Almost no one makes a living from writing short stories anymore. The story has to a large extent been severed from its traditional roots — from popular, large-circulation magazines, that is — and it has been transplanted into the greenhouses of the academy….
Oddly, though, you can still make a pretty good living by teaching other people how to write short stories. The form survives — and even thrives, in a forced, hothouse sort of way — because it has become the instructional medium of choice in most of our writing programs…. The result, or so we are always being told, is a couple of generations' worth of people — a vast and somewhat underemployed army — who have been trained to write competent but profoundly uninspired short fiction that is unread except by other writers of short fiction and by the people who hire them to instruct yet more people in this arcane little craft.
There is some truth to this, but it's also true that freed from the dictates of the marketplace, short stories these days are often less formulaic, less imitative than they used to be. There's no preferred style or mode anymore — even The New Yorker no longer publishes "the New Yorker short story" — and there are now dozens of different camps of short-fiction writing, all happily coexisting.
And this drivel comes from the new editor of the NYTBR, who should certainly know better! Just because the category of "commercial mainstream" has killed off its short fiction doesn't mean all publishing categories have done so; neither does it mean so because that category has relegated what short fiction it does produce largely to academic exercises.
Short fiction is certainly alive—how "well" it is depends upon whom you ask, and what you mean by "well," but it is not just academic exercises—in other publishing categories. Consider, for example, speculative fiction. The field, with its purportedly tiny audience, maintains three monthly magazines, a bimonthly magazine, and a biweekly website that typically publish work of comparable literary quality to what has appeared in The New Yorker and Atlantic Monthly and so on since the early 1990s. And that is just the top-end, "professional" markets; and just the venues devoted exclusively to speculative fiction. Things are not as healthy over in mysteries, but there are still two category-only monthly magazines of short fiction.
Better yet, Mr McGrath, find a reference librarian in a real public library (which, because it is primarily a "we wanted to be a university library but don't have a university" institution, excludes the New York Public Library) who pays attention to magazine circulation and demand, and ask what magazines circulate. Sure, the cooking magazines do. So do the craft magazines. But shortly thereafter the librarian will mention the "writers' magazines" and the so-called "genre fiction" magazines, probably well before reaching The New Yorker.
That said, the first sentence is absolutely correct: Nobody makes a living writing and publishing short fiction anymore. The age of Ring Lardner and Edgar R. Burroughs and others like them is long gone, primarily because the money just isn't there anymore. On an inflation-adjusted basis, a short-story-writer's income during the Depression for one story sold each month would have been about four times what that writer could make today, even without considering the vastly greater competition—and it still would have been starvation-level income. However, a great many of the leading writers of short fiction have "day jobs" or other writing activities outside the academy. They're screenwriters and journalists and novelists and science columnists and chief scientists of NASA projects and… and mostly disdain the "I live in the academé" writers (and their work) invoked by Mr McGrath. On the other hand, Lardner was also a journalist.
So, Mr McGrath, before you go on making broad pronouncements as if they're uniformly applicable across the publishing industry and the arts, it would behoove you to get your head out of your category preference for "mainstream fiction." You should also consider this thirty-year-old statement by a leading writer of short fiction, and one of the leading American fiction writers period: "Fake realism is the escapist literature of our time." (No, I'm not going to reveal who wrote that; find out for yourself!)