Poor Woody

Woody Allen Doesn't Own Computer and doesn't use email

The Huffington Post
By Britney Fitzgerald

Posted: 06/18/2012 2:57 pm Updated: 06/18/2012 2:57 pm




While streams of email flood most of our inboxes, director Woody Allen remains happily disconnected from much of the virtual world.



In an interview with the Wall Street Journal, Allen admitted to owning an iPhone, but only for making calls and listening to jazz records while traveling. He doesn't have a computer, he said, and he doesn't even use email -- ever. (He does, however, read The Huffington Post.)



"I have never sent an email in my life. I never received an email. I have two buttons [on my iPhone] I can touch -- the weather and the Huffington Post," he told WSJ.



Allen has directed hit films over the span of several decades, including the 1977 classic "Annie Hall," as well as more recent award winners like "Midnight in Paris." Even in his movies set during modern times, you'll rarely see Allen's characters texting or scrolling through Twitter feeds.



"I tend to have my characters use typewriters, because that's the way that I think. I think they're home with a typewriter. I hate when I have to put them home with a word processor or something," the tech-shy director told the Journal and admitted that he isn't really a fan of "anything mechanical."



Allen isn't the only celebrity to shun many of the latest trends in consumer tech and online culture. Smashing Pumpkins frontman Billy Corgan recently ranted to Antiquiet about negativity on Facebook pressuring people to change their ideals.



"You’ve got a Facebook with a few hundred friends. If you do something truly radical, are you ready to withstand the forty negative comments? Most people aren’t. So they’re getting peer pressured at levels they don’t even realize. It’s what you don’t say," said Corgan. "It’s like the government spying on us. Right? Now it becomes about what we don’t say."

I Wish I Understood

What was going on in Europe with the continuing scary economic situation and now yesterday's Greek elections but I don't understand so I'm not going to worry about it.

The Man Who Isn't There

Who is Mitt Romney?  Beats me.  What does he stand for?  I don't know.  What would he like to accomplish is he's elected President?  Other than repeal Obamacare I haven't a clue. 

He was raised in monied privilege so he has no compelling life story.  As far as I can tell, he has not accomplished anything professionally except make big money at Bain Capital restructuring companies and putting thousands of people out of work.  His approval rating when he got bored as Governor of Massachusetts and left was in the 30's.  The only notable thing he did was health care which he runs from now.  He has flip flopped on every important political issue.  He can't talk about his religion because of the crazy things that Mormons believe.

As Gertrude Stein would say, there is no there THERE.

Krugman's New Book

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What Would Keynes Do?

‘End This Depression Now!’ by Paul Krugman

By MATTHEW BISHOP

Published: June 15, 2012

Nearly four years on from the financial meltdown that plunged it into recession, the global economy remains fragile. The latest green shoots of recovery in the United States already show signs of turning brown. It is touch and go whether Barack Obama will enter the polls with unemployment above or below the 8 percent rate that usually means defeat for an incumbent president. Across the Atlantic, the euro zone stumbles from crisis to crisis; the continuing problems of the heavily indebted PIIGS (Portugal, Ireland, Italy, Greece and Spain) remain the basis for many a nightmare, some of the worst involving the banks around the world that own much of the debt.

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Illustration by Paola Rollo

END THIS DEPRESSION NOW!

By Paul Krugman

259 pp. W. W. Norton & Company. $24.95.

If ever there was a moment for fresh thinking, this is surely it. Indeed, Paul Krugman argues in “End This Depression Now!,” without a radical change in economic policy in both the United States and Europe, the likeliest outcome is a prolonged depression, perhaps not as “great” as in the 1930s but with clear similarities, above all in the immense human cost of needlessly high unemployment. As Krugman sees it, fiscal austerity, a fashionable idea on both sides of the Atlantic, can only make matters worse. This new “austerian” conventional wisdom, Krugman says, has “completely thrown away Keynes’s central dictum: ‘The boom, not the slump, is the time for austerity.’ ” 

Not surprisingly, as today’s leading interpreter of John Maynard Keynes, Krugman uses Keynes’s definition of a depression, “a chronic condition of subnormal activity for a considerable period without any marked tendency either towards recovery or towards collapse.” He attributes this to a classic Keynesian “liquidity trap,” in which an indebted private sector is so intent on rebuilding its savings that even interest rates of zero cannot tempt it to borrow and spend enough to get the economy working again at full capacity. And he offers the classic Keynesian remedy of the government making up for the lack of private spending by splashing the cash around itself. Even now, Krugman argues, full employment could be restored to the United States in less than two years, given the political will to spend a lot of money. 

How much money? Ideally, enough to generate inflation of 4 percent a year, Krugman says, breaking another of today’s economic taboos by arguing that a bit of inflation would be good for us. He is particularly dismissive of the fact that the “Germans hate, hate, hate” inflation, owing to memories of the great inflation of the 1920s; in fact it was the deflationary policies of the 1930s, he tells us, that “actually set the stage for the rise of you-know-who.” One of the advantages of inflation cited by Krugman is that it reduces the real value of all that depression-inducing debt, like the mortgages people use to buy homes. On today’s current low inflation trend, Krugman anticipates prices being 8 percent higher in 2017 than today. But, he says, “if we could manage 4 or 5 percent inflation over that stretch, so that prices were 25 percent higher, the real value of mortgage debt would be substantially lower than it looks on current prospect — and the economy would therefore be substantially farther along the road to sustained recovery.” 

Longtime readers of Krugman will know there are at least two of him. One is the gifted winner of the Nobel in economic science, respected throughout the academy for his mastery of the dismal science; the other, the populist polemicist and baiter of the right who writes columns in The New York Times. “End This Depression Now!” is a collaborative effort by the two Krugmen. Professor Krugman usefully contributes plenty of mainstream economics in support of his stimulus plan and in order to debunk the idea that austerity policies in today’s circumstances can boost an economy by increasing confidence. (As he points out, Britain, the leading country to embrace austerity voluntarily, is hardly setting the world on fire.) Yet no opportunity to preach to the choir is missed by the populist Mr. Krugman, nor any chance to mock those he calls the “Very Serious People” who disagree with him. This is often entertaining: during a stern speech in 2010 by Germany’s finance minister, Krugman’s wife dismissed those who regard austerity as a sort of moral purification with the whispered aside, “As we leave the room, we’ll be given whips to scourge ourselves.” But the book’s preachiness gives those politicians and economists who most need to read this book an easy excuse to ignore it. 

To this Moderately Serious Reviewer, Krugman’s habit of bashing anyone who does not share his conclusions is not merely stylistically irritating; it is flawed in substance. The rise in unemployment may be largely the result of inadequate demand, but that does not mean there has been no contribution from structural changes like the substitution of cheap foreign workers and innovative technology for some jobs in rich countries. The austerians may be excessively fearful of so-called “bond vigilantes,” but that does not mean there is no need to worry about what investors think about the health of a government’s finances. Sure, ridicule those fundamentalists who believe it is theoretically impossible for an economy ever to suffer a shortage of demand, but does Krugman really need to take passing shots at Erskine Bowles and Alan Simpson, the chairmen of the widely respected bipartisan Bowles-Simpson Commission on deficit reduction appointed by President Obama? Maybe his case for stimulating the economy in the short run would be taken more seriously by those in power if it were offered along with a Bowles-­Simpson-style plan for improving America’s finances in the medium or long term. Instead, Krugman suggests cavalierly that any extra government borrowing probably “won’t have to be paid off quickly, or indeed at all.”

 

 

Whether that would be as marvelous as Krugman says is debatable. Inflation imposes real costs, for instance on retired baby boomers reliant on fixed dollar annuities and on foreign investors in government bonds. How those bondholders would respond is anyone’s guess, though they might shift away from the dollar or euro to other currencies or to alternatives like gold. Inflation would certainly increase the risk of the dollar losing its status as the world’s reserve currency, with potentially serious political consequences like competitive devaluations, accusations of currency manipulation, trade wars and maybe worse (as Krugman, an expert in the economics of trade, well knows). In wanting to give top priority to helping the unemployed, Krugman’s heart is clearly in the right place. Yet it would have made for a better book if he had offered a fuller discussion of the potential consequences of his policies, rather than evading it by citing Keynes’s famous observation that “in the long run we are all dead.” 

Matthew Bishop, the New York bureau chief of The Economist, has written several books on economics and is the author, with Michael Green, of the e-book “In Gold We Trust? The Future of Money in an Age of Uncertainty.”

A version of this review appeared in print on June 17, 2012, on page BR20 of the Sunday Book Review with the headline: What Would Keynes Do?.

Mitt's World

We Don’t Need No Education

By PAUL KRUGMAN

Published: June 14, 2012 649 Comments

Hope springs eternal. For a few hours I was ready to applaud Mitt Romney for speaking honestly about what his calls for smaller government actually mean.

Fred R. Conrad/The New York Times

Paul Krugman 

Never mind. Soon the candidate was being his normal self, denying having said what he said and serving up a bunch of self-contradictory excuses. But let’s talk about his accidental truth-telling, and what it reveals. 

In the remarks Mr. Romney later tried to deny, he derided President Obama: “He says we need more firemen, more policemen, more teachers.” Then he declared, “It’s time for us to cut back on government and help the American people.” 

You can see why I was ready to give points for honesty. For once, he actually admitted what he and his allies mean when they talk about shrinking government. Conservatives love to pretend that there are vast armies of government bureaucrats doing who knows what; in reality, a majority of government workers are employed providing either education (teachers) or public protection (police officers and firefighters). 

So would getting rid of teachers, police officers, and firefighters help the American people? Well, some Republicans would prefer to see Americans get less education; remember Rick Santorum’s description of colleges as “indoctrination mills”? Still, neither less education nor worse protection are issues the G.O.P. wants to run on. 

But the more relevant question for the moment is whether the public job cuts Mr. Romney applauds are good or bad for the economy. And we now have a lot of evidence bearing on that question. 

First of all, there’s our own experience. Conservatives would have you believe that our disappointing economic performance has somehow been caused by excessive government spending, which crowds out private job creation. But the reality is that private-sector job growth has more or less matched the recoveries from the last two recessions; the big difference this time is an unprecedented fall in public employment, which is now about 1.4 million jobs less than it would be if it had grown as fast as it did under President George W. Bush. 

And, if we had those extra jobs, the unemployment rate would be much lower than it is — something like 7.3 percent instead of 8.2 percent. It sure looks as if cutting government when the economy is deeply depressed hurts rather than helps the American people. 

The really decisive evidence on government cuts, however, comes from Europe. Consider the case of Ireland, which has reduced public employment by 28,000 since 2008 — the equivalent, as a share of population, of laying off 1.9 million workers here. These cuts were hailed by conservatives, who predicted great results. “The Irish economy is showing encouraging signs of recovery,” declared Alan Reynolds of the Cato Institute in June 2010. 

But recovery never came; Irish unemployment is currently more than 14 percent. Ireland’s experience shows that austerity in the face of a depressed economy is a terrible mistake to be avoided if possible.

And the point is that in America it is possible. You can argue that countries like Ireland had and have very limited policy choices. But America — which unlike Europe has a federal government — has an easy way to reverse the job cuts that are killing the recovery: have the feds, who can borrow at historically low rates, provide aid that helps state and local governments weather the hard times. That, in essence, is what the president was proposing and Mr. Romney was deriding. 

So the former governor of Massachusetts was telling the truth the first time: by opposing aid to beleaguered state and local governments, he is, in effect, calling for more layoffs of teachers, policemen and firemen.

Actually, it’s kind of ironic. While Republicans love to engage in Europe-bashing, they’re actually the ones who want us to emulate European-style austerity and experience a European-style depression. 

And that’s not just an inference. Last week R. Glenn Hubbard of Columbia University, a top Romney adviser, published an article in a German newspaper urging the Germans to ignore advice from Mr. Obama and continue pushing their hard-line policies. In so doing, Mr. Hubbard was deliberately undercutting a sitting president’s foreign policy. More important, however, he was throwing his support behind a policy that is collapsing as you read this. 

In fact, almost everyone following the situation now realizes that Germany’s austerity obsession has brought Europe to the edge of catastrophe — almost everyone, that is, except the Germans themselves and, it turns out, the Romney economic team. 

Needless to say, this bodes ill if Mr. Romney wins in November. For all indications are that his idea of smart policy is to double down on the very spending cuts that have hobbled recovery here and sent Europe into an economic and political tailspin.

The Maraniss Obama Bio

The Making of the President

‘Barack Obama,’ by David Maraniss from JAMES FALLOWS

Published: June 14, 2012

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During his 2008 campaign, Barack Obama so often stressed the improbability of his story that we have grown inured to how unlikely it really is. Everyone knows that his name, along with his inexperience, was an electoral handicap; that his mixed-race background made his victory historic; and that his transformation within five years from local Illinois politician to the most famous person on earth (and first incumbent president since Woodrow Wilson to win the Nobel Peace Prize) has no obvious parallel. The great virtue of David Maraniss’s huge and absorbing new biography is to demonstrate that Obama’s saga in its full and previously unexplored detail is more surprising and gripping than the version the world is familiar with.

BARACK OBAMA

The Story

By David Maraniss

Illustrated. 641 pp. Simon & Schuster. $32.50.

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Photograph from “Barack Obama: The Story”

Obama and his girlfriend Genevieve Cook, circa 1984. 

The engrossing parts of “Barack Obama: The Story” are not the ones that created the most pre-publication buzz: the diary entries from one of Obama’s girlfriends in his New York days in the early 1980s. This was Genevieve Cook, a white Australian, who let Maraniss quote the notes she made during her infatuation with Obama and eventual estrangement — including the judgment that for all his initial charm, he proved to be too cool and distant. In the context of current politics, that may seem a relevant insight. But in the context of this book, those entries are almost ho-hum, precisely because they could have come from any troubled “it’s not about you . . . ” relationship. The rest of Maraniss’s chronicle, which very minutely traces the president’s African and American lineages back for more than a century, is far more unusual. 

Maraniss, a Washington Post veteran and author of a celebrated biography of Bill Clinton and other works, has (with assistants whom he credits) applied a version of the Robert Caro treatment to a politician who, unlike Caro’s Lyndon Johnson, is still in his functioning prime. The book begins with people Barack Obama never met and certainly knows less about than Maraniss does, his great-grandparents on both sides. Nearly 600 pages later it ends with the current president, at age 27, driving a used yellow Datsun away from Chicago, where he had been a community organizer, to Harvard Law School and what Maraniss presents as the end of his search for identity and the beginning of a purposeful political career. 

To my taste the book has two imperfections. First, details pile up in encyclopedic volume sometimes unrelated to their significance. One example, of a large number I noted: It is important to know what Obama’s American grandfather and great-uncle did in combat during World War II, less so to see a list of people from the same Kansas county who were killed. Perhaps Maraniss wanted to leave no doubt about the thoroughness of his research, but even at half the book’s length that would have been clear. Also, when Maraniss departs from narrative and steps in to “tell” rather than “show,” his presentation of themes can sound balder than the subtle complexities evident from the tale itself. For instance, about Obama’s Kenyan grandfather, Hussein Onyango Obama: “There were times, foreshadowing the circumstances of his American grandson, when he was dismissed by some of his own people for acting white, or not seeming black enough.” The “foreshadowing” part is evident without belaboring. 

Nonetheless, this is a revelatory book, which anyone interested in modern politics will want to read, and which will certainly shape our understanding of President Obama’s strengths, weaknesses and inscrutabilities. 

Every few pages Maraniss offers a factual nugget that changes or enlarges the prevailing lore. For example: 

Obama’s Kenyan grand­father, who had five wives, was apparently not involved in Kenyan insurgencies or ever tortured by British colonialists during the Mau Mau era. (Indeed, he remained a trusted figure among white Kenyans — and although himself a convert to Islam, he sent his son to a Christian school.) Similarly: Obama’s mother was named Stanley Ann Dunham not at the perverse insistence of her father, Stanley, but because her mother was taken by the sophistication of a Bette Davis character, a woman named Stanley, in the movie “In This Our Life,” which she saw while ­pregnant. 

The entire tale is too vast to summarize, but four narratives dominate. The most tragically self-destructive is that of Obama’s own father, who dazzled people in Africa and America with his intelligence and eloquence but ruined other lives and finally his own with his irresponsibility. He had a wife in Kenya, with two children, when at the University of Hawaii he met, romanced and impregnated the 17-year-old Stanley Ann Dunham in 1960. They married, but she went home to Seattle a month after the birth of “Barry” in 1961. (The book’s details about a doctor who remembered the case would change the minds of any “birthers” open to factual evidence.) Maraniss says that “perhaps the luckiest thing” in young Obama’s life was that afterward he saw almost nothing of his father, “sparing his mother and him years of unpredictability and potential domestic violence.” On his return to Kenya, the senior Barack Obama went into a debauched alcoholic spiral and was involved in countless car crashes before the one that killed him in 1982, when he was 48 and his son was 21. 

Obama’s two American grandparents, Madelyn Payne and Stanley Dunham, are also compelling figures. On the surface they are Greatest Generation stalwarts: he a combat veteran, she a bomber-plant worker, young sweethearts from small-town Kansas secretly married on the night of a high school banquet. (Grandfather Stanley, with his long face and big ears, is also the forebear with the most striking physical resemblance to Barack Obama; the president looks almost nothing like his African father.) Under the surface, the Dunhams’ life was tense. Stanley’s childhood had been shattered when his mother killed herself. As an adult, he was increasingly a big-talking but disappointed salesman, while his wife, who became a bank official, took responsibility for the family and for the grandson who came to live with them rather than his mother. 

Maraniss’s portrayal of Obama’s mother, which complements that of Janny Scott in her 2011 book “A Singular Woman,” makes clear that even for her time Stanley Ann Dunham was a romantic and a risk taker. 

She sought adventure and was “afraid of smallness.” She married a Kenyan at 18 and an Indonesian at 22. She placed her son in elementary school in Jakarta — a school for the country’s academic elite, Maraniss shows, not an Islamic madrassa — and then sent him away, to her parents, as she delved deeper into Javanese culture. I will not be the only reader to finish this book feeling acute loss that Stanley Ann Dunham, who died of cancer at 52 before her son’s first run for any office, is not around to behold and explain the man he has become. 

And the narrative of her son: The evidence Maraniss has collected about this pre-law-school stage in Barack Obama’s life suggests a richer view of the man we have become familiar with, without really knowing. The years as a boy in Indonesia, where chubby Barry Soetoro (his step­father’s last name) with his curly hair was assumed to be from Ambon or some other nearby island of darker-skinned people. Adolescence in Hawaii, where he was thought of as one of many hapa, or multi­racial, people rather than placed on the unavoidable black-white grid of mainland America. Maraniss explains how Obama entered Occidental College as Barry and left as Barack, having decided on his first exposure to mainland culture that he must be black rather than white, a decision ratified through his time at Columbia and in Chicago. And yet, as Maraniss says, a “recurring theme is his determination to avoid life’s traps.” These include “the trap of his unusual family biography . . . in terms of stability and psychology. Then the trap of geography,” from being raised in Hawaii, and “finally the trap of race in America, with its likelihood of rejection and cynicism.” Anything that might have seemed odd in Barack Obama’s demeanor, from his studied unflappability to his sometimes unappealing coldness, seems instead a miracle of normality and adjustment after the story recounted here. 

We never fully know public figures, least of all one whose identity so much involves cool, deliberate reserve. But after this book we know one public figure much better. 

James Fallows is a national correspondent for The Atlantic and the author, most recently, of “China Airborne.”

Brainwashed

Thursday, Jun 14, 2012 5:21 PM UTC

We’ve been brainwashed

It's no accident that Americans widely underestimate inequality. The 1 percent has done it intentionally

By Joseph E. Stiglit

• • 
    
• (Credit: Yuri Arcurs via Shu

This article was adapted from the new book "The Price of Inequality."

How, in a democracy supposedly based on one person one vote, could the 1 percent could have been so victorious in shaping policies in its interests? It is part of a process of disempowerment, disillusionment, and disenfranchisement that produces low voter turnout, a system in which electoral success requires heavy investments, and in which those with money have made political investments that have reaped large rewards — often greater than the returns they have reaped on their other investments.

There is another way for moneyed interests to get what they want out of government: convince the 99 percent that they have shared interests. This strategy requires an impressive sleight of hand; in many respects the interests of the 1 percent and the 99 percent differ markedly.

The fact that the 1 percent has so successfully shaped public perception testifies to the malleability of beliefs. When others engage in it, we call it “brainwashing” and “propaganda.” We look askance at these attempts to shape public views, because they are often seen as unbalanced and manipulative, without realizing that there is something akin going on in democracies, too. What is different today is that we have far greater understanding of how to shape perceptions and beliefs — thanks to the advances in research in the social sciences.

It is clear that many, if not most, Americans possess a limited understanding of the nature of the inequality in our society: They believe that there is less inequality than there is, they underestimate its adverse economic effects, they underestimate the ability of government to do anything about it, and they overestimate the costs of taking action. They even fail to understand what the government is doing — many who value highly government programs like Medicare don’t realize that they are in the public sector.

In a recent study respondents on average thought that the top fifth of the population had just short of 60 percent of the wealth, when in truth that group holds approximately 85 percent of the wealth. (Interestingly, respondents described an ideal wealth distribution as one in which the top 20 percent hold just over 30 percent of the wealth. Americans recognize that some inequality is inevitable, and perhaps even desirable if one is to provide incentives; but the level of inequality in American society is well beyond that level.)
Not only do Americans misperceive the level of inequality; they underestimate the changes that have been going on. Only 42 percent of Americans believe that inequality has increased in the past ten years, when in fact the increase has been tectonic. Misperceptions are evident, too, in views about social mobility. Several studies have confirmed that perceptions of social mobility are overly optimistic.

Americans are not alone in their misperceptions of the degree of inequality. Looking across countries, it appears that there is an inverse correlation between trends in inequality and perceptions of inequality and fairness. One suggested explanation is that when inequality is as large as it is in the United States, it becomes less noticeable—perhaps because people with different incomes and wealth don’t even mix.
These mistaken beliefs, whatever their origins, are having an important effect on politics and economic policy.

Perceptions have always shaped reality, and understanding how beliefs evolve has been a central focus of intellectual history. Much as those in power might like to shape beliefs, and much as they do shape beliefs, they do not have full control: ideas have a life of their own, and changes in the world—in our economy and technology—impact ideas (just as ideas have an enormous effect in shaping our economy). What is different today is that the 1 percent now has more knowledge about how to shape preferences and beliefs in ways that enable the wealthy to better advance their cause, and more tools and more resources to do so.
Beliefs and perceptions, whether they are grounded in reality or not, affect behavior. If people see the “Marlboro man” as the type of person they aspire to be, they may choose that cigarette over others. If individuals overestimate some risk, they may take excessive precautions.

But important as perceptions and beliefs are in shaping individual behavior, they are even more important in shaping collective behavior, including political decisions affecting economics. Economists have long recognized the influence of ideas in shaping policies. As Keynes famously put it,

The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.

Social sciences like economics differ from the hard sciences in that beliefs affect reality: beliefs about how atoms behave don’t affect how atoms actually behave, but beliefs about how the economic system functions affect how it actually functions. George Soros, the great financier, has referred to this phenomenon as reflexivity, and his understanding of it may have contributed to his success. Keynes, who was famous not just as a great economist but also as a great investor, described markets as a beauty contest where the winner is the one who assessed correctly what the other judges would judge to be the most beautiful.

Markets can sometimes create their own reality. If there is widespread belief that markets are efficient and that government regulations only interfere with efficiency, then it is more likely that government will strip away regulations, and this will affect how markets actually behave. In the most recent crisis what followed from deregulation was far from efficient, but even here a battle of interpretation rages. Members of the Right tried to blame the seeming market failures on government; in their mind the government effort to push people with low incomes into homeownership was the source of the problem. Widespread as this belief has become in conservative circles, virtually all serious attempts to evaluate the evidence have concluded that there is little merit in this view. But the little merit that it had was enough to convince those who believed that markets could do no evil and governments could do no good that their views were valid, another example of “confirmatory bias.”

If individuals believe that they are being treated unfairly by their employer, they are more likely to shirk on the job. If individuals from some minority are paid lower wages than other equally qualified individuals, they will and should feel that they are being treated unfairly—but the lower productivity that results can, and likely will, lead employers to pay lower wages. There can be a “discriminatory equilibrium.”

Even perceptions of race, caste, and gender identities can have significant effects on productivity. In a brilliant set of experiments in India, low- and high-caste children were asked to solve puzzles, with monetary rewards for success. When they were asked to do so anonymously, there was no caste difference in performance. But when the low caste and high caste were in a mixed group where the low-caste individuals were known to be low caste (they knew it, and they knew that others knew it), low-caste performance was much lower than that of the high caste. The experiment highlighted the importance of social perceptions: low-caste individuals somehow absorbed into their own reality the belief that lower-caste individuals were inferior—but only so in the presence of those who held that belief.

Fairness, like beauty, is at least partly in the eyes of the beholder, and those at the top want to be sure that the inequality in the United States today is framed in ways that make it seem fair, or at least acceptable. If it is perceived to be unfair, not only may that hurt productivity in the workplace but it might lead to legislation that would attempt to temper it.

In the battle over public policy, whatever the realpolitik of special interests, public discourse focuses on efficiency and fairness. In my years in government, I never heard an industry supplicant looking for a subsidy ask for it simply because it would enrich his coffers. Instead, the supplicants expressed their requests in the language of fairness—and the benefits that would be conferred on others (more jobs, high tax payments).
The same goes for the policies that have shaped the growing inequality in the United States—both those that have contributed to the inequality in market incomes and those that have weakened the role of government in bringing down the level of inequality. The battle about “framing” first centers on how we see the level of inequality—how large is it, what are its causes, how can it be justified?

Corporate CEOs, especially those in the financial sector, have thus tried to persuade others (and themselves) that high pay can be justified as a result of an individual’s larger contribution to society, and that it is necessary to motivate him to continue making those contributions. That is why it is called incentive pay. But the crisis showed to everyone what economic research had long revealed—the argument was a sham. What was called incentive pay was anything but that: pay was high when performance was high, but pay was still high when performance was low. Only the name changed. When performance was low, the name changed to “retention pay.”

If the problems of those at the bottom are mainly of their own making and if those collecting welfare checks were really living high on the rest of society (as the “welfare deadbeats” and “welfare queen” campaign in the 1980s and 1990s suggested), then there is little compunction in not providing assistance to them. If those at the top receive high incomes because they have contributed so much to our society—in fact, their pay is but a fraction of their social contribution—then their pay seems justified, especially if their contributions were the result of hard work rather than just luck. Other ideas (the importance of incentives and incentive pay) suggest that there would be a high price to reducing inequality. Still others (trickle-down economics) suggest that high inequality is not really that bad, since all are better off than they would be in a world without such a high level of inequality.

On the other side of this battle are countering beliefs: fundamental beliefs in the value of equality, and analyses such as those presented in earlier chapters that find that the high level of inequality in the United States today increases instability, reduces productivity, and undermines democracy, and that much of it arises in ways that are unrelated to social contributions, that it comes, rather, from the ability to exercise market power—the ability to exploit consumers through monopoly power or to exploit poor and uneducated borrowers through practices that, if not illegal, ought to be.

The intellectual battle is often fought over particular policies, such as whether taxes should be raised on capital gains. But behind these disputes lies this bigger battle over perceptions and over big ideas—like the role of the market, the state, and civil society. This is not just a philosophical debate but a battle over shaping perceptions about the competencies of these different institutions. Those who don’t want the state to stop the rent seeking from which they benefit so much, and don’t want it to engage in redistribution or to increase economic opportunity and mobility, emphasize the state’s failings. (Remarkably, this is true even when they are in office and could and should do something to correct any problem of which they are aware.) They emphasize that the state interferes with the workings of the markets. At the same time that they exaggerate the failures of government, they exaggerate the strengths of markets. Most importantly for our purposes, they strive to make sure that these perceptions become part of the common perspective, that money spent by private individuals (presumably, even on gambling) is better spent than money entrusted to the government, and that any government attempts to correct market failures—such as the proclivity of firms to pollute excessively—cause more harm than good.

This big battle is crucial for understanding the evolution of inequality in America. The success of the Right in this battle during the past thirty years has shaped our government. We haven’t achieved the minimalist state that libertarians advocate. What we’ve achieved is a state too constrained to provide the public goods—investments in infrastructure, technology, and education—that would make for a vibrant economy and too weak to engage in the redistribution that is needed to create a fair society. But we have a state that is still large enough and distorted enough that it can provide a bounty of gifts to the wealthy. The advocates of a small state in the financial sector were happy that the government had the money to rescue them in 2008—and bailouts have in fact been part of capitalism for centuries.

These political battles, in turn, rest on broader ideas about human rights, human nature, and the meaning of democracy and equality. Debates and perspectives on these issues have taken a different course in the United States in recent years than in much of the rest of the world, especially in other advanced industrial countries. Two controversies—the death penalty (which is anathema in Europe) and the right to access to medicine (which in most countries is taken as a basic human right)—are emblematic of these differences. It may be difficult to ascertain the role the greater economic and social divides in our society has played in creating these differences in beliefs; but what is clear is that if American values and perceptions are seen to be out of line with those in the rest of the world, our global influence will be diminished.
Reprinted from The Price of Inequality by Joseph Stiglitz. Copyright © 2012 by Joseph Stiglitz. With the permission of the publisher, W.W. Norton & Company, Inc.