to ask you about from palgrave macmillan, macmillan -- >> the largest spanish-language daily newspaper in the u.s. and she has written a book called killing the american dream which argues against the anti immigration policies. ..

rising inequality in the u.s. is banned for the democracy. he says we need to become a more equitable society. this is just over an hour. >> thank you very much and i appreciate some of people coming here even though there's a little bit of discomfort. as many of you may know, this book now grew out of an article i wrote in a "vanity fair". "vanity fair" is not the usual meet him for economists, but i did discover that it's read more than my articles in econometrica. [laughter] the title of the article summarizes a lot of what i'm going to say which is the title of that article is the other 1%,

by a 1%, and for the 1% and describes something about our economy. the article went level. it's one of the modern technology, and my publisher persuaded me to expand a four page article and they got bigger and bigger. what i wrote was much bigger than that and he can disappoint me. what i want to do this evening is to try to describe the magnitude of the inequality in the united states, which i think most people haven't fully grasped the causes of this inequality, the consequences, and i'm going to argue that is actually very bad for our economy, but also very bad for our democracy. i will talk a little bit about the way it manifests itself in almost every aspect of public

decision from budgets to macroeconomic policy. and then finally, i will house a few words to say about what can be done about it, because i'm going to argue it's not inevitable, it's a consequence of the policies we've adopted and to try to see what can be done. picking up on the remark that was made. one of the presidential candidate suggested you shouldn't talk about these things in public. he also said it's all about the politics of envy. it's not the politics of envy, it's about the justification consequences of a level of inequality that is reached in erica today. what aspect is that most americans don't realize today america has more in the quality than any of the other infants in

the industrial countries. and that says something because we like to think of inequality as having something to do with market forces. but market forces are all over the world. will we do with our poverty in government affects how the market forces operate and the way that has happened in the united states has resulted in having more inequality than any of their society. that should be positive reflection. not only have we obtained this high level in the quality, it's been growing. and it's been growing very rapidly. it is to be said that watching inequality grows like watching grass grow. it's very hard to see it happen. but in fact it's been happening in the united states it's been extraordinarily rapid. since 1980, the share of the

national income that goes to the top one person has doubled from 10% to 20%. one person it's one out of $5. that's in terms of income, but in terms of wealth, and he called these even greater. the top 1% it's about 40% of all -- has about all the wealth at 40%. however you slice it, in the quality is growing. at the very, very top, the top .1%, their share of gdp has tripled since 1980. what happened more recently, say 2010, in the recovery from the great recession, not a full recovery, not a real recovery, but what happened, the top 1% got 93% of the growth of our

economy. but even more disturbing in some ways is what's been happening to opportunity. ryan, the head of the budget committee, said we are not interested in equal what the outcomes. we are interested in is opportunity. but unfortunately, that's not any better. the united states is the country with of the least the quality of opportunity of any of these advanced industrial countries for which there's data. what does that mean? the life chances of somebody born at the bottom carless -- leche less than that of somebody born in the middle and at the top, and there's a higher correlation, higher dependence on the child -- of a child's prospects on the education and

income of his parents than any of these other advanced industrial countries. that should be very disturbing because we think of ourselves as a land of opportunity, and we all know examples of people who've made it from the bottom to the top from the metal to the top. we all know examples of immigrants from poor backgrounds that have made it to the top. but many economists talk about opportunities, we don't mean these examples, these exhibitions. will we be in is what happens on average. what are the life chances. and that dimension america is performing more poorly than any of the other advanced industrial countries. what is particularly concerned is what this boats for the future of any call the in the united states because if there's less opportunity it's less likely that in the future we will have even more in the quality in a vicious circle that

i will come back to later. as i said, this level of inequality is not inevitable. other countries have less, we have less inequality in our past. even the increase of any quality is not inevitable. the united states say a decade or two ago have even then the highest level of inequality, but our inequality has been increasing rapidly while others have managed to tame the increases in the quality and the few countries have reversed it and brought down the degree of inequality. one example of that of such countries as brazil, and one way of looking at what happened in brazil, one interpretation is they looked at the press of this, they saw where they were going and the good fight in the society. people had a kind of political social and economic turmoil and

they said they can't go there and they developed a cohesion of even the 1% in the interest for their continuation of the society. the very far right by the american standards and the left president cardoza said it was important for every mehdi to get an education, and he pushed this and you all know that the president saying no child should go hungry. no child should go without vaccinations and succeeded in actually doing a lot about the poverty in that country so much so that it's already reflected in the data. you see the decline and inequality in the relatively short pro time. those who defend this kind of inequality -- and there are, as

you know, many, although increasingly few -- those who defend this level of any quality say it's the politics of envy. everybody really benefits and that's an idea called trickle-down economics. you throw enough money to the top and somehow it trickles down, and eventually everybody benefits. i wish it were true because if it is true, given the level of inequality everybody would be in pretty good shape. if you look at the data right now, most americans, and let me repeat, most americans are worse off than they were a decade and a half ago. in other words, incomes adjusted for inflation at the median, half above and half below lower than they were in 1997. the next striking.

so, the american economy hasn't been working for most americans. it's working very well for those in the upper 1% or 10%, but not for the majority of americans. another statistic i find even more troubling is when you parcel out more finely when you see is the extent to which some groups in our society have been doing particularly poorly. males have a large fraction of the population obviously. a full-time male worker in the united states, his income adjusted for inflation medium, people in the middle, is lower than was in 1968 almost half a century ago. and if you want to understand some of the frustrations and

some of the alienation, it has a lot to do with people finally beginning to figure out that the american dream is not true. so the idea that you shouldn't complain because while the bottom may be getting and the metal may be getting a smaller share the pie is getting bigger and therefore the size of the slice is bigger that's just wrong. in fact, if you look historically, in the period, in the decades immediately after world war ii, and our economy grew much faster than it did in the period after 1980. and the period after world war ii we grew together. every group grew, but the people what the bottom grew more rapidly. and the people as contrasted to

the period after 1980, where the bottom and the middle have not done very well, but the people with the top have done very well. and this relationship between in the quality and growth is not an accident, and in the way to try to continue that leader. i believe this inequality has been harming our economy. it's also the case that our views of inequality would be different if those at the very top receive their income because of their greater contribution that they made. the idea that those of the top received their high-income justification has been part of the economic theory for a very long time. those of you that study the standard economics may remember the theory called marginal productivity people's pay is related to their contribution.

well, that idea was totally undermined in my judgment by what happened in the great recession. you may remember that those bankers who brought the world's economy to the brink, who brought their own firm to the brink of their contribution, either to the firm were to the society, and was unambiguously negative and walked off with very large bonuses. how could you say that their pay was a result of their margin of productivity? i sometimes joke then you make a site in periera, so they thought that was negatively correlated rather than positively, but that isn't what the theory is really supposed to say. in fact, some firms were so embarrassed by the lack congruence between performance and pay that they decided to change the name performance pay

to retention bonus. of course it raises the same question why you want to retain somebody who brought you to the brink of room. that is one of the reasons that there's such discontent. if you look at the people who made the most important contributions to society, the people who did the mathematics behind the computer, the people who discovered the transistor, the laser, you can go down all the major innovations that the dna that have transformed our society. none of them are in the top wealthiest people in the country were in the world. the people who wind up there have done something different. i'm going to come to that in imminent. i do want to say before coming to that fear that there are many

dimensions to the inequality. it's not that there's too much money at the top, but it's been a hollowing out of the middle class. their income line mentioned is lower but the population is in a range of the middle that's been getting smaller and the country is becoming more polarized, and the consequence of that is that there are larger factions, significantly larger fraction of the populations that are in poverty today. one example of that brought home when i was in india not long ago, and on the front page they had a big article about how one out of seven americans is on food stamps, and one out of seven americans even though they were on food stamps faced food in security. that means they go to bed at least once a month concrete not because they are on a diet but they can't afford food. and of course the context, the

indians for finding this amazing. america is supposed to be this rich country, and yet here even in america there are so many people that can afford food and remain hungry. the recession has made all these problems worse and it's taken away particularly in the area of all its had a devastating effect because americans in the bottom and the middle put most of their wealth in their homes. when the house prices went down by 30% in some places by 50%, they lost everything. so that leads to the kind of statistics such that the six members of the family have a wealth that is equal to the bottom 30% of america. and that is a testimony to how

rich the rich is but it's also testimony to help poor the bottom is. when you look at income inequality, it manifests itself in every dimension. for health, life expectancy. if you happen to be poor come in your life expectancy is remarkably low were. especially in america, because we don't have any commitment to providing health care for everyone. so come and let me now spend a few minutes, and i am running out of time explaining the sources of this inequality. each part of the inequality, the increase in the top, the holding out in the middle, the increasing poverty has their own explanations, and i'm going to spend most of my time talking about the top. one of the arguments in the book

is that a lot of income at the top is related to brank seeking. those of you that are not economists, let me explain. links r-tn come you get not from working, not from effort that your ownership. say originated landowners bought rent but now the economies have generalized that and the basic ideas are very simple. the question is are you making the pie bigger that's creating wealth, or are you trying to get a bigger share of the pie and the fight to get a bigger share you actually made me get a smaller. and we are used to talking about the problem of rent seeking in the leal countries and russia. we described these countries as rent seeking economies. what most americans don't realize is we have become to a

large extent a rent seeking the economy. it's like monopoly. monopoly you get your profits by restricting output, not by producing more but by restricting output. if you look at the people with the top, the include some monopolists. not only my judgment of monopoly, with american courts have judged. you can figure out who i'm talking about. another kind of rent seeking example occurs as a result of our deficiencies in corporate governance. of the ceos of the corporations had been very successful in getting for themselves a larger share of the corporate pie. this has increased enormously in the las30 years.

much worse in the united states than in any of their country. you cannot relate their pay to any high level of productivity for american corporations. it's unrelated as an example i gave him the financial sector illustrates. so, if you have somebody the worked for you, you would say you have the right to determine what their pages. it's almost obvious. the managers of companies are supposed to work for the shareholders. but the managers fought tooth and nail to stop a simple provision that would say shareholders should have a say in pay. other countries like mr. dalia have had such legislation. but the ceos in america said it would be the end of capitalism because they would be held accountable.

and that's an example of rent seeking getting a larger share of the pie. market forces obviously to play a role in affecting all level of inequality though we have. but market forces don't exist in a vacuum and laws and regulations the kleypas sheep those market forces. let me give you two examples that illustrate that. take our bankruptcy law. our bankruptcy law and the united states gives first priority to your evidence. the risky securities that brought down aig and require a bailout of $150 billion, we say those are the most important things in society. more important than paying wages or anything else, turn of events. and scores the consequence of that is that resources moved into terrific this and making our economy more unstable.

at the other extreme, and the bankruptcy law, we say this deutsch in debt cannot be discharged even in bankruptcy, even if the school does not deliver on the education they promised. in most areas use the satisfaction guaranteed and your money back. but in this as the for-profit schools, many of them owned by wall street have tried to exploit the system's said you won't get your money back no matter what we give you coming and your student loan will be an albatross around your neck rest of your life. and i argue in the book reintroducing the united states a kind of partial indentured servitude. another example that should be deeply disturbing is the way the financial sector has been very

successful in predatory lending and abuse of credit card practice, a whole set of things of that kind which effectively move money from the bottom to the top, so that helps explain the two extremes why there is so much money it the top and little money at the bottom the end of the legal framework gave them the scope to do that. that's another set of explanations for the unusual level of inequality in the united states. a final set explanations has to do with a government that to those of the top use their political influence to get more money out of the government. it takes many forms. - the chairman of the council of economic advisers one of the tasks i was given as to identify corporate welfare and try to do something about it. it's not so easy to identify

because an awful lot of it is buried in the tax code, not easy to find. but it was very and i was very large. unfortunately, while we could identify it after a lot of work, we couldn't do anything about it. in fact and the subsequent years it grew enormously. the largest active corporate welfare was the bailout of the banks and the trillions of dollars. but in addition to this, there are a whole set of open largely hidden subsidies and an example of hidden subsidies is when the government pays more of the market price for what a bias to it in a sample was medicare part b, the drug benefit, very important program that there was one sentence and it shows how it can make a difference. one sentence that said the government, the largest

purchaser of drugs could and to bargain with the drug companies and the estimated cost of the one sentence is a half trillion dollars over ten years. again, just a gift to the top. the other way of course is to sell public assets and below market prices. again, a kind of giveaway. when we sell minerals come we ask them on the to pay a nominal amount, not anything related to the fair market value. so, again it's a giveaway that leads to moreni quality. well, these things i've described have contributed to making the u.s. of the country with the most unequal before tax and distribution of income. we do less to correct the inequality of market and come.

that is to say we do less through the progressive taxation and transfers to make our society more equal even given the high level of inequality that we have. and things again have gotten worse. most of you probably know about the most egregious example of that coming and that is that the average tax rate of the top 1% is around 15%. less, much less, than those who learn a much lower in come. and we all know at least one person who falls exactly in that category not paying his fair share of taxes. the reason for this of course we have special provisions in the tax code for the taxation of capital gains.

it's a much lower income than people who work for a living by you think about what is the doing? what it says is if you make your money by speculating, buying cbs, trying to lie down the creaky economy, caused turmoil in the world, you're going to be taxed at 15%. if you work hard and try to make an innovation and are successful , you will be taxed at 35%. you can say how does this reflect either our values or system of economic efficiency. what it does reflect of course is politics. but before coming to that, i want to spend just a few minutes trying to explain why america's in the quality is so bad for our economy and growth. it's bad for politics and has a lot adverse effects, but in the

narrow sense, not only looking at it from a moral point of view but an economic point of view, it's bad. the first reason is this kind of inequality is associated with more instability. it's not -- in a weaker economy. it's not an accident last time any quality reached a level that is comparable to what we have today was the 1929 great depression. and the reason for this, let me try to explain very quickly, the people with the top save a significant fraction of their income, 15, 20%. people at the bottom can't. they spend all their money. so when you redistribute money from the bottom to the top, you reduce demand. now the response of the fed ignored what was going on the and said i know how to keep

demand going. let's create a bubble. of course they didn't say it quite that way. what they did discover that regulations. they had a flood of liquidity and that it creates the bible and the kept the economy going in spite of the fact of the low demand rising from level of inequality. worked but only temporarily. that was predictable and a loss predicted and now we are dealing with the aftermath but part of the aftermath is we still have a degree of equality, but we don't have the bubbly and that means our economy is lacking effective demand. how aggregate demand and that means there will be high levels of unemployment persistently. some of the of reasons and the qualities that for the economy and economic growth followed very much from the analysis of

the sources of inequality. i talked about one of the sources of in the quality is the extensive rent seeking and the rent seeking is that you are trying to get more money from others rather than adding to the wealth of the society so you are diverting resources to speculation to lobbying to try to persuade congress to give you a gift rather than using it more productively. in fact as a teacher at columbia coming and when i talk to teachers and other universities the field this frustration their best students disproportionately went in to finance. in the older days the would have gone into research and public research and medicine into a

variety of professions, but because of the magnitude of the money in investment banking, the disproportionately went into that area. and if society is allocating all of its human capital in that area, there are going to the consequences. a three reason why on average societies with higher levels of any quality don't do very well relates to the phenomena that i described before that america is the country with the least the quality of opportunity. what does that mean? people love the bottom are not living up to their potential. their prospects depend on their education, depends on the education and income of their parents and the means a large fraction of americans are not living up to that potential and is weakening of the economy.

the final thing is a strong economy requires heavy levels of public investment. public investment infrastructure, technology education. but when you have a very divided society, it's difficult to get support for that kind of public investment. part of the reason is that the 1% of people with the top worry about too strong of the government because they worry the government might use its power to redistribute, and they don't want that. they don't need the public parks. they don't need the public education. so for them, the government is a threat and yet in the long run, they are wrong because unless you would make these investments, the overall economy isn't going to perform well and they won't do well. so there's one important idea that comes out of this analysis, and that is you look at the old

textbooks they always talk about trade-offs. inequality is a bad thing they say but the price we will pay is lower growth, lower gdp. guess there are trade-offs and if you want more recall the, you have to pay a price. with the san alexey says is we will have a more efficient economy. does not a trade-off and in the quality is hurting our economy. that is the reason for the price of inequality. well, i've described the effect on the economy. i want to say a little bit about other aspects of commerce society because i do think the level of any quality that we achieved is weakening our

democracy and there is a puzzle pose that study political science know the standard theory says that in a democracy, the outcomes should reflect the median voter, the person have want more public spending in half want less. if you look what is the outcome of the american democracy it doesn't reflect the median. it's reflecting the views of the top and that is the puzzle. i try to analyze why that is and the two hypotheses, one of them is there has been a process of disenfranchisement. we saw that in florida, it is empowerment, and most importantly, disillusionment. because if you have a politics that leads to outcomes that are the same no matter what happens, that is to say we drive the legislation no matter what

party. in light make a difference but it doesn't make a lot of difference and you get a disillusionment with democratic politics and you saw that so clearly in the last election of 2010 where only 20% of the people bothered to show up. what they were saying is politics is inclined to solve the problem. and that i think it's extraordinarily difficult, extraordinarily bad for our democracy. the other partial reason for what's been going on has to do with advances in modern psychology, behavioral economics firms have learned how to sell products. they were able to sell the idea that cigarettes, there was no credible evidence that cigarettes cause cancer. even though the companies had in

their files the evidence that it did cause cancer. but they said this over and over again. they had a good advertising campaign, and a lot of people believed it. the point here is if you can sell that, dean to this products coming you can also sell bad ideas. and those in the 1% have the tools today, the resources, they have the incentives to do exactly that. and you see that over and over again. perceptions of the degree in the united states have been shaped by those who don't want americans to realize how unequal we are to be the equality of opportunity. people say we don't care about the quality of outcome we care about the opportunity as it that's all we have come about we don't. so there's been a concerted effort to convince america that there isn't a problem, when there clearly is.

what i try to do in a series of chapters in books is to show how these debates about inequality, these concerns of the growing inequality affects every aspect of our society of our politics so let me just give two examples. we are used to thinking of our country as determined by a rule of law, justice for all. but what do you mean by the rule of law and justice for all? it is supposed to protect those at the bottom. just to give you one example, think about what happened in the foreclosure crisis. we threw people love their homes. under the so-called rule of law who own nothing. and what is the banks' response? the response is most of the people thrown out of their homes

did owe something that the system of justice says most of the people who get capital punishment were probably guilty is something we should feel uncomfortable with that is the mindset of the bank we have undermined the rule of law. if we get other aspects of the system of justice we have evolved to not justice for all but those that can afford it. there is another example in washington going through the battle of the budget. you might think the battle of the budget was about the deficit, but it's not. it's about the issue of in the quality. the first place and would begin is to remember ten years ago we had a surplus the was so large alan greenspan said unless we do something about it, we are going to pay back our total national debt and he wouldn't be able to conduct monetary policy. [laughter] when you think about it for a

moment he realized how the species that argument was. assume those surpluses have continued in say 2,015 we have almost paid back the national debt. i believe he could have gone to his successor could have gone to congress and said we face a national emergency. you have to spend more. and you have to have a deficit. i cannot believe congress and the administration couldn't find a way to spend more and get the deficit up yet he made with a straight face that argument and congress passed a tax cut for the millionaires on the basis of that argument. you go through the of the things that happened between 2001 and today and realize of course we converted the surplus into a very big deficit, and the obvious way to get rid of the

deficit is reverse of the fourth things, there are only four things there really with the change in the fiscal position between 2001 and 2011 that would go a long way to correcting the problem with that kind of discussion is not on the agenda. what am i talking about? in the package that comes from the paulson send a token of capping the tax rate of the top. so, really what is here is an agenda to deduce the degree to some extent. i don't want to make it to strong but there is an element here of reducing the degree of distribution and progress devotee in our economy and society. the final chapter presents an agenda for reform and you can see that it pretty well follows from the analysis of the source of inequality of all the kinds. the top, the middle and the bottom. i want to go through it because i want to open up for questions.

but there is a difficult question. while it's easy to write down the economic reform agenda, i had 21 points but my editor said you can't list 21 points in a book that anyone will buy. it's a there what you have to figure it out. but we know the economics. we know what to do. the question is will the politics allow it? this is where to get the economic reforms we have to have political reforms. the political agenda i think is fairly well understood although there are some aspects that i think we try to call attention to that haven't gotten sufficient attention to the campaign finance reform, stopping the revolving doors, the lobbyists and so forth. the difficulty is we are going to have a vicious circle.

more economic inequality leads to more political equality that leads to the rules that make more economic inequality and the question is how do you cut into that vicious circle. i don't have a matching solution to that. i wish i did. that leads me to the final question is there hope. now, i want to end on a little bit of an upbeat because i was also told people don't buy books if they are going to get depressed. [laughter] my book, the the 3 trillion-dollar war, nobody wanted to buy it because it was too depressing and it turned out to underestimate the cost of the war. we can go into that later.

let me end on an optimistic note with a realization that there is skepticism about this optimism. [laughter] our country has been that high levels of inequality and other times. in the gilded age and in the years in the 20's and each of those times we step back from the brink. after the gilded age we have the progressive era we passed the antitrust laws that deal with monopoly. a full set of legislation to make our society work better and more to get their. the new deal. we know about the whole set of legislation in the 30's that make our economy work better and our society come together. so, hopefully what i hope this that americans will realize where we are, what the

consequences are, with the price we are paying for inequality and the price we will pay for inequality if we allow it to continue that will step back from the brink and do something about what is clearly one of our most pressing problems. thank you. [applause] that was absolutely spectacular. >> that's a good way to start. let me just stop there. [laughter] >> and i've been a fan for a long time. i have to quick questions. one of them is a leveraged buyout a rent seeking activity particularly when the money that comes out of the company goes into the financial economy and stays there and is treated back

and forth? and should we ban them? the second thing is it is what is the matter with kansas problem. you said it is why do working-class and lower middle class people, the people that are being squeezed the most by this economy, why do they vote republican? and you suggested that it had something to do with the advertising and understanding, and that's true. could it also have to do with the fact there is no leadership on our side, that we don't have an fdr, we can't even say the word liberal? >> let me first ask a question about leveraged buyout. companies need to be restructured at times, and the activity of restructuring companies that are not working well is important. but a lot of the buyouts, it's not about restructuring, it's about taking money out of the company, shortsighted activity

that then leaves the company in people come in worse shape, and as all of you may know, a lot of the companies that restructured money gets taken out and ago been dropped a couple years later said there is some fundamental kind of restructuring that he is an important part of the tasks. i don't think leadership provides all the explanation because if you look at the republican party i don't see leadership there either, so that by itself is not a convincing argument. there are other theories about the ability to exploit social issues that do play a role but i think to me the explanations i focus on in the book are properly that most persuasive ones. >> i am a retired professor of mathematics and i realized in listening to your talk my

biggest failure in life is that i was never an important enough to be a capitalist crony. [laughter] on a more serious note, you talk about instability. i must remind the that aristotle's politics, where some where he says when the few have too much and the many have too little the incomes come to an end. 35 years ago, he recognized the extremes of the terrible consequences but he emphasized the political instability that will result from this economy. >> let me say i only had half an hour and i overran that time but that political instability is one of the risks. when i say that our democracy is

a carroll you see what is going on as a result of the now performance of the economy in europe. the rise of extreme groups, the neo-fascist, and that is the kind of political instability that can a rise. i should also say about social and stability or social problems. in those countries that have in which these kind of high levels of any quality have persisted coming you find the 1% live in key to the communities separated from africa deals. the area in a kind of prison but the point is the different communities different and it undermines the notion of the community. you use the malveaux another world as possible, and that's

also the model for a coalition of was formed out of seattle during the wto protest. it's called our world is not for sale. that coalition has worked hard to try to turnaround the trade agreements that are harmful to the kind of issues that you are talking about here. and it's very, very difficult. you know, the negotiations go underground and you can't even get the documents now. so, my question is what would you do to begin to mobilize people? it's like we have a super saturated solution right now. but what would you do to begin to mobilize people to begin to really make a change? >> on a particular dish you that you discuss the trade agreements , i think one of the points is exactly the point you made that many of these trade agreements are negotiated in

secrecy. right now many of us want to know what is coming on in the partnership agreements with asia that we are talking about. no one really knows. and the result of this is that at the end we have been presented with a document and they say we've already negotiated. you can't change it now. so i think one of the demand sought to the transparency. and that is at least we may disagree -- people may disagree with the contents are but i do agree with greater transparency people would say this isn't acceptable, this doesn't reflect our values. >> i want to make a point corporations do know what's in those. >> they know what the rest of us don't and that is the concern. >> i was lucky enough to hear you on the radio a couple days ago as a wife had two days to think about this. you said the stockholders, the stockholders had more control

over the ceo salaries until about 19 eda. or correct me. >> basically what happened was we didn't change the corporate governance wall, but they're used to be a kind of social consensus, a kind of self discipline that the ceo said it's wrong for us to take a salary that is a thousand times that of our average worker. you know, in japan the norm was ten. in europe it's maybe 30. in the united states it just went out of bounds. so, you might call it the social contract disappeared in the united states. and then because we had no corporate governance wall like australia, there was nothing to restrain.

and finally, the breaking of the air traffic control strike weekend the unions which had served as a partial constraint. and then we got in the situation where the company would say we have to pay you the weech is because we don't have the revenue and the reason we don't have the revenue is because we are paying this $400 million salary. and they said that began with a straight face. >> do you have any ideas? i bet a few people here are stockholders of some companies. [laughter] >> there is a movement for shareholder activism and what is striking in europe it's actually working. people are voting down the exorbitant pay of a lot of ceos and the interesting thing is what they called exorbitant is minuscule compared to american pay.

>> thank you, sir. >> it's a pleasure to finally meet the face behind all of those bylines on the academic papers i didn't read in college. [laughter] we talked a lot about the grand strategy, but i would like to bring it a little bit more personal. myself and my friends about two years out of college find ourselves in an interest in land we are too inexperienced to get the internship and not experienced enough to get jobs, and we've noticed that there is a seemingly in the quality within the internship world itself, whereas those that have wealthy parents and can afford to take an unpaid internship at a very prestigious institution can afford to go somewhere, and those that can't and up waitressing or something, not that there's anything wrong with that, but they don't have the opportunities. so i was wondering if you could speak on paid internships. >> you're an absolutely right. and i actually talk about that in the book.

because it is one of the mechanisms by which inequality gets perpetuated. the question is why is it the united states becomes the country with the least equality of opportunity, the highest correlation between parental income and the child's income. and that is one of the mechanisms by which we perpetuate inequality. and obviously it also a form of exploitation as well. there's actually interesting books that have come out on that. >> i will have to buy your book. >> okay. >> i am sort of in the same situation he is. tiny a recent college graduate as well. i want to hear your thoughts on the occupied movement. i was down there the of the night and was a rather sad sight only a few tents, the park pretty much trashed. the restaurants around there, the top say how glad they were that occupy was done and they could have a normal business

again then i see the tea party and the republicans pretty much going to the tea party and starting to take over the republicans and i don't see that with occupied and the democrats so where would you say they went wrong in that regard? >> first coming young people that don't have a job i don't know if this is going to make you feel better but if you read in spain there's a 50%, more than 50% unemployment rate and there is no prospect in things getting better so you might say relatively you are better off but that shouldn't be a good answer. i think the reason this is a difficult year for movements like occupy wall street because it is a political season and with the tea party did is linked

itself with a political party, with the republican party and tried to take over the republican party coming and i think there hasn't been that kind of linked between the protesters and an attempt to have their voice heard more strongly within the democratic party. so that is at least one possible explanation. let me just say o more thing about the occupied wall street movement in spain. i spent last year i went to to nisha and cairo and i talked to all of these protesters in the park and they have a common theme in all of these and that is markets were not working the way they were supposed to.

when they are functioning they're supposed to get a job. the demand is supposed to equal that economics and part of command equals supply in the labour market. the labor market is and obeying the basic law of the demand equal to supply. moreover, you have our economy we have underutilized resources and huge unmet needs. so again, something is wrong. they also articulate the politics hasn't fixed at. finally the articulating the view that it's very much consistent with this book some things are going on. so the politics hasn't worked, there is inequity and inefficiency. the difference is they didn't have an agenda to try to fix it. they articulated what was wrong. the tea party movement has a simplistic solution which will make things worse and will be

worse even for their self-interest. i think eventually they will figure that out but it may be very painful process not only them but for the whole country. >> i'm a college student and unpaid in turn by the week. [laughter] my question is how we a lowercase talented people away from the financial world into the world of innovation and policy. if you are proposing to abolish rent seeking high kind of feel like that is devaluing ideas and discoveries so how do you convince a culture? >> it's not brand seeking. it's the opposite. it's creating value by creating something that makes the size of the pie bigger. that is the major distinction. one way of redirecting resources is the taxation. when you have rent the good

thing is if you tax rent it discourages rent seeking. so if a lot of the income of the top is rent coming you make it less attractive to go into rent seeking activities. it's not an accident i don't think that the lowering of tax rate at the top has led to more inequality and the before tax income because it provided more incentives for people to engage in rent seeking. so naturally there is an interaction between the tax structure and our before tax income distribution. ..

>> well. good question. let me -- the problem -- the difficulty with economics is it should be a science, but the pronouncement, the economic analysis has political consequences and that means there are strong incentives for formulating ideas that support

your political perspective sir. wet me give examples of what i am talking about. in my own research on the asymmetry of information information isn't perfect. some people no more than something other people don't know. what we showed was the reason adam smith's invisible hand was invisible was that it wasn't there. that is to say that it was not the case that the pursuit of self-interest leads inexorably to the well-being of everybody. the bankers pursue their self-interest and i don't think any of us -- the well-being of all of us. that theory has been discredited as a theory but if you listen to milton friedman and his disciples you would not believe that this research was taught in all the graduates schools, accepted everywhere but they

have a political agenda. they want to ignore these results. what they try to say is this is a little peccadillo of imperfect information but almost perfect information and that is why when i did my research one of the things i showed is even a little bit of imperfect information changed the result in a dramatic way. there was a discontinuity. they don't want to pay attention to that. my answer is the reason you hear different fees to large extent, not completely is there is a political agenda on some of these theories. there are some other cases where there is ambiguous empirical evidence. the world is complicated and we have to interpret the world. let me give you an example very briefly of where there ought to

be unanimity but there's a controversy and there's a big debate about the role of austerity. there has not been a single large economy that has ever recovered through austerity. not a single one. those on the other side have identified a few instances where government has cut back and the economy grew. those were all small economy is and if you look at what happened it was very simple. they were lucky. they were lucky because they' trading partners were going into a boom and as government spending went down, the gap was filled by exports.

so there are some circumstances and you could manage to increase your exports if you are a small economy especially exchange rates but we are not a small economy and our trading partners are not in good shape. there is no way that we can hope to grow through austerity. there is no way that europe can hope to grow through austerity. there have been experiment after experiment, real-life experiment. the first one recent history was herbert hoover. he tried austerity, converted stock market crash into the great depression. i don't know why anyone wants to try that again but some republicans want to do that. we don't have enough evidence the i m f did some more experiments on voluntary patients. had austerity in indonesia, korea, thailand, argentina and

in each of these instances it was a disaster. downturn's converted into recessions and then depressions and not one of them worked. that is an instance where people can say we haven't looked at data and their successes but when you look at the data more careful you realize there are none. i hope he listens. [inaudible] >> good evening. thank you for your terrific presentation and look forward to reading your book. as an irish national icon directly relate to what happens when the majority population shifts from productivity to rent seeking which is exactly what ireland is trying to recover from. two questions. the first one would you care to comment on the loss of manufacturing base in the united

states, rise of china, indy and other economies as to what the impact is on the price of inequality and secondly would you like to close this evening by letting us know whose policies, obama's for mitt romney's will be better for curing the price of the economy? >> okay. the first question is not easy to fully answer. the role of globalization in this process. wet me say that 30 years ago we could have kept manufacturing more in the united states but we decided to let it go and industrial policy or strategy, once you let it go you start with what we call dynamic

comparative advantage. they learn and we don't warn. they develop institutions, germany maintained their industrial capacity but they have good education around it and a set of financial institutions and a set of on for nors. they managed to maintain it but it would be difficult to recover. even if we were able to do a little recovering, manufacturing was a little like agriculture 100 years ago. we were the victim of our own success. at productivity and agriculture meant we went from a world in which 60% of people are on farmers and two% of the

population rose more food, and manufacturing is built in the same light. increasing productivity, and china going down dramatically. and declining employment which is why we restructure our economy. your second question is not an easy one. simply doesn't understand inequality. and the politics of envy, came out and realize there is an important part. this is a key problem for america. reflecting that, i mentioned before that mitt romney is only paying 15% taxes. warren buffett is paying 15% taxes but what warren buffett

said is it is wrong. he has come out with a lot of other billionaires' and said it is wrong for him to pay lower taxes and his secretary. i have not heard that from romney. he evidently thinks it is right. that is very disturbing to me both about the likely policies they would pursue and a sense of moral compass about the right direction for our society. [applause] >> is there a nonfiction author or book he would like to see featured on booktv? send an e-mail to booktv@c-span.org or tweak us at twitter.com/booktv. >> we have to be really clear about the very many ways that we own ourselves and we own our history and we make decisions

that our history is phenomenal, vital and special. >> former president of bennett college julianne malone writes about politics and african-american history. next sunday your calls, e-mails and wes providing and thriving, 365 fax thin black economic history. for in-depth why that noon eastern on c-span2's booktv. >> we want to introduce you to michele fitzgerald legal associate director of marketing and publicity at macmillan publishers. we want to learn about the upcoming titles for fall of 2012 and let's talk about the former president of france. >> we have his new book my life in politics coming out this fall about the history of u.s./french

relations. he talks openly about growing up in france during and after world war ii, his time in algeria, his political career and his vision for the future of france. >> will he be touring the u.s.? >> he will not. he is a bit under the weather so he will be doing interviews remotely from france that won't be able to travel. israel is our most controversial book on the list this season which makes it fun to work on. deputy speaker in israel and what people refer to as a republican israeli leader. he really details that the u.s. and israel had a strong close relationship with allies but the u.s. really focuses on their own concerns and for israel to prosper in the future if they need to do the same. >> what kind of books does palgrave macmillan look for? >> we are a publisher of

nonfiction. a global publisher and we look to publish books that focus on all sides of the debate. we want to contribute to the dialogue and we publish a wide range of ideas as long as they're thoughtful and well argued. >> another author with a book coming out is eerie and brooks and john watkins. >> free-market revolution. from the executive director of the ireland institute and they really argue to pull themselves off of the brink of the economic crisis we should revert to the libertarian principles of and rand. >> finally, one more book we want to ask you about from palgrave macmillan. >> editor -- the largest spanish-language daily newspaper in the u.s. and has written a book called killing the american dream which argues against the anti immigration policies in the u.s. saying we are not only

courting ourselves economically by losing contributions to social security and income tax but we experience a brain drain. >> is this a book that will be published simultaneously in english and spanish? >> only at english-language publisher. >> we are talking with michele fitzgerald of palgrave macmillan. we are here at book expo america which is the book publishing industry's annual convention in new york city. >> you are watching in ginger the worm -- for book expo america. the publishing industry annual trade show. for more information visit bookexpoamerica.com. >> we did not begin as a city. there was only a vague and native american region and later