Outline of Chapter 3

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Outlineof Chapter 3

Outlineof Chapter 3

1.Chapter 3: Markets and Inequality

I.Beyond Market Forces:The market rules as well as behaviors play a significant role increating key inequalities of power and wealth. Every regulation, law,and the institutional arrangement have unsettling consequences andthe way Americans have been shaping the market economy of the countryworks to the merit of the individuals at the top and the demerit ofthe rest.

I.Corporate Governance:

Economicforces allowing managers to work for their individual gain as well asweaker social cohesion and unions working with the corporategovernance laws have led to a decline in wage share in nationalincome and an alteration in the way the American economy response toan economic downturn.

Evidence:the great recession led to a decline in wage share with firms pridingthemselves on their ruthlessness to cut down on workers and increaseproductivity.

II.Discrimination:Markets can create discrimination which leads to greater inequality:

I.Evidence:Matched pair field experiment by Devah Pager

II.Role of Government in Redistribution

Thegovernment is doing less to address the problem of inequality in theUnited States. Whereas the inequality level generated by the marketin the U.S., which is shaped as well as distorted by rent seeking andpolitics, is higher compared to the other developed industrialcountries, the government does less to interfere with the inequalitythrough the application of expenditure and tax programs.

a.Government and Opportunity

Inequalityof opportunity is regarded more rampant in the U.S. than the majorityof countries in the developed world.

Evidence:huge inequality levels in the access to jobs and human capital.

III.The Big Picture

Themore the egalitarian societies work to keep their social cohesion inthe unequal societies, the policies proposed by the government andother institutions foster the tenacity of inequality.

a.Justifying inequality:

Marginalproductivity theory regarded as a prevailing notion in economics.

Evidence:Lew Daly and Gar Alperovitz conclusion in 2009 that if much of whatone owes came to him as a free gift of most generations of historicalcontribution, then there is a profound question regarding how muchcan be claimed as reasonably earned by any single individual in thepresent or coming days.

b.Is inequality necessary to give people incentives?

Inequalityis not necessary for giving people incentives since less of it canlead to better productivity.

Evidence:the embarrassment of the banks following the 2008 financial debaclethat made them change the name of what they paid their managers fromperformance bonuses to retention bonus.

c.Parsing out the sources of inequality:

Explanationof the increase in wages and salaries dispersion remains contentious.

Evidence:the growth reported in the financial sector as a portion of the totalU.S. income contributing to elevated levels of inequality.


Stiglitz,J. E., (2013). ThePrice of Inequality: How today’s Divided Society Endangers outFuture.New York: W. W. Norton &amp Company, 1st ed. ISBN-13:978-0393345063)