Business, Politics & Society

Inequality: Our Divided Society

Paul Krugman

Lesson time 14:44 min

Learn the social and cultural costs of our inequality, and ways to advocate for a more equal society.

Paul Krugman
Teaches Economics and Society
Nobel Prize-winning economist Paul Krugman teaches you the economic theories that drive history, policy, and help explain the world around you.
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Economists don't necessarily understand everything that's going on. So if you want to ask, why did inequality take off? The answer is, that's an interesting question. We have a bunch of stories-- there are-- there's probably some truth in all of them. Some of it is probably technology. It's probably true that technology reduced the demand for regular laborers, increased the demand for people with lots of formal education. Although, even college graduates haven't done so well since about 2000. Another answer-- a little bit is globalization. Certainly, some significant number of blue collar jobs were lost-- imports from China, and that sort of thing. A lot of it, though, seems to be changes in institutions and social norms. Why do I say that it's cultural and not economic, or not purely the underlying economic story? We can, to some extent, measure the impacts of things like technology and trade. And they're not enough. They're not big enough to explain what we're seeing, you know, and-- which says, well, it's got to be something else. And cultural and political shifts are a natural place to look. Part of it is timing-- this big turn corresponds pretty closely to the election of Ronald Reagan, right? You can see that that's happening. Partly, it's history. We know that this great compression-- that was clearly political. So if the great move towards equality was political, then it's a pretty good bet that the significant part of the movement back towards inequality is also political. Got to say, all of this is a little bit of, you know, we're doing a fair bit of hand waving. But, sometimes, if that's where things seem to point, you say, look, this looks to me like it's not-- for once, it's not just supply and demand and the invisible hand. That there's something going on about social norms and politics. Used to be that when corporations were deciding on the CEO's paycheck, right? Who decides how much a CEO is paid? Well, there's a compensation committee. Who appoints the compensation committee? Actually, the CEO appoints the compensation committee. So you might say, well, of course, they're always going to vote gigantic paychecks for CEOs. In fact, they used to be inhibited about that. They used to say, well, let's-- we can't, you know-- it'll hurt worker morale if we pay this CEO too much money. And the union will protest. But these days, unions have been vastly reduced in influence. The notion that-- you know, the norm that says that outlandish pay to the CEO while the workers are poorly paid kind of went away. And a lot of that probably comes back to politics. The decline of unions-- a lot of that decline took place during the Reagan years because Reagan administration had strongly anti-union policies. And so on, down the line. So it looks like there's kind of a turning point politically, institutionally, around 1980 that turns us into this highly unequal society. And it hasn't fully played out yet. That's, am...

Think like an economist

For Nobel Prize-winner Paul Krugman, economics is not a set of answers—it’s a way of understanding the world. In his economics MasterClass, Paul teaches you the principles that shape political and social issues, including access to health care, the tax debate, globalization, and political polarization. Heighten your ability to read between the lines and decipher the underlying economics at play.


Students give MasterClass an average rating of 4.7 out of 5 stars.

I appreciate Paul's style, I argued with him through my screen and laughed at his humor. I changed my position on a few issues and had my position strengthened on others. Exactly what I was looking for . (sorry if I was harsh on his political slant before, I knew his position when I started this course). Thanks Paul!

Great class. Was a good refresher for me and I love reading Paul's column in the Times.

A nice introduction to economy and how to think like an economist. It is full of clear explanations, examples and analogies.

Enjoyed the lessons- would like to see more! Great basic class to economics. I used it for enjoying one of my favorite disciplines of study. It would be nice to see a live Q & A with Krugman.


RJane @.

If the federal government (electoral college) overrides the voting system of the presidential collection, it also controls the rest of the government system. We need more conscientious, mindful and altruistic politicians and policy makers in congress, senate and electoral college.

Allan H.

Economics, politics and psychology will always be inextricably coupled. If you ignore this coupling you cannot produce useful analysis. It is, however, better to express issues like inequality in more pragmatic terms. There is absolutely nothing wrong with creation of considerable wealth but we have to remember that significant success is built on the foundation of healthy, educated, stable society and those who have had great success owe a considerable debt to the nation. Right now the support of the foundation is considerably out of balance and this has put an enormous pressure on the middle class. Using a “pragmatic” perspective consider healthcare. Yes universal healthcare is a moral issue but having a functional national system also provides the competitive advantage of a mobile, agile workforce (and innovation community) that most of the rest of the world has. Yes ideology is a destructive force in our current national dialog but the answer is more scientific (problem-solving), pragmatic thinking. We need to have the numbers and data to back any argument and Dr. Krugman is attempting to supply this. Failing to supply this information leaves economics in a vacuum.

A fellow student

Basic economic principles are great! Agenda driven Ideology... not so much! Stick to the topic!

Craig K.

From Trust Busting during Teddy Roosevelt's time to Franklin Roosevelt's New Deal, Public Policy always effects the economy. Given that Boomers are the most selfish, entitled and narcissistic class in America at the moment, I'm not the slightest bit surprised that they won't want progressive policies toward expanding the middle class. Unfortunately, it's my belief that the Boomers will have to pass on before America can resume looking toward a healthy country with a broad middle class. Once on the road to recovery, first and foremost, education in this country must dramatically expand with less expensive education at all levels. At this frightening moment in history, ignorance seems to be fueling the elected class. And even a prospering country as a whole cannot withstand the current amount of ignorance without long term consequences. America was based on the concept of a Jeffersonian Democratic population and must return to those ideals with all deliberate speed.

Graeme R.

Dr. Krugman holds liberal views. I gave up on his New York Times column because I found it to be too predictable and insufficiently balanced. I have no problem with him expressing his views in these lectures. Many of his ideas seem entirely reasonable. But I do expect him to present both sides of an argument. He is nostalgic for the days of strong unions, but doesn't present the negative consequences. As someone who grew up in Australia at a time when Scots (in particular) and English immigrants established both their class hatred and a demanding, self-interested laziness that often resulted in strikes, I view unions with contempt and Dr. Krugman as a naive academic partisan. The German model of labor relations seems to be worthy of examination.

Paul R.

Stick to economics. I took this class as a way to learn more about economics, not to have economics falsely overlaid on political agendas. Disregarding the politics of the numbers reflected in economic numbers doesn’t mean it was economic factors drove the results. That might be true in academia, but not in application. It seems like you limited your parameters to meet your believe. I’ll try to keep watching these lessons to learn more about Econ, but if this continues I will disregard all your lessons as false information skewed by your beliefs.

Pureum K.

I think one thing Krugman does not mention is that labor capital has become much more valuable. Now a software engineer can create tremendous value. Look how much value Google and Microsoft have created through searching and office products- Couple increase in labor capital with stock options, BAM- You have some people making ton of money-

Chris G.

Forgive me if I am wrong, but shouldn't the graphic be a red elephant and a blue donkey?

Shaun T.

It's interesting that his arguments are in exact opposition to another Nobel prize winning economist, Milton Freeman.

Tyler B.

Are poverty and inequality being conflated? Inflation adjusted household incomes have risen since the 1960's. That means a middle class family today is better off than a middle class family in 1960.