Combating Inequality: Rethinking Government's Role

Leading economists and policymakers consider what economic tools are most effective in reversing the rise in inequality. Economic inequality is the defining issue of our time. In the United States, the wealth share of the top 1% has risen from 25% in the late 1970s to around 40% today. The percentage of children earning more than their parents has fallen from 90% in the 1940s to around 50% today. In Combating Inequality, leading economists, many of them current or former policymakers, bring good news: we have the tools to reverse the rise in inequality. In their discussions, they consider which of these tools are the most effective at doing so. The contributors express widespread agreement that we need to aim policies at economic inequality itself; deregulation and economic stimulus will not do the job. No longer does anyone ask, in relation to expanded social programs, “Can we pay for it?” And most believe that US taxes will have to rise—although they debate whether the progressivity should focus on the revenue side or the expenditure side, through broad-based taxes like the VAT or through a wealth tax aimed at the very top of the income scale. They also consider the philosophical aspects of inequality—whether it is bad in itself or because of its consequences; the risks and benefits of more radical interventions to change the nature of production and trade; and future policy directions. Contributors Daron Acemoglu, Philippe Aghion, Danielle Allen, Ben Ansell, David Autor, Sheri Berman, Marianne Bertrand, Olivier Blanchard, Lucas Chancel, William Darity Jr., Peter Diamond, Christian Dustmann, David T. Ellwood, Richard Freeman, Caroline Freund, Jason Furman, Hilary Hoynes, Lawrence F. Katz, Wojciech Kopczuk, N. Gregory Mankiw, Nolan McCarty, Dani Rodrik, Jesse Rothstein, Emmanuel Saez, T. M. Scanlon, Heidi Shierholz, Tharman Shanmugaratnam, Stefanie Stantcheva, Michael Stynes, Laura D'Andrea Tyson, Philippe Van Parijs, Gabriel Zucman

Table of Contents:
Introduction: We Have the Tools to Reverse the Rise in Inequality xi Olivier Blanchard and Dani Rodrik I The Landscape 1 1 Ten Facts about Inequality in Advanced Economies 3 Lucas Chancel 2 Discussion of the Landscape 31 Peter Diamond II Ethical and Philosophical Dimensions 39 3 Time for New Philosophical Foundations for Economic Theory? 41 Danielle Allen 4 What Kinds of Inequality Should Economists Address? 49 Philippe Van Parijs 5 Why Does Inequality Matter? 59 T. M. Scanlon III Political Dimensions 65 6 Wealth Inequality and Politics 67 Ben Ansell 7 The Political Conditions Necessary for Addressing Inequality 75 Sheri Berman 8 The Political Obstacles to Tackling Economic Inequality in the United States 85 Nolan McCarty IV The Distribution of Human Capital 91 9 A Modern Safety Net 93 Jesse Rothstein, Lawrence F. Katz, and Michael Stynes 10 Education’s Untapped Potential 99 Tharman Shanmugaratnam V Policies toward Trade, Outsourcing, and Foreign Investment 107 11 Why Was the “China Shock” So Shocking—and What Does This Mean for Policy? 109 David Autor 12 Trade, Labor Markets, and the China Shock: What Can Be Learned from the German Experience? 117 Christian Dustmann 13 Combating Inequality: Rethinking Policies to Reduce Inequality in Advanced Economies 125 Caroline Freund VI The (Re)distribution of Financial Capital 135 14 How to Increase Taxes on the Rich (If You Must) 137 N. Gregory Mankiw 15 Would a Wealth Tax Help Combat Inequality? 141 Lawrence H. Summers 16 Should We Tax Wealth? 153 Emmanuel Saez VII Policies That Affect the Rate and Direction of Technological Change 161 17 Could We and Should We Reverse (Excessive) Automation? 163 Daron Acemoglu 18 Innovation and Inequality 171 Philippe Aghion 19 Technological Change, Income Inequality, and Good Jobs 177 Laura D’Andrea Tyson VIII Labor Market Policies, Institutions, and Social Norms 193 20 Gender Inequality 195 Marianne Bertrand 21 Ownership Cures for Inequality 201 Richard B. Freeman IX Labor Market Tools 211 22 Guaranteeing Employment for All 213 William Darity Jr. 23 Making Work Work 219 David T. Ellwood 24 The Importance of Enforcement in Designing Effective Labor Market Tools 227 Heidi Shierholz X Social Safety Net 235 25 Enhancing Micro and Macro Resilience by Building on the Improvements in the Social Safety Net 237 Jason Furman 26 The Social Safety Net for Families with Children: What Is Working and How to Do More 245 Hilary Hoynes XI Progressive Taxation 253 27 Reflections on Taxation in Support of Redistributive Policies 255 Wojciech Kopczuk 28 Why Do We Not Support More Redistribution? New Explanations from Economics Research 263 Stefanie Stantcheva 29 Can a Wealth Tax Work? 271 Gabriel Zucman Contributors 277 Index 279