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Mr Mankiw begins with a thought experiment: "Imagine a society with perfect economic equality...Then, one day, this egalitarian utopia is disturbed by an entrepreneur with an idea for a new product. Think of the entrepreneur as Steve Jobs as he develops the iPod, J.K. Rowling as she writes her Harry Potter books, or Steven Spielberg as he directs his blockbuster movies." Everyone wants to buy the entrepreneur's product, which results in a hugely unequal distribution of income. Should the government shift to a progressive tax system to reduce the inequality?Obviously Mr Mankiw discovers that the answer is "no", because that's the answer he has built his analogy to produce.

Mr Mankiw's analogy sneaks in his conclusion by implying that greater inequality is the price we pay for more invention and creativity. But his own choices of hero-entrepreneurs make it clear that there's no evidence to support this claim.

Of the three Mr Mankiw proposes, only Steve Jobs plausibly had an irreducible, unique effect on material culture and the structure of an industry. Mr Spielberg and Ms Rowling are acclaimed artists, but their startling wealth and prominence are entirely due to the increasing power of network effects in mass culture over the past several decades. Mr Spielberg happened to be directing his first movies just as Hollywood was beginning to stage coordinated marketing blitzes that created round-the-block lines for top-grossing films. Ms Rowling hit the bookshelves just as a similar superstar phenomenon was taking over publishing, with sales increasingly concentrated on individual mega-bestsellers rather than spread across a few dozen authors and titles. Mr Jobs is an unusual figure in that his ability to combine engineering, aesthetics, and a vision of how users might interact with the digital universe has created a kind of integrated multi-product entity that might not otherwise have existed; it's not clear that BlackBerry, Nokia or Samsung would have been up to the task. But even in Mr Jobs's case, much of the power that accrued to Apple was due to the gradual sorting of the consumer information-technology world into integrated ecosystems

Since 1979, the one-percenters have doubled their share of the nation’s collective income from about 10 percent to about 20 percent.

And between 2009, when the Great Recession ended, and 2011, the one-percenters saw their average income rise by 11 percent even as the 99-percenters saw theirs fall slightly

This dismal litany invites the conclusion that if we would just put a tight enough choke chain on the 1 percent, then we’d solve the problem of income inequality. But alas, that isn’t true, because it wouldn’t address the other half of the story: the rise of the educated class.

Since 1978, the Chinese Communist Party has built the largest higher educational system in the world with upwards of 30 million students; its 2,400 institutions of higher learning produce roughly eight million graduates per year, about five million more than American colleges and universities.

A thirty-year run of neoliberalism (a universalized logic of competition that justifies the transformation of institutions established for the public good into business enterprises) is depleting the American academy of its intellectual capital. The symptoms of that deterioration include the influx of corporate managerialism, administrative bloat, the erosion of shared governance, the near-disappearance of the tenure system, skyrocketing tuitions, the diminution of the humanities in favor of vocationally oriented STEM programs, and the deprofessionalization (or adjunctification) of the faculty as a cost-saving measure to compensate for exorbitant executive salaries.

the American academy has lost its way by jettisoning key features of its own historical and cultural heritage, including the disinterested pursuit of knowledge, academic freedom protected by tenure, and the importance of faculty oversight of the curriculum.

The details of the discussions on “The McLaughlin Group” weren’t nearly as important as the chemistry and the pacing. Unlike it gray competitors, “The Group” was as much about the speed of the discussion as the intensity. Under McLaughlin’s lash, the panel churned through multiple topics in minutes, establishing the modern standard.

McLaughlin taunted the panelists to elicit counter-opinions, and he demanded predictions — creating, in short, the kind of speculative, subjective conversations that political junkies and sports fans adore. Who cared whether all the guessing and opinion-mongering probably influenced no one and ultimately meant nothing but a good show?

Some critics, including Germond, were appalled by what the show had wrought. They thought it trafficked in superficiality and oversimplification, reducing complicated policy questions to a point-scoring exercise. No less a critic than President Reagan said “The Group” had turned the traditional Sunday morning talk show into “a political version of ‘Animal House.’ ”

Many nonprofit organizations stare down a shared set of challenges: In a 2013 report, the Urban Institute surveyed over 4,000 nonprofits of a wide range of types and sizes across the continental U.S. It found that all kinds of nonprofits struggled with delays in payment for contracts, difficulty securing funding for the full cost of their services, and other financial issues.

Recent years have been especially hard for many nonprofits. Most have annual budgets of less than $1 million, and those budgets took a big hit from the recession, when federal, municipal, and philanthropic funding dried up. On top of that, because so many nonprofits depend on government money, policy changes can cause funding priorities to change, which in turn can put nonprofits in a bind.

The pressure from funders to tighten budgets and cut costs can produce what researchers call the “nonprofit starvation cycle.” The cycle starts with funders’ unrealistic expectations about the costs of running a nonprofit. In response, nonprofits try to spend less on overhead (like salaries) and under-report expenses to try to meet those unrealistic expectations. That response then reinforces the unrealistic expectations that began the cycle. In this light, it’s no surprise that so many nonprofits have come to rely on unpaid work.

Trump’s election as president is an existential moment in American history. His candidacy, campaign, victory and actions halfway through the transition to governing, heretofore unimaginable, pose a genuine threat to the well-being of our country and the sustainability of our democracy.

our constitutional system provides an elaborate set of checks and balances designed to frustrate any would-be autocrat. The critical question is whether they and the essential norms that have in the past worked to make them effective, will be up to the challenge of a Trump presidency

Here I discuss briefly several key elements: the rule of law, a free press, an institutionally responsible Congress, a vigorous federal system, and a vibrant civil society.

President Obama became the first sitting U.S. president to visit the Japanese city of Hiroshima, site of the first use of a nuclear bomb in warfare more than seven decades ago. He did not apologize for his nation's act — which led to the deaths of an estimated 140,000 people — but made a somber speech about the need for disarmament.

The decision by President Harry Truman to deploy this terrifying weapon was, according to the China Daily, "a bid to bring an early end to the war and prevent protracted warfare from claiming even more lives."

The editorial reminded all that Japan's imperialist regime had brought on the onslaught after a decade of expansionist war and brutal occupation elsewhere in Asia.

if protectionism really is becoming an important political force, how should reasonable people — economists and others — respond?

To make sense of the debate over trade, there are three things you need to know.

The first is that we have gotten to where we are — a largely free-trade world — through a generations-long process of international diplomacy, going all the way back to F.D.R. This process combines a series of quid pro quos — I’ll open my markets if you open yours — with rules to prevent backsliding.

It is one of the great investment conundrums of our time: Why do so many stockholders cheer when a company announces that it’s buying back shares?

Stated simply, repurchase programs can be hazardous to a company’s long-term financial health and often signal a management that has run out of better ways to invest in the business.

given the enormous popularity of buybacks nowadays, those that are harmful probably outnumber the beneficial.

It’s therefore wrong to interpret public outrage about CEO pay as a protest against high compensation in and of itself. This outrage is not driven by the class envy about which the GOP presidential candidates so frequently complain. It is, rather, a protest against rationing, corruption, sweetheart deals, and foxes guarding the henhouse. It is a protest, in other words, against the corruption of markets by power.

It doesn’t make much sense to think about rents and market failures when inequality is mainly a product of our impoverished ideas about autonomy, community, and solidarity. The failures here are political, not economic, and they are likely to be remedied only by a politics of cross-class and cross-race solidarity

the top tax rate could be as high as 83 percent—as opposed to 57 percent in the pure supply-side model—without harming economic growth.

Michael Cembalest, the chief investment officer of JPMorgan Chase, wrote in July of this year (in a clients-only newsletter obtained by Washington Post columnist Harold Meyerson) that “profit margins have reached levels not seen in decades,” and “reductions in wages and benefits explain the majority of the net improvement.” (Cembalest printed the latter quote in boldfaced lettering.) “US labor compensation,” he explained, “is now at a 50-year low relative to both company sales and US GDP.”

Citigroup analysts see the American postindustrial economy’s abandonment of fair play as an interesting fact to consider in formulating future investment strategies

“The upper classes of this country raped this country” is one of the more polite things that Morgan Stanley money manager Steve Eisman has to say on the eve of the 2008 sub-prime fiasco.

For decades, Democrats have suffered continuous and increasingly severe losses among white voters. But preparations by Democratic operatives for the 2012 election make it clear for the first time that the party will explicitly abandon the white working class.

All pretense of trying to win a majority of the white working class has been effectively jettisoned in favor of cementing a center-left coalition made up, on the one hand, of voters who have gotten ahead on the basis of educational attainment — professors, artists, designers, editors, human resources managers, lawyers, librarians, social workers, teachers and therapists — and a second, substantial constituency of lower-income voters who are disproportionately African-American and Hispanic.

there has been a significant shift in the role of the working class. You see it across all advanced industrial countries,” Teixeira, a senior fellow at the Center for American Progress, said in an interview.In the United States, Teixeira noted, “the Republican Party has become the party of the white working class,” while in Europe, many working-class voters who had been the core of Social Democratic parties have moved over to far right parties, especially those with anti-immigration platforms.

a college degree is no longer the guarantor of a middle-class existence. Until the early 1970s, less than 11 percent of the adult population graduated from college, and most of them could get a decent job. Today nearly a third have college degrees, and a higher percentage of them graduated from nonelite schools. A bachelor’s degree on its own no longer conveys intelligence and capability. To get a good job, you have to have some special skill — charm, by the way, counts — that employers value. But there’s also a pretty good chance that by some point in the next few years, your boss will find that some new technology or some worker overseas can replace you.

Though it’s no guarantee, a B.A. or some kind of technical training is at least a prerequisite for a decent salary. It’s hard to see any great future for high-school dropouts or high-school graduates with no technical skills. They most often get jobs that require little judgment and minimal training, like stocking shelves, cooking burgers and cleaning offices. Employers generally see these unskilled workers as commodities — one is as good as any other — and thus each worker has very little bargaining power, especially now that unions are weaker. There are about 40 million of these low-skilled people in our work force. They’re vying for jobs that are likely to earn near the minimum wage with few or no benefits, and they have a high chance of being laid off many times in a career.

The actual rules have also changed notably since the 1970s. Back then, there were all sorts of stabilizers that pushed working-class wages up and kept rich people’s wages lower. The minimum wage, at its pre-1970s peak, was almost 50 percent higher than it is now (inflation adjusted, naturally). Unions were stronger and had more government support. The United States taxed the rich much higher relative to the working class. (The top bracket was taxed at 70 percent in 1978; now it’s 35 percent.) It’s hard to imagine, but regulations largely limited the profitability of banks and kept bankers’ financial compensation low.

Health economists are nearly unanimous that the United States should move away from fee-for-service payments to doctors, the traditional system where private physicians are paid for each procedure and test, because it drives up the nation’s $2.7 trillion health care bill by rewarding overuse

“In many places, the trend will almost certainly lead to more expensive care in the short run,”

When hospitals gather the right mix of salaried front-line doctors and specialists under one roof, it can yield cost-efficient and coordinated patient care, like the Kaiser system in California

rom the outset, the Volcker Rule was the product of compromise. The Obama administration declined to favor legislation forcing banks to spin off their turbulent Wall Street operations from their deposit-taking businesses. At the same time, it did not want regulated banks, which enjoy deposit insurance and other forms of government support, trading for their own profit. That business, known as proprietary trading, had long been a lucrative, albeit risky, business for Wall Street banks.

Paul A. Volcker, a former chairman of the Federal Reserve who served as an adviser to President Obama, urged that Dodd-Frank outlaw proprietary trading. And over the objections of Wall Street, the administration inserted into Dodd-Frank what became known as the Volcker Rule.

The rule, however, does not ban types of trading that are thought to be part of a bank’s basic business. Banks can still buy stocks and bonds for their clients — a practice called market making — and place trades that are meant to hedge their risks.

The reason that postwar economies looked different — that inequality fell — was historical catastrophe. World War I, the Depression and World War II destroyed huge accumulations of private capital, especially in Europe. What the French call “les trentes glorieuses” — the roughly 30 postwar years of rapid economic growth and shrinking inequality — were a rebound. The American curve, of course, is less sharp, given that the fighting was elsewhere.

the professional and political assumption of the 1950s and 1960s, that inequality would stabilize and diminish on its own, proved to be an illusion. We are now back to a traditional pattern of returns on capital of 4 percent to 5 percent a year and rates of economic growth of around 1.5 percent a year.

So inequality has been quickly gathering pace, aided to some degree by the Reagan and Thatcher doctrines of tax cuts for the wealthy. “Trickle-down economics could have been true,” Mr. Piketty said simply. “It just happened to be wrong.”

both optimists and pessimists share a belief more telling than Piketty’s success: the idea that the traditional Democratic economic agenda is dead.

Piketty’s book reinforces the idea that the domestic policies liberals advocate for are palliative, not curative — that, in essence, inequality is here to stay.

“for countries at the world technological frontier” — the United States, northern Europe and parts of Asia — and “ultimately for the planet as a whole – there is ample reason to believe that the growth rate will not exceed 1-1.5 percent in the long run, no matter what economic policies are adopted.”

Atlantic.displayRandomElement('#header li.business .sponsored-dropdown-item'); Derek Thompson - Derek Thompson is a senior editor at The Atlantic, where he oversees business coverage for the website. More Derek has also written for Slate, BusinessWeek, and the Daily Beast. He has appeared as a guest on radio and television networks, including NPR, the BBC, CNBC, and MSNBC. All Posts RSS feed Share Share on facebook Share on linkedin Share on twitter « Previous Thompson Email Print Close function plusOneCallback () { $(document).trigger('share'); } $(document).ready(function() { var iframeUrl = "\/ad\/thanks-iframe\/TheAtlanticOnline\/channel_business;src=blog;by=derek-thompson;title=the-irrational-consumer-why-economics-is-dead-wrong-about-how-we-make-choices;pos=sharing;sz=640x480,336x280,300x250"; var toolsClicked = false; $('#toolsTop').click(function() { toolsClicked = 'top'; }); $('#toolsBottom').click(function() { toolsClicked = 'bottom'; }); $('#thanksForSharing a.hide').click(function() { $('#thanksForSharing').hide(); }); var onShareClickHandler = function() { var top = parseInt($(this).css('top').replace(/px/, ''), 10); toolsClicked = (top > 600) ? 'bottom' : 'top'; }; var onIframeReady = function(iframe) { var win = iframe.contentWindow; // Don't show the box if there's no ad in it if (win.$('.ad').children().length == 1) { return; } var visibleAds = win.$('.ad').filter(function() { return !($(this).css('display') == 'none'); }); if (visibleAds.length == 0) { // Ad is hidden, so don't show return; } if (win.$('.ad').hasClass('adNotLoaded')) { // Ad failed to load so don't show return; } $('#thanksForSharing').css('display', 'block'); var top; if(toolsClicked == 'bottom' && $('#toolsBottom').length) { top = $('#toolsBottom')[0].offsetTop + $('#toolsBottom').height() - 310; } else { top = $('#toolsTop')[0].offsetTop + $('#toolsTop').height() + 10; } $('#thanksForSharing').css('left', (-$('#toolsTop').offset().left + 60) + 'px'); $('#thanksForSharing').css('top', top + 'px'); }; var onShare = function() { // Close "Share successful!" AddThis plugin popup if (window._atw && window._atw.clb && $('#at15s:visible').length) { _atw.clb(); } if (iframeUrl == null) { return; } $('#thanksForSharingIframe').attr('src', "\/ad\/thanks-iframe\/TheAtlanticOnline\/channel_business;src=blog;by=derek-thompson;title=the-irrational-consumer-why-economics-is-dead-wrong-about-how-we-make-choices;pos=sharing;sz=640x480,336x280,300x250"); $('#thanksForSharingIframe').load(function() { var iframe = this; var win = iframe.contentWindow; if (win.loaded) { onIframeReady(iframe); } else { win.$(iframe.contentDocument).ready(function() { onIframeReady(iframe); }) } }); }; if (window.addthis) { addthis.addEventListener('addthis.ready', function() { $('.articleTools .share').mouseover(function() { $('#at15s').unbind('click', onShareClickHandler); $('#at15s').bind('click', onShareClickHandler); }); }); addthis.addEventListener('addthis.menu.share', function(evt) { onShare(); }); } // This 'share' event is used for testing, so one can call // $(document).trigger('share') to get the thank you for // sharing box to appear. $(document).bind('share', function(event) { onShare(); }); if (!window.FB || (window.FB && !window.FB._apiKey)) { // Hook into the fbAsyncInit function and register our listener there var oldFbAsyncInit = (window.fbAsyncInit) ? window.fbAsyncInit : (function() { }); window.fbAsyncInit = function() { oldFbAsyncInit(); FB.Event.subscribe('edge.create', function(response) { // to hide the facebook comments box $('#facebookLike span.fb_edge_comment_widget').hide(); onShare(); }); }; } else if (window.FB) { FB.Event.subscribe('edge.create', function(response) { // to hide the facebook comments box $('#facebookLike span.fb_edge_comment_widget').hide(); onShare(); }); } }); The Irrational Consumer: Why Economics Is Dead Wrong About How We Make Choices By Derek Thompson he

First, making a choice is physically exhausting, literally, so that somebody forced to make a number of decisions in a row is likely to get lazy and dumb.

Second, having too many choices can make us less likely to come to a conclusion. In a famous study of the so-called "paradox of choice", psychologists Mark Lepper and Sheena Iyengar found that customers presented with six jam varieties were more likely to buy one than customers offered a choice of 24.

n recent years, historians have rubbed much of the luster from the Civil War and questioned its sanctification. Should we consecrate a war that killed and maimed over a million Americans? Or should we question, as many have in recent conflicts, whether this was really a war of necessity that justified its appalling costs?

Unlike the revisionists of old, Goldfield sees slavery as the bedrock of the Southern cause and abolition as the war's great achievement. But he argues that white supremacy was so entrenched, North and South, that war and Reconstruction could never deliver true racial justice to freed slaves, who soon became subject to economic peonage, Black Codes, Jim Crow, and rampant lynching.

Nor did the war knit the nation back together. Instead, the South became a stagnant backwater, a resentful region that lagged and resisted the nation's progress. It would take a century and the Civil Rights struggle for blacks to achieve legal equality, and for the South to emerge from poverty and isolation.

At Amazon, workers are encouraged to tear apart one another’s ideas in meetings, toil long and late (emails arrive past midnight, followed by text messages asking why they were not answered), and held to standards that the company boasts are “unreasonably high.” The internal phone directory instructs colleagues on how to send secret feedback to one another’s bosses. Employees say it is frequently used to sabotage others. (The tool offers sample texts, including this: “I felt concerned about his inflexibility and openly complaining about minor tasks.”)

The company’s winners dream up innovations that they roll out to a quarter-billion customers and accrue small fortunes in soaring stock. Losers leave or are fired in annual cullings of the staff — “purposeful Darwinism,”

his enduring image was watching people weep in the office, a sight other workers described as well. “You walk out of a conference room and you’ll see a grown man covering his face,” he said. “Nearly every person I worked with, I saw cry at their desk.”