Inequality: Krugman's "Inferno"

1. Three possible reasons why over the last thirty years the return to education has risen are: a rising demand for skilled labor due to advances in technology; changes in economic institutions and norms; and political hostility to unions. "Greater returns to education" are not enough to explain the inequality because the institutions-and-norms explanation of the current increase of inequality links current events to the dramatic decrease in inequality that took place in the 1930s and 1940s.

2. Idealistically CEO salaries are set based on each executives quality of work, which could be their blessing or curse in the competition of being hired by the most profitable corporation. Yet the reality tends to be more socially based, meaning the corporate board hires CEOs based on whether the prospect would be the best public face for the company. As to measuring the marginal productivity of a CEO, the standard is too subjective to be accurate.

3. Table 10 on page 248 shows data comparing key results from mathematical tests that were given to 8th graders sorted according to talent and family economic status. Its purpose was to give support to the hypothesis that inequality of outcome is the direct result of a lack of equality.

4. Krugman responds that as compared to the American labor force, France has a smaller fraction of a population that is employed. Though French GDP per worker is lower than American GDP per worker, it is due to French workers getting more paid vacation time: they put in only 86% as many hours each year as compared to American workers. Yet worker productivity per hour is higher in France than in the United States. Krugman advances the premise that question should be what aspects of the French system are problematic and which are alternative and perhaps better choices than the those of the American system.