The Price of Inequality | Joseph E. Stiglitz

Summary of: The Price of Inequality: How Today’s Divided Society Endangers Our Future
By: Joseph E. Stiglitz

Final Recap

Stiglitz’s The Price of Inequality presents a thorough analysis of widening income disparities in the United States and the dangers posed by this divided society. The book emphasizes the pressing need to address the problem of inequality and discusses the flawed economic decisions and government policies that have aggravated the issue. Through a comprehensive exploration of the challenges before us, the book marshals a call for necessary reforms to create a more just and inclusive society. Ultimately, Stiglitz argues that all members of society, including the wealthiest, would benefit from a more equitable distribution of resources and opportunities, and the strengthening of social cohesion that would surely follow.


The Price of Inequality offers a compelling examination of the current income disparities in America and how they jeopardize the future of society. By delving into the roots, outcomes, and potential dangers of inequality, Nobel laureate Joseph E. Stiglitz reveals the alarming scope of this issue and underscores the urgency of addressing it. Our summary will guide you through the major themes of the book, including the changes in wage trends, the influence of government policies on inequality, and the role of trust in a stable society. We’ll also discuss the possible paths towards remedying inequality, and the benefits of building a more equitable and inclusive society.

The Reality of Income Inequality in America

Income inequality has been on the rise in America since the 1980s with the concentration of income among the richest earners. Despite the country’s GDP growth, the economy does not work for most citizens. This has resulted in numerous economic, political, and social consequences and a decline in living standards for Americans. Studies have shown that Americans are overly confident about their social mobility and ability to increase their income, beliefs that the 1% shape through promoting certain ideas. The US needs to tackle the issue of income inequality to prevent the strife-laden future that waits for the country if the situation persists and worsens.

The Impact of Government Policies on Inequality

Government policies have a significant impact on inequality in society. Laws and policies often benefit certain groups while burdening others. For example, changes in tax laws have made the system less progressive, benefiting the wealthy. Also, policies have helped lenders and employers while hurting students and low-wage workers. The government has a role in correcting these market failures to design policies that align private incentives with social returns. Poor management of globalization has led to job destruction and caused pay rates to converge, creating a wage drop for workers in developed countries. The free flow of capital adds financial volatility, limiting a country’s ability to make decisions. Inequality creates instability that leads to more inequality, and the government must take responsibility for correcting these issues.

The Cost of Rent-Seeking Behavior

Rent-seeking behavior describes a situation where individuals or entities gain outsized rewards without creating wealth themselves. The concept has expanded to include subsidies, natural resources, monopoly profits, and quotas. Unfortunately, widespread rent-seeking behaviors create economic inequality, which lowers consumption and weakens the economy. The behavior is perpetuated by laws that reduce market competition, weak enforcement of anticompetitive rules, and regulatory loopholes. Macroeconomic policies contribute to the high level of inequality amongst the US population. If these conditions persist, the wealth gap will continue to grow, and economic growth will stagnate. To rectify this problem, policymakers must correct the gaps between private rewards and social returns by taxing income that meets the economic definition of “rent.” This policy could increase efficiency, reduce inequality, and elevate productivity in the United States.

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