more highly educated, our measured income inequality will increase pretty much by demographic fiat. 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. Robert J. Gordon, an economist from Northwestern University who is hardly known as a right-wing apologist, wrote in a recent paper that “there was no increase of inequality after 1993 in the bottom 99 percent of the population”, and that whatever overall change there was “can be entirely explained by the behavior of income in the top 1 percent.”4

And so we come again to the gains of the top earners, clearly the big story told by the data. It’s worth noting that over this same period of time, inequality of work hours increased too. The top earners worked a lot more and most other Americans worked somewhat less. That’s another reason why high earners don’t occasion more resentment: Many people understand how hard they have to work to get there. It also seems that most of the income gains of the top earners were related to performance pay—bonuses, in other words—and not wildly out-of-whack yearly salaries.5

It is also the case that any society with a lot of “threshold earners” is likely to experience growing income inequality. A threshold earner is someone who seeks to earn a certain amount of money and no more. 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.

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. Many studies suggest that above a certain level more money brings only marginal increments of happiness. What isn’t so widely advertised is that those same critics have basically been telling us, without realizing it, that we should be acting in such a manner as to increase measured income inequality. Not only is high inequality an inevitable concomitant of human diversity, but growing income inequality may be, too, if lots of us take the kind of advice that will make us happier.

Why is the top 1 percent doing so well?

Steven N. Kaplan and Joshua Rauh have recently provided a detailed estimation of particular American incomes.6 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. For instance, for 2004, nonfinancial executives of publicly traded companies accounted for less than 6 percent of the top 0.01 percent income bracket. In that same year, the top 25 hedge fund managers combined appear to have earned more than all of the CEOs from the entire S&P 500. The number of Wall Street investors earning more than $100 million a year was nine times higher than the public company executives earning that amount. 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.

Many of the other high earners are also connected to finance. After Wall Street, Kaplan and Rauh identify the legal sector as a contributor to the growing spread in earnings at the top. Yet many high-earning lawyers are doing financial deals, so a lot of the income generated through legal activity is rooted in finance. Other lawyers are defending corporations against lawsuits, filing lawsuits or helping corporations deal with complex regulations. The returns to these activities are an artifact of the growing complexity of the law and government growth rather than a tale of markets per se. 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. Tiger Woods earns much more, even adjusting for inflation, than Arnold Palmer ever did. J.K. Rowling, the first billionaire author, earns much more than did Charles Dickens. These high incomes come, on balance, from the greater reach of modern communications and marketing. Kids all over the world read about Harry Potter. There is more purchasing power to spend on children’s books and, indeed, on culture and celebrities more generally. For high-earning celebrities, hardly anyone finds these earnings so morally objectionable as to suggest that they be politically actionable. Cultural critics can complain that good schoolteachers earn too little, and they may be right, but that does not make celebrities into political targets. They’re too popular. It’s also pretty clear that most of them work hard to earn their money, by persuading fans to buy or otherwise support their product. Most of these individuals do not come from elite or extremely privileged backgrounds, either. They worked their way to the top, and even if Rowling is not an author for the ages, her books tapped into the spirit of their time in a special way. 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.

to be sure, the high incomes in finance should give us all pause.

The first factor driving high returns is sometimes called by practitioners “going short on volatility.” Sometimes it is called “negative skewness.” In plain English, this means that some investors opt for a strategy of betting against big, unexpected moves in market prices. 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.

if you bet against unlikely events, most of the time you will look smart and have the money to validate the appearance. Periodically, however, you will look very bad. 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. If you plan to stay with an investment bank for ten years or less, most of the people playing this investing strategy will make out very well most of the time. Everyone’s time horizon is a bit limited and you will bring in some nice years of extra returns and reap nice bonuses. 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. For the people actually investing the money, there’s barely any downside risk other than having to quit the party early. Furthermore, if everyone else made more or less the same mistake (very surprising major events, such as a busted housing market, affect virtually everybody), you’re hardly disgraced. You might even get rehired at another investment bank, or maybe a hedge fund, within months or even weeks.

Moreover, smart shareholders will acquiesce to or even encourage these gambles. They gain on the upside, while the downside, past the point of bankruptcy, is borne by the firm’s creditors. And will the bondholders object? Well, they might have a difficult time monitoring the internal trading operations of financial institutions. Of course, the firm’s trading book cannot be open to competitors, and that means it cannot be open to bondholders (or even most shareholders) either. So what, exactly, will they have in hand to object to?

Perhaps more important, government bailouts minimize the damage to creditors on the downside. Neither the Treasury nor the Fed allowed creditors to take any losses from the collapse of the major banks during the financial crisis. The U.S. government guaranteed these loans, either explicitly or implicitly. Guaranteeing the debt also encourages equity holders to take more risk. While current bailouts have not in general maintained equity values, and while share prices have often fallen to near zero following the bust of a major bank, the bailouts still give the bank a lifeline. Instead of the bank being destroyed, sometimes those equity prices do climb back out of the hole. This is true of the major surviving banks in the United States, and even AIG is paying back its bailout. For better or worse, we’re handing out free options on recovery, and that encourages banks to take more risk in the first place.

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. “Going short on volatility” is a dangerous strategy from a social point of view. For one thing, in so-called normal times, the finance sector attracts a big chunk of the smartest, most hard-working and most talented individuals. That represents a huge human capital opportunity cost to society and the economy at large. 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.

And it’s not just the taxpayer cost of the bailout that stings. The financial disruption ends up throwing a lot of people out of work down the economic food chain, often for long periods. Furthermore, the Federal Reserve System has recapitalized major U.S. banks by paying interest on bank reserves and by keeping an unusually high interest rate spread, which allows banks to borrow short from Treasury at near-zero rates and invest in other higher-yielding assets and earn back lots of money rather quickly. In essence, we’re allowing banks to earn their way back by arbitraging interest rate spreads against the U.S. government. This is rarely called a bailout and it doesn’t count as a normal budget item, but it is a bailout nonetheless. This type of implicit bailout brings high social costs by slowing down economic recovery (the interest rate spreads require tight monetary policy) and by redistributing income from the Treasury to the major banks.

the “going short on volatility” strategy increases income inequality. In normal years the financial sector is flush with cash and high earnings. In implosion years a lot of the losses are borne by other sectors of society. In other words, financial crisis begets income inequality. Despite being conceptually distinct phenomena, the political economy of income inequality is, in part, the political economy of finance. Simon Johnson tabulates the numbers nicely: From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent in 2007.7

There’s a second reason why the financial sector abets income inequality: the “moving first” issue. Let’s say that some news hits the market and that traders interpret this news at different speeds. One trader figures out what the news means in a second, while the other traders require five seconds. Still other traders require an entire day or maybe even a month to figure things out. The early traders earn the extra money. They buy the proper assets early, at the lower prices, and reap most of the gains when the other, later traders pile on. Similarly, if you buy into a successful tech company in the early stages, you are “moving first” in a very effective manner, and you will capture most of the gains if that company hits it big.

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. This difference will persist, even if those who are fourth come pretty close to competing with those who are first. In this context, first is first and it doesn’t matter much whether those who come in fourth pile on a month, a minute or a fraction of a second later. Those who bought (or sold, as the case may be) first have captured and locked in most of the available gains. 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.

These two features of the problem—“going short on volatility” and “getting there first”—are related. Let’s say that Goldman Sachs regularly secures a lot of the best and quickest trades, whether because of its quality analysis, inside connections or high-frequency trading apparatus (it has all three). It builds up a treasure chest of profits and continues to hire very sharp traders and to receive valuable information. Those profits allow it to make “short on volatility” bets faster than anyone else, because if it messes up, it still has a large enough buffer to pad losses. This increases the odds that Goldman will repeatedly pull in spectacular profits.

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. It’s as if the major banks have tapped a hole in the social till and they are drinking from it with a straw. 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? Yet over time this situation will corrode productivity, because what the banks do bears almost no resemblance to a process of getting capital into the hands of those who can make most efficient use of it. And it leads to periodic financial explosions. That, in short, is the real problem of income inequality we face today. It’s what causes the inequality at the very top of the earning pyramid that has dangerous implications for the economy as a whole.

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 just isn’t that easy to oversee a balance sheet with hundreds of billions of dollars on it, especially when short-term positions are wound down before quarterly inspections. It’s also not clear how well regulators can identify risky assets. Some of the worst excesses of the financial crisis were grounded in mortgage-backed assets—a very traditional function of banks—not exotic derivatives trading strategies. Virtually any asset position can be used to bet long odds, one way or another. It is naive to think that underpaid, undertrained regulators can keep up with financial traders, especially when the latter stand to earn billions by circumventing the intent of regulations while remaining within the letter of the law.

For the time being, we need to accept the possibility that the financial sector has learned how to game the American (and UK-based) system of state capitalism. 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. The root cause of income inequality, viewed in the most general terms, is extreme human ingenuity, albeit of a perverse kind. That is why it is so hard to control.

Another root cause of growing inequality is that the modern world, by so limiting our downside risk, makes extreme risk-taking all too comfortable and easy. More risk-taking will mean more inequality, sooner or later, because winners always emerge from risk-taking. Yet bankers who take bad risks (provided those risks are legal) simply do not end up with bad outcomes in any absolute sense. They still have millions in the bank, lots of human capital and plenty of social status. We’re not going to bring back torture, trial by ordeal or debtors’ prisons, nor should we. Yet the threat of impoverishment and disgrace no longer looms the way it once did, so we no longer can constrain excess financial risk-taking. It’s too soft and cushy a world.

Why don’t we simply eliminate the safety net for clueless or unlucky risk-takers so that losses equal gains overall? That’s a good idea in principle, but it is hard to put into practice. Once a financial crisis arrives, politicians will seek to limit the damage, and that means they will bail out major financial institutions. Had we not passed TARP and related policies, the United States probably would have faced unemployment rates of 25 percent of higher, as in the Great Depression. The political consequences would not have been pretty. Bank bailouts may sound quite interventionist, and indeed they are, but in relative terms they probably were the most libertarian policy we had on tap. It meant big one-time expenses, but, for the most part, it kept government out of the real economy (the General Motors bailout aside).

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. Yet neither is another crisis immediately upon us. The underlying dynamic favors excess risk-taking, but banks at the current moment fear the scrutiny of regulators and the public and so are playing it fairly safe. 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.

Is the overall picture a shame? Yes. Is it distorting resource distribution and productivity in the meantime? Yes. Will it again bring our economy to its knees? Probably. Maybe that’s simply the price of modern society. Income inequality will likely continue to rise and we will search in vain for the appropriate political remedies for our underlying problems.

Choice, free or coerced, is neither a sufficient nor a necessary condition for responsibility.

All that is required to be responsible for an event is to be in the causal chain leading to an event.

this truth, which economists hold self-evident: Relative to a status quo of no or limited international trade, permitting full free trade across borders will leave in its wake some immediate losers, but citizens who gain from such trade gain much more than the losers lose. On a net basis, therefore, each nation gains over all from such trade.

In their work, economists are typically are not nationalistic. National boundaries mean little to them, other than that much data happen to be collected on a national basis. Whether a fellow American gains from a trade or someone in Shanghai does not make any difference to most economists, nor does it matter to them where the losers from global competition live, in America or elsewhere.

I say most economists, because here and there one can find some who do seem to worry about how fellow Americans fare in the matter of free trade. In a widely noted column in The Washington Post, “Free Trade’s Great, but Offshoring Rattles Me,” for example, my Princeton colleague Alan Blinder wrote: I’m a free trader down to my toes. Always have been. Yet lately, I’m being treated as a heretic by many of my fellow economists. Why? Because I have stuck my neck out and predicted that the offshoring of service jobs from rich countries such as the United States to poor countries such as India may pose major problems for tens of millions of American workers over the coming decades. In fact, I think offshoring may be the biggest political issue in economics for a generation. When I say this, many of my fellow free traders react with a mixture of disbelief, pity and hostility. Blinder, have you lost your mind? Professor Blinder has estimated that 30 million to 40 million jobs in the United States are potentially offshorable — including those of scientists, mathematicians, radiologists and editors on the high end of the market, and those of telephone operators, clerks and typists on the low end. He says he is rattled by the question of how our country will cope with this phenomenon, especially in view of our tattered social safety net. “That is why I am going public with my concerns now,” he concludes. “If we economists stubbornly insist on chanting ‘free trade is good for you’ to people who know that it is not, we will quickly become irrelevant to the public debate. Compared with that, a little apostasy should be welcome.

A classic example is the way that “family” has replaced “marriage” in public discourse, with the implication that all “lifestyles” are equally valuable, despite the fact that most people persist in wanting to get married. It has become taboo to describe homosexuality as a “perversion,” though this was precisely the word used in the 1960’s by the radical philosopher Herbert Marcuse (who was praising homosexuality as an expression of dissent). In today’s atmosphere of what Marcuse would call “repressive tolerance,” such language would be considered “stigmatizing.”

The sociological imperative behind the spread of “political correctness” is the fact that we no longer live in patriarchal, hierarchical, mono-cultural societies, which exhibit general, if unreflective, agreement on basic values. The pathetic efforts to inculcate a common sense of “Britishness” or “Dutchness” in multi-cultural societies, however well-intentioned, attest to the breakdown of a common identity.

The defense of free speech is made no easier by the abuses of the popular press. We need free media to expose abuses of power. But investigative journalism becomes discredited when it is suborned to “expose” the private lives of the famous when no issue of public interest is involved. Entertaining gossip has mutated into an assault on privacy, with newspapers claiming that any attempt to keep them out of people’s bedrooms is an assault on free speech. You know that a doctrine is in trouble when not even those claiming to defend it understand what it means. By that standard, the classic doctrine of free speech is in crisis. We had better sort it out quickly – legally, morally, and culturally – if we are to retain a proper sense of what it means to live in a free society.

What, then, is the role of public (government) funding of research? Primarily, Wade argues (and I agree), to provide infrastructure for expensive research programs, such as building large colliders.

the more the government invests in basic science and infrastructure, the more winners will emerge that private industry can then capitalize on. This is a good way to build a competitive dynamic economy.

But there is a pitfall – prematurely picking winners and losers. Wade give the example of California investing specifically into developing stem cell treatments. He argues that stem cells, while promising, do not hold a guarantee of eventual success, and perhaps there are other technologies that will work and are being neglected. The history of science and technology has clearly demonstrated that it is wickedly difficult to predict the future (and all those who try are destined to be mocked by future generations with the benefit of perfect hindsight). Prematurely committing to one technology therefore contains a high risk of wasting a great deal of limited resources, and missing other perhaps more fruitful opportunities.

The underlying concept is that science research is a long-term game. Many avenues of research will not pan out, and those that do will take time to inspire specific applications. The media, however, likes catchy headlines. That means when they are reporting on basic science research journalists ask themselves – why should people care? What is the application of this that the average person can relate to? This seems reasonable from a journalistic point of view, but with basic science reporting it leads to wild speculation about a distant possible future application. The public is then left with the impression that we are on the verge of curing the common cold or cancer, or developing invisibility cloaks or flying cars, or replacing organs and having household robot servants. When a few years go by and we don’t have our personal android butlers, the public then thinks that the basic science was a bust, when in fact there was never a reasonable expectation that it would lead to a specific application anytime soon. But it still may be on track for interesting applications in a decade or two.

this also means that the government, generally, should not be in the game of picking winners an losers – putting their thumb on the scale, as it were. Rather, they will get the most bang for the research buck if they simply invest in science infrastructure, and also fund scientists in broad areas.

The same is true of technology – don’t pick winners and losers. The much-hyped “hydrogen economy” comes to mind. Let industry and the free market sort out what will work. If you have to invest in infrastructure before a technology is mature, then at least hedge your bets and keep funding flexible. Fund “alternative fuel” as a general category, and reassess on a regular basis how funds should be allocated. But don’t get too specific.

Funding research but leaving the details to scientists may be optimal

The scientific community can do their part by getting better at communicating with the media and the public. Try to avoid the temptation to overhype your own research, just because it is the most interesting thing in the world to you personally and you feel hype will help your funding. Don’t make it easy for the media to sensationalize your research – you should be the ones trying to hold back the reigns. Perhaps this is too much to hope for – market forces conspire too much to promote sensationalism.

it can be trained from very early in a child’s education. There’re ways that you can get quite young children to recognize what’s a good argument and what’s a bad argument. And as children grow older, it can be done in a more and more sophisticated form until by the time they’re undergraduates in universities they would be studying Plato’s dialogues for example and really looking at those tricky arguments and trying to figure out how to think. And this is important not just for the individual thinking about society, but it’s important for the way people talk to each other. In all too many public discussions people just throw out slogans and they throw out insults. And what democracy needs is listening. And respect. And so when people learn how to analyze an argument, then they look at what the other person’s saying differently. And they try to take it apart, and they think: “Well, do I share some of those views and where do I differ here?” and so on. And this really does produce a much more deliberative, respectful style of public interaction.

The second [quality] is what I call “the ability to think as a citizen of the whole world.” We’re all narrow and this is again something that we get from our animal heritage. Most non-human animals just think about the group. But, of course, in this world we need to think, first of all, our whole nation -- its many different groups, minority and majority. And then we need to think outside the nation, about how problems involving, let’s say, the environment or global economy and so on need cooperative resolution that brings together people from many different nations.

That’s complicated and it requires learning a lot of history, and it means learning not just to parrot some facts about history but to think critically about how to assess historical evidence. It means learning how to think about the global economy. And then I think particularly important in this era, it means learning something about the major world religions. Learning complicated, nonstereotypical accounts of those religions because there’s so much fear that’s circulating around in every country that’s based usually on just inadequate stereotypes of what Muslims are or whatever. So knowledge can at least begin to address that.

the third thing, which I think goes very closely with the other two, is what I call “the narrative imagination,” which is the ability to put yourself in the shoes of another person to have some understanding of how the world looks from that point of view. And to really have that kind of educated sympathy with the lives of others. Now again this is something we come into the world with. Psychologists have now found that babies less than a year old are able to take up the perspective of another person and do things, see things from that perspective. But it’s very narrow and usually people learn how to think about what their parents are thinking and maybe other family members but we need to extend that and develop it, and learn how the world looks from the point of view of minorities in our own culture, people outside our culture, and so on.

since we can’t go to all the places that we need to understand -- it’s accomplished by reading narratives, reading literature, drama, participating through the arts in the thought processes of another culture. So literature and the arts are the major ways we would develop and extend that capacity.

For many years, the leading model of development ... used by economists and international agencies measuring welfare was simply that for a country to develop means to increase [its] gross domestic product per capita. Now, in recent years, there has been a backlash to that because people feel that it just doesn’t ask enough about what goods are really doing for people, what can people really do and be.

so since 1990s the United Nations’ development program has produced annually what’s called a “Human Development Report” that looks at things like access to education, access to health care. In other words, a much richer menu of human chances and opportunities that people have. And at the theoretical end I’ve worked for about 20 years now with economist Amartya Sen, who won the Nobel Prize in 1998 for economics. And we’ve developed this as account of -- so for us what it is for a country to do better is to enhance the set of capabilities meaning substantial opportunities that people have to lead meaningful, fruitful lives. And then I go on to focus on a certain core group of those capabilities that I think ought to be protected by constitutional law in every country.

Life; health; bodily integrity; the development of senses, imagination, and thought; the development of practical reason; opportunities to have meaningful affiliations both friendly and political with other people; the ability to have emotional health -- not to be in other words dominated by overwhelming fear and so on; the ability to have a productive relationship with the environment and the world of nature; the ability to play and have leisure time, which is something that I think people don’t think enough about; and then, finally, control over one’s material and social environment, some measure of control. Now of course, each of these is very abstract, and I specify them further. Although I also think that each country needs to finally specify them with its own particular circumstances in view.

when kids learn in a classroom that just makes them sit in a chair, well, they can take in something in their heads, but it doesn’t make them competent at negotiating in the world. And so starting, at least, with Jean Jacques Rousseau in the 18th century, people thought: “Well, if we really want people to be independent citizens in a democracy that means that we can’t have whole classes of people who don’t know how to do anything, who are just simply sitting there waiting to be waited on in practical matters.” And so the idea that children should participate in their practical environment came out of the initial democratizing tendencies that went running through the 18th century.

even countries who absolutely do not want that kind of engaged citizenry see that for the success of business these abilities are pretty important. Both Singapore and China have conducted mass education reforms over the last five years because they realized that their business cultures don’t have enough imagination and they also don’t have enough critical thinking, because you can have awfully corrupt business culture if no one is willing to say the unpleasant word or make a criticism.

So they have striven to introduce more critical thinking and more imagination into their curricula. But, of course, for them, they want to cordon it off -- they want to do it in the science classroom, in the business classroom, but not in the politics classroom. Well, we’ll see -- can they do that? Can they segment it that way? I think democratic thinking is awfully hard to segment as current events in the Middle East are showing us. It does have the tendency to spread.

so maybe the people in Singapore and China will not like the end result of what they tried to do or maybe the reform will just fail, which is equally likely -- I mean the educational reform.

if you really don’t want democracy, this is not the education for you. It had its origins in the ancient Athenian democracy which was a very, very strong participatory democracy and it is most at home in really true democracy, where our whole goal is to get each and every person involved and to get them thinking about things. So, of course, if politicians have ambivalence about that goal they may well not want this kind of education.

when we bring up children in the family or in the school, we are always engineering. I mean, there is no values-free form of education in the world. Even an education that just teaches you a list of facts has values built into it. Namely, it gives a negative value to imagination and to the critical faculties and a very high value to a kind of rote, technical competence. So, you can't avoid shaping children.

ncreasingly the child should be in control and should become free. And that's what the critical thinking is all about -- it's about promoting freedom as the child goes on. So, the end product should be an adult who is really thinking for him- or herself about the direction of society. But you don't get freedom just by saying, "Oh, you are free." Progressive educators that simply stopped teaching found out very quickly that that didn't produce freedom. Even some of the very extreme forms of progressive school where children were just allowed to say every day what it was they wanted to learn, they found that didn't give the child the kind of mastery of self and of the world that you really need to be a free person.

But other researchers, both with and without Templeton grants, say that they find the foundation remarkably open and non-dogmatic. "The Templeton Foundation has never in my experience pressured, suggested or hinted at any kind of ideological slant," says Michael Shermer, editor of Skeptic, a magazine that debunks pseudoscience, who was hired by the foundation to edit an essay series entitled 'Does science make belief in God obsolete?'

The debate highlights some of the challenges facing the Templeton Foundation after the death of its founder in July 2008, at the age of 95.

With the help of a $528-million bequest from Templeton, the foundation has been radically reframing its research programme. As part of that effort, it is reducing its emphasis on religion to make its programmes more palatable to the broader scientific community. Like many of his generation, Templeton was a great believer in progress, learning, initiative and the power of human imagination — not to mention the free-enterprise system that allowed him, a middle-class boy from Winchester, Tennessee, to earn billions of dollars on Wall Street. The foundation accordingly allocates 40% of its annual grants to programmes with names such as 'character development', 'freedom and free enterprise' and 'exceptional cognitive talent and genius'.

Unlike most of his peers, however, Templeton thought that the principles of progress should also apply to religion. He described himself as "an enthusiastic Christian" — but was also open to learning from Hinduism, Islam and other religious traditions. Why, he wondered, couldn't religious ideas be open to the type of constructive competition that had produced so many advances in science and the free market?

That question sparked Templeton's mission to make religion "just as progressive as medicine or astronomy".

Early Templeton prizes had nothing to do with science: the first went to the Catholic missionary Mother Theresa of Calcutta in 1973.

By the 1980s, however, Templeton had begun to realize that fields such as neuroscience, psychology and physics could advance understanding of topics that are usually considered spiritual matters — among them forgiveness, morality and even the nature of reality. So he started to appoint scientists to the prize panel, and in 1985 the award went to a research scientist for the first time: Alister Hardy, a marine biologist who also investigated religious experience. Since then, scientists have won with increasing frequency.

"There's a distinct feeling in the research community that Templeton just gives the award to the most senior scientist they can find who's willing to say something nice about religion," says Harold Kroto, a chemist at Florida State University in Tallahassee, who was co-recipient of the 1996 Nobel Prize in Chemistry and describes himself as a devout atheist.

Yet Templeton saw scientists as allies. They had what he called "the humble approach" to knowledge, as opposed to the dogmatic approach. "Almost every scientist will agree that they know so little and they need to learn," he once said.

Templeton wasn't interested in funding mainstream research, says Barnaby Marsh, the foundation's executive vice-president. Templeton wanted to explore areas — such as kindness and hatred — that were not well known and did not attract major funding agencies. Marsh says Templeton wondered, "Why is it that some conflicts go on for centuries, yet some groups are able to move on?"

Templeton's interests gave the resulting list of grants a certain New Age quality (See Table 1). For example, in 1999 the foundation gave $4.6 million for forgiveness research at the Virginia Commonwealth University in Richmond, and in 2001 it donated $8.2 million to create an Institute for Research on Unlimited Love (that is, altruism and compassion) at Case Western Reserve University in Cleveland, Ohio. "A lot of money wasted on nonsensical ideas," says Kroto. Worse, says Coyne, these projects are profoundly corrupting to science, because the money tempts researchers into wasting time and effort on topics that aren't worth it. If someone is willing to sell out for a million dollars, he says, "Templeton is there to oblige him".

At the same time, says Marsh, the 'dean of value investing', as Templeton was known on Wall Street, had no intention of wasting his money on junk science or unanswerables such as whether God exists. So before pursuing a scientific topic he would ask his staff to get an assessment from appropriate scholars — a practice that soon evolved into a peer-review process drawing on experts from across the scientific community.

Because Templeton didn't like bureaucracy, adds Marsh, the foundation outsourced much of its peer review and grant giving. In 1996, for example, it gave $5.3 million to the American Association for the Advancement of Science (AAAS) in Washington DC, to fund efforts that work with evangelical groups to find common ground on issues such as the environment, and to get more science into seminary curricula. In 2006, Templeton gave $8.8 million towards the creation of the Foundational Questions Institute (FQXi), which funds research on the origins of the Universe and other fundamental issues in physics, under the leadership of Anthony Aguirre, an astrophysicist at the University of California, Santa Cruz, and Max Tegmark, a cosmologist at the Massachusetts Institute of Technology in Cambridge.

But external peer review hasn't always kept the foundation out of trouble. In the 1990s, for example, Templeton-funded organizations gave book-writing grants to Guillermo Gonzalez, an astrophysicist now at Grove City College in Pennsylvania, and William Dembski, a philosopher now at the Southwestern Baptist Theological Seminary in Fort Worth, Texas. After obtaining the grants, both later joined the Discovery Institute — a think-tank based in Seattle, Washington, that promotes intelligent design. Other Templeton grants supported a number of college courses in which intelligent design was discussed. Then, in 1999, the foundation funded a conference at Concordia University in Mequon, Wisconsin, in which intelligent-design proponents confronted critics. Those awards became a major embarrassment in late 2005, during a highly publicized court fight over the teaching of intelligent design in schools in Dover, Pennsylvania. A number of media accounts of the intelligent design movement described the Templeton Foundation as a major supporter — a charge that Charles Harper, then senior vice-president, was at pains to deny.

Some foundation officials were initially intrigued by intelligent design, Harper told The New York Times. But disillusionment set in — and Templeton funding stopped — when it became clear that the theory was part of a political movement from the Christian right wing, not science. Today, the foundation website explicitly warns intelligent-design researchers not to bother submitting proposals: they will not be considered.

Avowedly antireligious scientists such as Coyne and Kroto see the intelligent-design imbroglio as a symptom of their fundamental complaint that religion and science should not mix at all. "Religion is based on dogma and belief, whereas science is based on doubt and questioning," says Coyne, echoing an argument made by many others. "In religion, faith is a virtue. In science, faith is a vice." The purpose of the Templeton Foundation is to break down that wall, he says — to reconcile the irreconcilable and give religion scholarly legitimacy.

Foundation officials insist that this is backwards: questioning is their reason for being. Religious dogma is what they are fighting. That does seem to be the experience of many scientists who have taken Templeton money. During the launch of FQXi, says Aguirre, "Max and I were very suspicious at first. So we said, 'We'll try this out, and the minute something smells, we'll cut and run.' It never happened. The grants we've given have not been connected with religion in any way, and they seem perfectly happy about that."

John Cacioppo, a psychologist at the University of Chicago, also had concerns when he started a Templeton-funded project in 2007. He had just published a paper with survey data showing that religious affiliation had a negative correlation with health among African-Americans — the opposite of what he assumed the foundation wanted to hear. He was bracing for a protest when someone told him to look at the foundation's website. They had displayed his finding on the front page. "That made me relax a bit," says Cacioppo.

Yet, even scientists who give the foundation high marks for openness often find it hard to shake their unease. Sean Carroll, a physicist at the California Institute of Technology in Pasadena, is willing to participate in Templeton-funded events — but worries about the foundation's emphasis on research into 'spiritual' matters. "The act of doing science means that you accept a purely material explanation of the Universe, that no spiritual dimension is required," he says.

It hasn't helped that Jack Templeton is much more politically and religiously conservative than his father was. The foundation shows no obvious rightwards trend in its grant-giving and other activities since John Templeton's death — and it is barred from supporting political activities by its legal status as a not-for-profit corporation. Still, many scientists find it hard to trust an organization whose president has used his personal fortune to support right-leaning candidates and causes such as the 2008 ballot initiative that outlawed gay marriage in California.

Scientists' discomfort with the foundation is probably inevitable in the current political climate, says Scott Atran, an anthropologist at the University of Michigan in Ann Arbor. The past 30 years have seen the growing power of the Christian religious right in the United States, the rise of radical Islam around the world, and religiously motivated terrorist attacks such as those in the United States on 11 September 2001. Given all that, says Atran, many scientists find it almost impossible to think of religion as anything but fundamentalism at war with reason.

the foundation has embraced the theme of 'science and the big questions' — an open-ended list that includes topics such as 'Does the Universe have a purpose?'

Towards the end of Templeton's life, says Marsh, he became increasingly concerned that this reaction was getting in the way of the foundation's mission: that the word 'religion' was alienating too many good scientists.

The peer-review and grant-making system has also been revamped: whereas in the past the foundation ran an informal mix of projects generated by Templeton and outside grant seekers, the system is now organized around an annual list of explicit funding priorities.

The foundation is still a work in progress, says Jack Templeton — and it always will be. "My father believed," he says, "we were all called to be part of an ongoing creative process. He was always trying to make people think differently." "And he always said, 'If you're still doing today what you tried to do two years ago, then you're not making progress.'" 

One organization using this approach is the Science and Entertainment Exchange, a program of the National Academy of Sciences. The Exchange puts writers, producers, and directors in touch with scientists and engineers who can answer specific questions or just brainstorm ideas. For example, writers for the TV show Fringe changed their original plot point of mind control through hypnosis to magnetic manipulation of brain waves after speaking with a neuroscientist at the Salk Institute for Biological Studies in La Jolla, California.

Hollywood, Health and Society (HHS), a program of the Centers for Disease Control and Prevention, takes a similar approach by providing free resources to the entertainment industry. HHS connects writers and producers — from prime time dramas like Law and Order and House to daytime soap operas – with experts who can provide accurate health information for their scripts.

HHS Director Sandra Buffington admits that environmental issues, especially climate change, pose particular challenges for communicators because at first glance, they are not as immediately relevant as personal health issues. However, she believes that by focusing on real, human stories — climate refugees displaced by rising water levels, farmers unable to grow food because of drought, children sick because of outbreaks of malaria — the issues of the planet will crystallize into something tangible. All scientists need to do is provide the information, and the professional creative storytellers will do the rest, she says.

Olson also takes a cue from television. He points to the rise of reality TV shows as a clear indication of where the general public interest lies. If environmentalists want to capture that interest, Olson thinks they need to start experimenting with these innovative types of unscripted forms. “That’s where the cutting edge exists,” he said.

the state’s reaction is typical: legitimise the violence by classifying the purported article as the culprit rather than those who took offence at it and engaged in violence. While our laws on speech undertaken with the malicious intent to give offence, or those governing attempts to produce enmity, are well intentioned, they have made the climate for free speech more, rather than less, precarious.

the simple fact that the state signals that it will easily punish those who engage in offensive speech creates incentives for offence mongering. Instead of sending a signal that a very high bar has to be crossed before speech is proscribed, the state essentially tells the people: if you can incite violence, or show that you are deeply offended, you will have your way.

A lot of representations of religion are needlessly gratuitous. But if we legitimise the taking of offence there will be more provocations, not less. The law should send a clear message that we live in a world where people cannot be protected from assorted things like Danish cartoons, Husain paintings, burqa lampoons or speculative novels on godly love. And religious believers commit the ultimate blasphemy by thinking that they need to protect their gods rather than their gods protecting them

Wordsmith intellectuals fare well in capitalist society; there they have great freedom to formulate, encounter, and propagate new ideas, to read and discuss them. Their occupational skills are in demand, their income much above average. Why then do they disproportionately oppose capitalism? Indeed, some data suggest that the more prosperous and successful the intellectual, the more likely he is to oppose capitalism. This opposition to capitalism is mainly "from the left" but not solely so. Yeats, Eliot, and Pound opposed market society from the right.

can distinguish two types of explanation for the relatively high proportion of intellectuals in opposition to capitalism. One type finds a factor unique to the anti-capitalist intellectuals. The second type of explanation identifies a factor applying to all intellectuals, a force propelling them toward anti-capitalist views. Whether it pushes any particular intellectual over into anti-capitalism will depend upon the other forces acting upon him. In the aggregate, though, since it makes anti-capitalism more likely for each intellectual, such a factor will produce a larger proportion of anti-capitalist intellectuals. Our explanation will be of this second type. We will identify a factor which tilts intellectuals toward anti-capitalist attitudes but does not guarantee it in any particular case.

Intellectuals now expect to be the most highly valued people in a society, those with the most prestige and power, those with the greatest rewards. Intellectuals feel entitled to this. But, by and large, a capitalist society does not honor its intellectuals. Ludwig von Mises explains the special resentment of intellectuals, in contrast to workers, by saying they mix socially with successful capitalists and so have them as a salient comparison group and are humiliated by their lesser status.

Why then do contemporary intellectuals feel entitled to the highest rewards their society has to offer and resentful when they do not receive this? Intellectuals feel they are the most valuable people, the ones with the highest merit, and that society should reward people in accordance with their value and merit. But a capitalist society does not satisfy the principle of distribution "to each according to his merit or value." Apart from the gifts, inheritances, and gambling winnings that occur in a free society, the market distributes to those who satisfy the perceived market-expressed demands of others, and how much it so distributes depends on how much is demanded and how great the alternative supply is. Unsuccessful businessmen and workers do not have the same animus against the capitalist system as do the wordsmith intellectuals. Only the sense of unrecognized superiority, of entitlement betrayed, produces that animus.

What factor produced feelings of superior value on the part of intellectuals? I want to focus on one institution in particular: schools. As book knowledge became increasingly important, schooling--the education together in classes of young people in reading and book knowledge--spread. Schools became the major institution outside of the family to shape the attitudes of young people, and almost all those who later became intellectuals went through schools. There they were successful. They were judged against others and deemed superior. They were praised and rewarded, the teacher's favorites. How could they fail to see themselves as superior? Daily, they experienced differences in facility with ideas, in quick-wittedness. The schools told them, and showed them, they were better.

We have refined the hypothesis somewhat. It is not simply formal schools but formal schooling in a specified social context that produces anti-capitalist animus in (wordsmith) intellectuals. No doubt, the hypothesis requires further refining. But enough. It is time to turn the hypothesis over to the social scientists, to take it from armchair speculations in the study and give it to those who will immerse themselves in more particular facts and data. We can point, however, to some areas where our hypothesis might yield testable consequences and predictions. First, one might predict that the more meritocratic a country's school system, the more likely its intellectuals are to be on the left. (Consider France.) Second, those intellectuals who were "late bloomers" in school would not have developed the same sense of entitlement to the very highest rewards; therefore, a lower percentage of the late-bloomer intellectuals will be anti-capitalist than of the early bloomers. Third, we limited our hypothesis to those societies (unlike Indian caste society) where the successful student plausibly could expect further comparable success in the wider society. In Western society, women have not heretofore plausibly held such expectations, so we would not expect the female students who constituted part of the academic upper class yet later underwent downward mobility to show the same anti-capitalist animus as male intellectuals. We might predict, then, that the more a society is known to move toward equality in occupational opportunity between women and men, the more its female intellectuals will exhibit the same disproportionate anti-capitalism its male intellectuals show.

What does it mean when we can no longer distinguish between the actions of the left and the right? If that dynamic no longer accurately distinguishes what occurs, why are so many of our policy debates framed in Left/Right terms? In many ways, American society is increasingly less married to this dynamic: Party Affiliation continues to fall, approval of Congress is at record lows, and voter participation hovers at very low rates.

There is some pushback already taking place against the concentration of corporate power: Mainstream corporate media has been increasingly replaced with user created content – YouTube and Blogs are increasingly important to news consumers (especially younger users). Independent voters are an increasingly larger share of the US electorate. And I suspect that much of the pushback against the Elizabeth Warren’s concept of a Financial Consumer Protection Agency plays directly into this Corporate vs. Individual fight. But the battle lines between the two groups have barely been drawn. I expect this fight will define American politics over the next decade.

The corporate blogging silos Winer is thinking of are services like Twitter, Facebook and WordPress. All three have been instrumental in the growth of the web, they make it easy for anyone publish. But they also suffer denial of service attacks, government shutdowns and growing pains, centralized services like Twitter and Facebook are vulnerable. Services wrapped up in a single company are also vulnerable to market whims, Geocities is gone, FriendFeed languishes at Facebook and Yahoo is planning to sell Delicious. A centralized web is brittle web, one that can make our data, our communications tools disappear tomorrow.

But the web will likely never be completely free of centralized services and Winer recognizes that. Most people will still choose convenience over freedom. Twitter’s user interface is simple, easy to use and works on half a dozen devices.

Winer isn’t the only one who believes the future of the web will be distributed systems that aren’t controlled by any single corporation or technology platform. Microformats founder Tantek Çelik is also working on a distributed publishing system that seeks to retain all the cool features of the social web, but remove the centralized bottleneck.

to be free of corporate blogging silos and centralized services the web will need an army of distributed servers run by hobbyists, not just tech-savvy web admins, but ordinary people who love the web and want to experiment.

Winer wants to start by creating a loosely coupled, distributed microblogging service like Twitter. “I’m pretty sure we know how to create a micro-blogging community with open formats and protocols and no central point of failure,” he writes on his blog.

that means decoupling the act of writing from the act of publishing. The idea isn’t to create an open alternative to Twitter, it’s to remove the need to use Twitter for writing on Twitter. Instead you write with the tools of your choice and publish to your own server.

If everyone publishes first to their own server there’s no single point of failure. There’s no fail whale, and no company owns your data. Once the content is on your server you can then push it on to wherever you’d like — Twitter, Tumblr, WordPress of whatever the site du jour is ten years from now.

The glue that holds this vision together is RSS. Winer sees RSS as the ideal broadcast mechanism for the distributed web and in fact he’s already using it — Winer has an RSS feed of links that are then pushed on to Twitter.

With a growing community of people determined to become collaborative producers rather than fit into the producer/consumer paradigm, and 3D files for physical objects already being shared like movies and music, the implications are profound. Products, and the manufacturing technology used to make them will continue to drop in price, become easier to make for individuals rather than large corporations, just as media is now shifting into the hands of the common people. And like the shift of information, industry will move from the elite and their agenda of preserving their power, to the end of empowering the people.

In a future alternative economy where everyone is a collaborative designer, producer, and manufacturer instead of passive consumers and when problems like "global climate change," "overpopulation," and "fuel crises" cross our path, we will counter them with technical solutions, not political indulgences like carbon taxes, and not draconian decrees like "one-child policies."

We will become the literal architects of our own future in this "personal manufacturing" revolution. While these technologies may still appear primitive, or somewhat "useless" or "impractical" we must remember where our personal computers stood on the eve of the dawning of the information age and how quickly they changed our lives. And while many of us may be unaware of this unfolding revolution, you can bet the globalists, power brokers, and all those that stand to lose from it not only see it but are already actively fighting against it.Understandably it takes some technical know-how to jump into the personal manufacturing revolution. In part 2 of "Alternative Economics" we will explore real world "low-tech" solutions to becoming self-sufficient, local, and rediscover the empowerment granted by doing so.

Arguing that governments can pick winners, Professor Chang urges us to reclaim economic planning, not as a token of centrally-planned communism, but rather as the simple reality behind our market economies today:

Capitalist economies are in large part planned. Governments in capitalist economies practice planning too, albeit on a more limited basis than under communist central planning. All of them finance a significant share of investment in R&D and infrastructure. Most of them plan a significant chunk of the economy through the planning of the activities of state-owned enterprises. Many capitalist governments plan the future shape of individual industrial sectors through sectoral industrial policy or even that of the national economy through indicative planning. More importantly, modern capitalist economies are made up of large, hierarchical corporations that plan their activities in great detail, even across national borders. Therefore, the question is not whether you plan or not. It is about planning the right things at the right levels.

Drawing a clear distinction between communist central planning and capitalist 'indicative' planning, Chang notes that the latter: ... involves the government ... setting some broad targets concerning key economic variables (e.g., investments in strategic industries, infrastructure development, exports) and working with, not against, the private sector to achieve them. Unlike under central planning, these targets are not legally binding; hence the adjective 'indicative'. However, the government will do its best to achieve them by mobilizing various carrots (e.g., subsidies, granting of monopoly rights) and sticks (e.g., regulations, influence through state-owned banks) at its disposal.

Chang observes that: France had great success in promoting investment and technological innovation through indicative planning in the 1950s and 60s, thereby overtaking the British economy as Europe's second industrial power. Other European countries, such as Finland, Norway and Austria, also successfully used indicative planning to upgrade their economies between the 1950s and the 1970s. The East Asian miracle economies of Japan, Korea and Taiwan used indicative planning too between the 1950s and 1980s. This is not to say that all indicative planning exercises have been successful; in India, for example, it has not. Nevertheless, the European and East Asian examples show that planning in certain forms is not incompatible with capitalism and may even promote capitalist development very well.

As we have argued before, the current crisis raging through Europe (in large part caused by free-market economics), forces us to reconsider our economic options. More than ever before, now is the time to rehabilitate indicative planning and industrial policy as key levers in our arsenal of policy tools.