U.S. economy

Paper wealth and the economic crisis, by Dean Baker

How to give banks confidence to lend to businesses, by Lucian Bebchuk and Itay Goldstein

Japanese fiscal policy in the 1990s, by Tyler Cowen

Fed’s new strategy to cut cost of borrowing, Financial Times

The big bang of bailouts, by Jeffrey Garten

Big three, meet the “little eight”, by Daniel Gross

A finger in the dike, by Nicholas Kristof

Deficits and the future, by Paul Krugman

The Madoff economy, by Paul Krugman

What to do, by Paul Krugman

Obama’s economic opportunity, by Robert Kuttner

$73 an hour: adding it up, by David Leonhardt

Grim job report not showing full picture, by David Leonhardt and Catherine Rampell

Crises and government, by Greg Mankiw

All recessions not created equal, New York Times

A proposal: employment-linked tax incentives, by Dani Rodrik

Automaker bankruptcies would cost up to 3.3 million U.S. jobs, by Robert Scott

Which is best: monetary policy, government spending, or tax cuts?, by Mark Thoma

How to squeeze the most from a stimulus plan, by Louis Uchitelle

Bernanke confronts the challenge of a lifetime, by Martin Wolf

Profit-maximization as the sole goal of a corporation, by Martin Wolf

Living standards, poverty, inequality, well-being

Improving the measurement of poverty, by Rebecca Blank and Mark Greenberg

How severance stacks up, BusinessWeek

Widening inequality means a democracy at risk, by Benjamin Friedman

Cause for alarm? Understanding recent trends in teenage childbearing, by Frank Furstenberg

The politics of fighting poverty in faltering economies, by William Galston

Is unemployment benefit a good thing after all?, by Tim Harford

Do liberals hate charity?, by Ezra Klein

The problem of wages, by Ezra Klein

Measuring the safety nets of the jobless, New York Times

Software that opens worlds to the disabled, New York Times

Creating second chances, by Devah Pager

Why do Americans still hate welfare?, by R.M. Schneiderman

EEGs show brain differences between poor and rich kids, UCBerkeleyNews

Nordic blogging, by Matthew Yglesias

Globalization

Finance, redistribution, globalisation, by Giuseppe Bertola and Anna Lo Prete

Obama has to lead the way on trade, by Clive Crook

How to sell anti-protectionism, by Leif Pagrotsky

Taxes

Taxes of the rich and famous, by Kevin Drum

Tax havens, Financial Times

Why wait to repeal tax cuts for the rich?, by Robert H. Frank

VATs next?, by Howard Gleckman

Health care

An unhealthy individual health insurance market, by Lester Feder and Ellen-Marie Whelan

The case for public plan choice in national health reform, by Jacob Hacker

The importance of the number, by Ezra Klein

What does health care reform mean? How quickly can we get there? LBJ’s example, by Maggie Mahar

Can Americans afford Medicare?, by Uwe Reinhardt

Education

No education silver bullet, by Dana Goldstein

Improving educational outcomes for poor children, by Brian Jacob and Jens Ludwig

College may soon become unaffordable for most in U.S., by Tamar Lewin

How Finland educates the youngest children, by Sara Mead

Housing

White House philosophy stoked mortgage bonfire, by Jo Becker, Sheryl Gay Stolberg, and Stephen Lebaton

The myth of the happy homeowner, by Richard Florida

Cities

Homes on the cheap, by Ryan Avent

New York, New York: America’s resilient city, by Ed Glaeser

U.S. politics

Experience first, by Ezra Klein

The most liberal Congress in history?, by Nolan McCarty

Polarization, by Nolan McCarty

The future of conservatism, by Richard Posner

Five big changes that are transforming our country, by Ruy Teixeira

Millenials’ views about government intervention, by Ruy Teixeira

How historic a victory?, by Michael Tomasky

Abroad

Never again, for real, by Madeleine Albright and William Cohen

French unions losing influence in downturn, by Katrin Bennhold

Does peacekeeping work?, by Chris Blattman

Why the coup in Guinea must be overturned, by Chris Blattman

How migrating workers from eastern Europe are improving labour markets, by Charlemagne

Why the left in Europe is not benefiting from the economic crisis, by Charlemagne

The end of the end of the revolution (Cuba), by Roger Cohen

If I were James Purnell… (UK), by Chris Dillow

Unmade in China, by Geoff Dyer

Coups and attempted coups are going out of fashion, The Economist

Democracy in Latin America, The Economist

Welfare reform in the U.K., The Economist

A slap-up immigration debate in Sweden, Financial Times

Preventing genocide, by Lexington

Massacre unfurls in Congo, despite nearby support, New York Times

Unemployed immigrants struggle as Spain rolls up the welcome mat, New York Times

A domino effect in the global work force, by Floyd Norris

Good news in bad times, by Jeffrey Sachs

Miscellaneous

Abortion politics didn’t doom the G.O.P., by Ross Douhat

Our mutual joy, by Lisa Miller

In a first, gay rights are pressed at the U.N., New York Times

Barcelona is winning with style and a new coach, New York Times

What you think ought to be done about inequality likely hinges on your view about whether financial success is determined more by luck or by effort. Progressives generally believe luck matters more, while conservatives say effort does.

This way of framing the question is wrongheaded. It suggests that the traits and behaviors conservatives emphasize — hard work, will, initiative, drive, focus, persistence, discipline — are largely independent of luck. And that encourages progressives to deny or minimize their importance in influencing success.

Thus Matthew Yglesias:

To get rich in the United States you pretty much have to work hard. But the idea that success is due to hard work ignores the fact that there are all these other people working hard and not succeeding. Hard work is much more common than success. And advantages of birth and dumb luck are making the difference — separating the hard-working partner at the corporate law firm from the hard-working guy who moved the furniture into the law firm’s office.

And Ezra Klein:

Since we justify income inequality by understanding success as an outcome of virtue, there’s a tendency to ascribe achievement to diligent effort rather than the market’s amoral decisions to attach high value to certain spheres of labor and low value to others. The important variable for success, however, does not seem to be hard work but profession. If you’re in a high-value profession, hard work can do you a lot of good. If you’re not, it may not do you much good at all.

Drive, diligence, and other virtuous qualities are themselves heavily influenced by luck. They are to a considerable extent a product of factors over which we have no control: our genes, what happens in utero, birth order, our parents’ traits, childhood nutrition and health, early social experiences with peers, stumbling into an occupation that suits our interests and abilities.

Conservatives tend to say the success and rewards that go to Michael Jordan, Warren Buffett, Bill Gates, and others like them are a result not only of their skills and of being in the right place at the right time, but also, perhaps mainly, of their effort. Even if true, this doesn’t diminish the role of luck. For their effort is itself largely attributable to good fortune.

For those interested, the 2009 conference of the Society for the Advancement of Socio-Economics (SASE) is July 16-18 in Paris. Details are here.

With an incoming Democratic president, should we expect some reversal of the rise in income inequality that has characterized much of the past generation? The following chart, from Larry Bartels’ book Unequal Democracy, suggests reason for optimism. Using Census Bureau data covering the period from 1948 to 2005, Bartels finds a much more egalitarian pattern of income growth under Democratic presidents than under Republican ones.

Bartels’ book is social science at its best: careful empirical research on questions at the forefront of current political and policy debate. His finding of a strong association between president’s party and income inequality is just one of the many interesting and important ones in Unequal Democracy.

That finding seems to have become accepted as an empirical fact by economic and political commentators. A sampling: Dan Balz, Alan Blinder, Tyler Cowen, Kevin Drum, Andrew Gelman, Ezra Klein, Paul Krugman, Andrew Leigh, Brendan Nyhan, Dani Rodrik, Theda Skocpol, Michael Tomasky, Will Wilkinson, Matthew Yglesias, Julian Zelizer.

Is it correct? The story struck me as convincing for the period through the end of the 1970s, but less so for the years since then. So I went to the data. Here’s a summary of my conclusions:

Bartels’ account of the first portion of the post-World War II era seems to me compelling. From the late 1940s through the 1970s, Democratic and Republican presidents tended to have sharply contrasting fiscal and monetary policy orientations. This difference in policies appears to have contributed to sizable differences in income growth for families at various points in the income distribution. Families near the top tended to do equally well irrespective of the president’s party, but families in the bottom 80% fared better under Democrats. Income inequality in the United States changed little over the period as a whole, as increases under Republican presidents were balanced by declines under Democratic presidents.

Since the 1970s the story has been very different. Income inequality has risen sharply, and the correlation between president’s party and movement in inequality has been much weaker.

If we focus on the bottom 95% of the income distribution, as Bartels does, we observe a notable partisan difference in inequality trends and in patterns of income growth in the lower half of the distribution during this period. Contrary to Bartels’ conclusion, this partisan difference exists mainly for pretransfer-pretax income, suggesting that transfer and/or tax policy differences have not been a key driver. To the extent presidents have mattered, the effect seems more likely to have operated via union strength and/or the minimum wage.

To fully understand post-1970s trends in income inequality in the United States, it is critical to include developments at the top of the distribution, which Bartels does not do. If we turn to data that include the top 1%, we find only a weak association between president’s party and changes in inequality since the 1970s. Republican and Democratic presidents have pursued contrasting tax policies, and those policies appear to have made a difference for inequality. But their impact has been swamped by trends in pretax income. At the moment we know relatively little about the factors driving the dramatic increase in the share of economic growth going to those at the top of the distribution, and even less about what role presidents have played.

The following chart is, I think, the best representation of what’s happened since the late 1970s:

The full paper is here.