Can you explain this/dumb it down for me? I don’t understand it at all. You’ll see I wrote next to a paragraph “I don’t understand this at all.” Really I don’t understand most of it. It’s an 11 page essay by Joseph Stiglitz titled “standard economics is wrong. Inequality and unearned income kills the economy”. If you could also explain the whole “left vs right” thing and also capitalism vs socialism vs communism that would be great. The essay talks a lot about it but I wanted to send those specific pages. Thanks. Inequalities are affected not just by the legal and formal institutional arrangements (such as thestrength of unions) but also by social custom, including whether it is viewed as acceptable toengage in discrimination.Atthe same time, governments have been lax in enforcing anti-discrimination laws. Contrary tothe suggestion of free-market economists, but consistent with even casual observation ofhow markets actually behave, discrimination has been a persistent aspect of marketeconomies, and helps explain much of what has gone on at the bottom. The discriminationtakes many forms-in housing markets, in financial markets (at least one of America's largebanks had to pay a very large fine for its discriminatory practices in the run-up to the crisis) andin labour markets. There is a large literature explaining how such discrimination persists.Of course, market forces- the demand and supply for skilled workers, affected by changes intechnology and education- play an important role as well, even if those forces are partiallyshaped by politics. But instead of these market forces and politics balancing each other out, withthe political process dampening the increase in inequalities of income and wealth in periodswhen market forces have led to growing disparities, in the rich countries today the two have beenworking together to increase inequality.The price of inequalityThe evidence is thus unsupportive of explanations of inequality solely focused on marginalproductivity. But what of the argument that we need inequality to grow?A first justification for the claim that inequality is necessary for growth focuses on the role ofsavings and investment in promoting growth, and is based on the observation that those at the topsave, while those at the bottom typically spend all of their earnings. Countries with a high shareof wages will thus not be able to accumulate capital as rapidly as those with a low share ofwages. The only way to generate savings required for long-term growth is thus to ensuresufficient income for the rich,This argument is particularly inapposite today, where the problem is, to usc Bernanke's term,astobal savings glut. But even in those circumstances where growth would be increased by anincrease in national savings, there are better wayss of inducing savings than increasing inequality.The government can tax the income of the rich, and use the funds to finance either privateor public investment; such policies reduce inequalities in consumption and disposable income,and icad to increased national savings (appropriately measured).A second argument centres on the popular misconception that those at the top are the jobcreators, and giving more money to them will thus create more jobs. Industrialised countries arefull of creative entrepreneurial people throughout the income distribution. What creates jobsis demand: when there is demand, firms will create the jobs to satisfy thatdemand (especially if we can get the financial system to work in the way it should, providingcredit to small and medium-sized enterprises). income inequality is high. This result holds also when other determinants of growth duration(like external shocks, property rights and macroeconomic conditions) are taken into account: onIn fact, aserage, a 10-percentile decrease in inequality increases the expected length of a growth spell byne nalr. The picture does not change if one focuses on medium-term average growth ratesnstead of growth duration. Recent empirical research released by the OECD shows that incomeinequality has a negative and statistically significant effect on medium-term growth. It estimatesthat in countries like the US, the UK and Italy, overall economic growth would have been sixLo nine percentage points higher in the past two decades had income inequality not risen.There are different channels through which inequality harms the economy. First, ImequVcads to weak aggregate demand. The reason is easy to understand: those atthe bottom spend a larger fraction of their income than those at the top. Theproblem may be eompounded by monetary authorities' flawed responses to this week demand.By lowering interest rates and relaxing regulations, monetary policy too easily gives rise to anasset bubble, the bursting of which leads in turn to recession.Many interpretations of the current crisis have indeed emphasised the importance ofdistributional concerns. Growing inequality would have led to lower consumption but for theeffects of loose monetary policy and lax regulations, which led to a housing bubble and aconsumption boom. It was, in short, only growing debt that allowed consumption to be sustained.But it was inevitable that the bubble would eventually break. And it was inevitable that, when itbroke, the economy would go into a downturn,Second, inequality of outcomes is associated with inequality of opportunity. When those at thebottom of the income distribution are at great risk of not living up to their potential, the economypays a price not only with weaker demand today, but also with lower growth in the future. Withnearly one in four American children growing up in poverty, many of them facing not justa lack of educational opportunity but also a lack of access to adequate nutrition and health,the country's leng-term prospects are being put into jeopardyThird, ietesestmentsy are less kelly to make publics im public transportatiom.If the rich believe that they don't need theserestructureDublic facilities, and worry that a strong government which could increase the efficiency of theeconomy might at the same time use its powers to redistribute income and wealthit is notsurprising that public mvestmont.is lower in countries with higher inequality. Moreover, in suchcountries tax and other economic policies are likely to encourage those activities that benefit thefinancial sector over more productive activities. In the United States today returns on long-termfinancial speculation (capital gains) are taxed at approximately half the rate of labour, andspeculative derivatives are given priority in bankruptcy over workers. Tax laws encourage jobcreation abroad rather than at home. The result is a weaker and more unstable economy.Reforming these policies- and using other policies to reduce rent-seeking- would not onlyreduce inequality; it would improve economic performance.out.unaler

Page 1 The initial paragraphs talk about the inequality that is existing in society.It is in the…

Answered: Can you explain this/dumb it down for…

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC