…To try to cure it by spending less is like trying to cure a sick person by bleeding. So it was natural to ask economist/advocates of bleeding like Harvard’s Alberto Alesina and Kenneth Rogoff how they expected their cure to work. Their answer was… the confidence fairy…. Alesina argued that… [the] beneficial impact on expectations would more than offset its debilitating effects. Buoyed by assurance of recovery, the half-dead patient would leap out of bed, start running, jumping, and eating normally, and would soon be restored to full vigor. The bleeding school produced some flaky evidence to show that this had happened in a few instances. Conservatives who wanted to cut public spending for ideological reasons found the bond vigilante/confidence fairy story to be ideally suited to their purpose. Talking up previous fiscal extravagance made a bond-market attack on heavily indebted governments seem more plausible (and more likely); the confidence fairy promised to reward fiscal frugality by making the economy more productive….

The cure… came about years behind schedule not through fiscal bleeding but by massive monetary stimulus…. The champions of fiscal bleeding triumphantly proclaimed that austerity had worked…. In his first budget in June 2010, Chancellor of the Exchequer George Osborne warned that ‘you can see in Greece an example of a country that didn’t face up to its problems, and that’s a fate I am determined to avoid.’ In presenting the United Kingdom’s 2015 budget in March, Osborne claimed that austerity had made Britain ‘walk tall’ again. On May 7, that claim will be put to the test in the UK’s parliamentary election. British voters, still wobbly from Osborne’s medicine, can be forgiven if they decide that they should have stayed in bed.

…but much of Europe lives under a severe debt burden. Nonfinancial corporate debt exceeds 100 percent of GDP in Belgium, Finland, France, Ireland, Luxembourg, Netherlands, Portugal, and Spain. And, gross government debt (as measured by Eurostat) is close to or exceeds this threshold in Belgium, France, Greece, Ireland, Italy, Portugal and Spain. Debt levels this high… are a drag on growth… households have more difficulty maintaining consumption when income falls; firms may be unable to keep up production and investment when revenue dips; and governments are in no position to smooth expenditure when revenue falls…. Beyond that, high levels of debt reduce the effectiveness of central bank stimulus…. Granted, zero (or even negative) interest rates postpone the day of reckoning, potentially for years. But as growth returns, we expect interest rates to rise and the burden of servicing the debt will rise with it. So, the time will ultimately come when waiting is no longer an option…

…The tasks we used to do can now be done more cheaply by lower-paid workers abroad or by computer-driven machines. My solution—and I’m hardly alone in suggesting this—has been an activist government that raises taxes on the wealthy, invests the proceeds in excellent schools and other means people need to become more productive, and redistributes to the needy. These recommendations have been vigorously opposed by those who believe the economy will function better for everyone if government is smaller and if taxes and redistributions are curtailed. While the explanation I offered a quarter-century ago… has become… standard, widely accepted…. I’ve come to believe it overlooks a critically important phenomenon: the increasing concentration of political power in a corporate and financial elite that has been able to influence the rules….

[The] market view… fails to account for much… doesn’t clarify why the transformation occurred so suddenly… [cannot] account for why other advanced economies facing similar forces of globalization and technological change did not succumb to them as readily… why the compensation packages of the top executives of big companies soared… the [recent] decline in wages of recent college graduates…. A deeper understanding of what has happened to American incomes over the last 25 years requires an examination of changes in the organization of the market… stem[ming] from a dramatic increase in the political power of large corporations and Wall Street…. Rising job insecurity can also be traced to high levels of unemployment. Here, too, government policies have played a significant role…. Reversing the scourge of widening inequality requires reversing the upward distributions within the rules of the market, and giving workers the bargaining leverage they need to get a larger share of the gains from growth. Yet neither will be possible as long as large corporations and Wall Street have the power to prevent such a restructuring…

…is that it is wrong to focus on inequality of outcomes in a ‘snapshot.’ Intergenerational mobility and ‘equality of opportunity’, so the argument goes, is what matters for normative evaluation. We ask what pattern of intergenerational mobility leads to lower inequality not between individuals but between the dynasties to which they belong? And how does this pattern in turn relate to commonly held views on what constitutes equality of opportunity? Focusing on bistochastic transition matrices in order to hold constant the steady state snapshot income distribution, we develop an explicit partial ordering which ranks matrices on the criterion of inequality between infinitely lived dynasties.

People who thought they were upwardly mobile are finding themselves with no-higher real incomes [than their parents]. And people who thought they were sociologically stable are finding themselves poorer.

Money, of course, provides the wherewithal for acquiring what are considered the traditional bedrocks of a middle-class life: adequate health care, college for the children and retirement savings, generally with a car and a regular summer vacation thrown in.

Some version of that basket can be bought across a range of incomes, depending on location. It might include a used Pontiac instead of a late-model Lexus, or a small walk-up instead of a house with a backyard. And even though consumption was once a useful shorthand guide to a middle-class lifestyle, it is no longer as reliable in a world where cellphones and flat-screen TVs are staples in a majority of households below the poverty line and retirement savings, even among top earners, are often treated as a luxury.

There isn’t one middle class, but many middle classes. Still, what all of them ultimately require, experts say, is a sense of economic security.

“If there’s no security, there’s no middle class,” said Thomas Hirschl, a sociologist at Cornell and an author of “Chasing the American Dream.”

The types of jobs that pay middle-class wages have shifted since 1980. Fewer of these positions are in male-dominated production occupations, while a greater share are in workplaces more open to women.

That feeling of security has been eroded by several factors.

Median per capita income has basically been flat since 2000, adjusted for inflation. The typical American family makes slightly less than a typical family did 15 years ago. And while many goods have become cheaper or better, the price of three of the biggest middle-class expenditures — housing, college and health care — have gone up much faster than the rate of inflation.

Equally important, Mr. Hirschl found a high degree of income volatility among most Americans in the four decades between 1969 and 2011. At some point in their working lives, a full 70 percent earned enough to put them in the top fifth of earners, and as many as 30 percent reached the equivalent of $200,000 in 2009 dollars, or roughly the top 4 percent.

Similarly, nearly 80 percent at least temporarily plunged into a red zone, where their income dropped near or below the poverty line, or they were compelled to gain access to a social safety net program like food stamps or collect unemployment insurance. More than half of Americans ages 25 to 60 will experience at least one year hovering around the poverty line.

For most people, their 20s and 30s have traditionally been the least secure decades, with earning power building to a peak in their 40s and 50s, Mr. Hirschl said. But the recession upended that pattern for many Americans. Older workers experienced an extended bout of unemployment, often followed by a new job at a lower wage…

…The fact that currently wealthy Americans have not, in general, inherited their wealth follows logically from the fact that, in their parents’ generation, there weren’t comparable accumulations…. Given the pattern of highly unequal incomes, and social immobility observed in the United States today, we can expect inheritance to play a much bigger role in explaining inequal…. Inherited advantages in the patrimonial society predicted by Piketty will include direct transfers of wealth as well as the effects of increasingly unequal access to education, early job opportunities and home ownership.

…there is almost no systematic empirical evidence on their economic effects. In this paper we analyze for the first time the economic impact of industrial robots, using new data on a panel of industries in 17 countries from 1993-2007. We find that industrial robots increased both labor productivity and value added. Our panel identification is robust to numerous controls, and we find similar results instrumenting increased robot use with a measure of workers’ replaceability by robots, which is based on the tasks prevalent in industries before robots were widely employed. We calculate that the increased use of robots raised countries’ average growth rates by about 0.37 percentage points. We also find that robots increased both wages and total factor productivity. While robots had no significant effect on total hours worked, there is some evidence that they reduced the hours of both low-skilled and middle-skilled workers.