This is not an easy book -- it's a collection of technical academic papers -- but it is an important one, using sound science to overturn all the conventional wisdom about the macroeconomics of inequality. The book starts off with an incredible chapter summarizing a great deal of post-Keynesian work about income distribution. For those who have only been exposed to the theories of mainstream economics, the chapter is an eye-opener -- here's a theory of macroeconomics that's not only consistent with reality, but actually makes sense!
From there, the book consists of a series of papers applying a new kind of analysis to inequality in different countries. This gets a little repetitive, since each paper return tends to explain the method again, but some of the chapters are really impressive. The chapter in Europe, in particular, makes clear that the conventional wisdom that Europe's high social safety net causes its unemployment is completely backwards -- in fact, it's quite the reverse: social safety nets reduce unemployment.
Here's the gist: People don't get paid based on how their personal contributions, they get paid based on how much of a monopolist their employer is -- the receptionist at Google is a millionaire, while even an important expert at a struggling firm has trouble making ends meet. Why? Because companies need people to stay in their jobs and work hard and not constantly worry about going off someplace else. The more inequality there is in a society, the more people are running off to go someplace else, and the more unemployment there is. By providing social services and progressive taxes so that a waitress at McDonald's isn't doing so badly compared to a powerful lawyer, people feel better about the jobs they have. It's also more fair: there's nothing special about the one receptionist who happened to be hired by Google; why should she get all that monopoly money?
I'm probably mangling some of the details, but it's a fascinating argument. Readers should also check out this paper by Galbraith based on the research: scribd.com/doc/21701998
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