companies scramble for workers, prices rise and supply chains struggle to keep pace with booming demand, this is the wrong moment to hit the economy with any added juice.

“We don’t have a lot of spare capacity,” said Kristin J. Forbes, an economist at the Massachusetts Institute of Technology. “We certainly don’t have a lot of spare workers today.”

Inflation looms more significantly in the near term because it is currently high, and if it remains that way for an extended period, consumers could change their behaviors and expectations, locking in faster gains. People who worry about the proposals say that 2022 is the wrong time to hand households more money.

Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, said she was unsure whether the package would fuel inflation. But given the current pace of price increases, “you have to be more careful than you would be otherwise.”

The White House says the provisions of the bill that put money in families’ pockets, such as child care help, are not simple stimulus. They will allow caregivers into the labor market, they argue, an investment in the economy’s future that will allow it to produce more with time.

That makes the new program different from the spending passed earlier this year. The Biden administration increasingly acknowledges that sending households checks and offering expanded unemployment insurance supplemented savings, and that as households had more wherewithal to spend it helped to drive up prices.

Mr. Biden said in Baltimore on Wednesday. But the White House contends that this program is not the same as the previous package, and that it will make the price situation better, not worse.

“According to the economic experts, this bill is going to ease inflationary pressures,” the president said on Wednesday.

Still, the 17 Nobel Prize-winning economists that the White House regularly cites have specified that capacity improvements will ease inflation over time rather than imminently.

“Because this agenda invests in long-term economic capacity and will enhance the ability of more Americans to participate productively in the economy,” they wrote, “it will ease longer-term inflationary pressures.”

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Once Tech’s Favorite Economist, Now a Thorn in Its Side

Paul Romer was once Silicon Valley’s favorite economist. The theory that helped him win a Nobel prize — that ideas are the turbocharged fuel of the modern economy — resonated deeply in the global capital of wealth-generating ideas. In the 1990s, Wired magazine called him “an economist for the technological age.” The Wall Street Journal said the tech industry treated him “like a rock star.”

Not anymore.

Today, Mr. Romer, 65, remains a believer in science and technology as engines of progress. But he has also become a fierce critic of the tech industry’s largest companies, saying that they stifle the flow of new ideas. He has championed new state taxes on the digital ads sold by companies like Facebook and Google, an idea that Maryland adopted this year.

And he is hard on economists, including himself, for long supplying the intellectual cover for hands-off policies and court rulings that have led to what he calls the “collapse of competition” in tech and other industries.

“Economists taught, ‘It’s the market. There’s nothing we can do,’” Mr. Romer said. “That’s really just so wrong.”

free-market theory. Monopoly or oligopoly seems to be the order of the day.

The relentless rise of the digital giants, they say, requires new thinking and new rules. Some were members of the tech-friendly Obama administration. In congressional testimony and research reports, they are contributing ideas and credibility to policymakers who want to rein in the big tech companies.

Their policy recommendations vary. They include stronger enforcement, giving people more control over their data and new legislation. Many economists support the bill introduced this year by Senator Amy Klobuchar, Democrat of Minnesota, that would tighten curbs on mergers. The bill would effectively “overrule a number of faulty, pro-defendant Supreme Court cases,” Carl Shapiro, an economist at the University of California, Berkeley, and a member of the Council of Economic Advisers in the Obama administration, wrote in a recent presentation to the American Bar Association.

Some economists, notably Jason Furman, a Harvard professor, chair of the Council of Economic Advisers in the Obama administration and adviser to the British government on digital markets, recommend a new regulatory authority to enforce a code of conduct on big tech companies that would include fair access to their platforms for rivals, open technical standards and data mobility.

his Nobel lecture in 2018 prompted him to think about the “progress gap” in America. Progress, he explained, is not just a matter of economic growth, but should also be seen in measures of individual and social well-being.

Mr. Romer pushed the idea that new cities of the developing world should be a blend of government design for basics like roads and sanitation, and mostly let markets take care of the rest. During a short stint as chief economist of the World Bank, he had hoped to persuade the bank to back a new city, without success.

In the big-tech debate, Mr. Romer notes the influence of progressives like Lina Khan, an antitrust scholar at Columbia Law School and a Democratic nominee to the Federal Trade Commission, who see market power itself as a danger and look at its impact on workers, suppliers and communities.

That social welfare perspective is a wider lens that appeals to Mr. Romer and others.

“I’m totally on board with Paul on this,” said Rebecca Henderson, an economist and professor at the Harvard Business School. “We have a much broader problem than one that falls within the confines of current antitrust law.”

Mr. Romer’s specific contribution is a proposal for a progressive tax on digital ads that would apply mainly to the largest internet companies supported by advertising. Its premise is that social networks like Facebook and Google’s YouTube rely on keeping people on their sites as long as possible by targeting them with attention-grabbing ads and content — a business model that inherently amplifies disinformation, hate speech and polarizing political messages.

So that digital ad revenue, Mr. Romer insists, is fair game for taxation. He would like to see the tax nudge the companies away from targeted ads toward a subscription model. But at the least, he said, it would give governments needed tax revenue.

In February, Maryland became the first state to pass legislation that embodies Mr. Romer’s digital ad tax concept. Other states including Connecticut and Indiana are considering similar proposals. Industry groups have filed a court challenge to the Maryland law asserting it is an illegal overreach by the state.

Mr. Romer says the tax is an economic tool with a political goal.

“I really do think the much bigger issue we’re facing is the preservation of democracy,” he said. “This goes way beyond efficiency.”

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Is It Time to Panic About Inflation? Ask These 5 Questions First.

Typically, these relative price changes are not a problem of macroeconomics — something best solved by the Federal Reserve (by raising interest rates) or Congress (by raising taxes) — but a problem of the microeconomics of those industries.

The core challenge of an economy emerging from a pandemic is that numerous industries are going through major shocks in demand and supply simultaneously. That means more big swings in relative price than usual.

Last year, relative price changes cut in both directions (prices for energy and travel-related services fell, while prices for meat and other groceries rose). But this spring, the overwhelming thrust is toward higher prices. There are fewer goods and services with falling prices to offset the rises.

Still, many of the most vivid and economically significant examples of price inflation so far, like for used cars, have unique industry dynamics at play, and therefore represent relative price changes, not economywide price rises. One important thing to watch is whether that changes — whether we start seeing uncomfortably high price increases more dispersed across the full range of goods and services.

That would be a sign that we were in a period not simply of an economy adjusting itself, but one of too much money chasing too little stuff.

Not all price changes have equal meaning for inflation. Much depends on what happens next.

If the price of something rises but then is expected to fall back to normal, it will act as a drag on inflation in the future. This often happens when there is a shortage of something caused by an unusual shock, like weather that ruins a crop. In an opposite example, in 2017 a price war brought down the price of mobile phone service, pulling down inflation. But when the price war was over, the downward pull ended.

On the other hand, a price that is expected to rise at exceptional rates year after year has considerably greater implications. Consider, for example, the multi-decade phenomenon in which health care prices rose faster than prices for most other goods, creating a persistent upward push on inflation.

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Unemployment Job Search Requirements Return. Is It Too Soon?

A tenet of the American unemployment system has been that anyone collecting benefits, in good times and bad, must look for work.

That quid pro quo changed early in the pandemic. Profound fears of contagion and the sudden need for millions of workers to become caregivers led states to lift the requirements for reasons both practical and compassionate.

But as vaccinations increase and the economy revs back to life, more than half of all states have revived their work search requirements. Arkansas and Louisiana did so months ago in an effort to push workers off their swollen unemployment rolls. Others, like Vermont and Kentucky, have followed in the last few weeks.

ordered the Labor Department to “work with the remaining states, as health and safety conditions allow,” to put such requirements in place as the pandemic abates.

Research suggests that work search requirements of some form in normal economic times can compel workers to find their next job and reduce their time on unemployment. But the pandemic has added a new layer to a debate over how to balance relief with the presumption that joblessness is only transitory. Most states cut off unemployment benefits after 26 weeks.

Business groups say bringing back work search requirements will help juice the labor market and dissuade workers from waiting to return to their old employers or holding out for remote or better-paying jobs.

Opponents contend that the mandate keeps undue numbers of Americans from continuing to receive needed benefits because it can be hard to meet the sometimes arduous requirements, including documenting the search efforts. And they say workers may be forced to apply for and accept lower-paying or less-satisfying jobs at a time when the pandemic has caused some to reassess the way they think about their work, their family needs and their prospects.

“I think the work search requirement is necessary as an economist,” said Marta Lachowska, an economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Mich., who has studied the effects of work search requirements on employment. But she added, “Perhaps given the big disruption we have observed to the labor market, people should be given some slack.”

In Washington, the issue has become part of a larger clash over jobless benefits that intensified after the disappointing April jobs report, with Republicans asserting that Mr. Biden’s policies are deterring people from looking for work and holding back the economic recovery.

A rising number of Republican governors have taken matters into their own hands, moving to end a weekly $300 unemployment supplement and other federally funded emergency assistance that otherwise isn’t due to expire until September.

Job openings rose in March to 8.1 million, the Labor Department reported on Tuesday, yet there are more than eight million fewer people working than before the pandemic. Economists ascribe some of the incongruity to a temporary mismatch between the jobs on offer and the skills or background of those looking for work. They say that in a recovering labor market like the current one, there may not be enough suitable jobs for people seeking re-employment, which can frustrate workers and drive them to apply to positions haphazardly.

That has been the case for Rie Wilson, 45, who worked in venue sales for a nonprofit in New York City before she lost her job last summer.

To fulfill New York’s work search requirement, which generally makes unemployment applicants complete at least three job search activities each week, Ms. Wilson has had to apply for positions she would not typically consider, like administrative assistant jobs, she said.

The prospect of accepting such a job makes her anxious.

“There is always a thought in my mind that, ‘Well, what if I do get pulled in this direction just because I’m being forced to apply for these jobs? What does that look like for my career?’” she said.

The process has been time-consuming, she said, “and it’s also a mental wear and tear because you’re literally pulled from all angles in a very stressful situation.”

Alexa Tapia, the unemployment insurance campaign coordinator at the National Employment Law Project, a worker advocacy group, said work search requirements “harm more than they help,” especially during the pandemic.

In particular, she said, such requirements perpetuate systemic racism by trapping people of color, especially women, in underpaid work with fewer benefits. And she noted that people of color were more likely to be denied benefits on the basis of such requirements.

With state unemployment offices already overtaxed, she added, work search requirements are “just another barrier being put to claimants, and it can be a very demoralizing barrier.”

In states that have reinstated work search requirements, worker advocates say an especially frustrating obstacle has been a lack of guidance.

Sue Berkowitz, the director of the South Carolina Appleseed Legal Justice Center, which works with low-income South Carolinians, said unemployed workers in the state largely wanted to go back to work. But the information on the state’s website about work search requirements is so confusing, she said, that she worries workers won’t understand it.

Before the state reimposed the requirements last month, Ms. Berkowitz sent a marked-up copy of the proposed language to the chief of staff at the South Carolina Department of Employment and Workforce urging clarifications and changes. One of her biggest concerns was that the language as it stood was at a 12th-grade reading level, while the typical reading level of adult Americans is much lower. She did not hear back. “It was crickets,” she said.

More broadly, employees in South Carolina, where the minimum wage is $7.25 an hour, can be reluctant to take a job that pays less than the one they had before the pandemic, Ms. Berkowitz said.

“It’s not that they are below taking a job that makes a lot less, but their financial needs are high enough that they need to continue to make a certain salary,” she said.

Although work search requirements have become a political issue, their restoration does not fall solely along partisan lines. Florida, for instance, where the Republican governor has repeatedly flouted virus restrictions, had kept the work search waiver in place before announcing recently that it would reinstate the requirement at the end of the month.

But many other states, particularly Republican ones, have rushed to bring their work search requirements back.

That is what Crista San Martin found when they left their job out of health concerns at a dog boarding facility in Cypress, Texas, which reinstated its work search requirement in November.

Mx. San Martin, 27, who uses the pronouns they and them, said there were very few job openings near them in the pet care industry, making finding a position onerous.

“That made it really difficult for me to log any work searches, because there simply weren’t enough jobs that I would actually want to take for my career,” they said. The first job they applied to was at a Panera, “which is not in my field of interest at all.”

Above all, applying to arbitrary jobs felt risky, they said, because there was no way to assess potential employers’ Covid-19 safety protocols. Mx. San Martin has since returned to their old job.

“It’s pretty unfair,” they said. “Going out and just casting a wide net and seeing whether a random business will take you is not safe.”

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Middle-Class Pay Lost Pace. Is Washington to Blame?

One of the most urgent questions in economics is why pay for middle-income workers has increased only slightly since the 1970s, even as pay for those near the top has escalated.

For years, the rough consensus among economists was that inexorable forces like technology and globalization explained much of the trend. But in a new paper, Lawrence Mishel and Josh Bivens, economists at the liberal Economic Policy Institute, conclude that government is to blame. “Intentional policy decisions (either of commission or omission) have generated wage suppression,” they write.

Included among these decisions are policymakers’ willingness to tolerate high unemployment and to let employers fight unions aggressively; trade deals that force workers to compete with low-paid labor abroad; and the tacit or explicit blessing of new legal arrangements, like employment contracts that make it harder for workers to seek new jobs.

Together, Dr. Mishel and Dr. Bivens argue, these developments deprived workers of bargaining power, which kept their wages low.

decline of unions; a succession of trade deals with low-wage countries; and increasingly common arrangements like “fissuring,” in which companies outsource work to lower-paying firms, and noncompete clauses in employment contracts, which make it hard for workers to leave for a competitor.

also written about unions and other reasons that workers have lost leverage, said the portion of the wage gap that Dr. Mishel and Dr. Bivens attribute to such factors probably overstated their impact.

The reason, he said, is that their effects can’t simply be added up. If excessive unemployment explains 25 percent of the gap and weaker unions explain 20 percent, it is not necessarily the case that they combine to explain 45 percent of the gap, as Dr. Mishel and Dr. Bivens imply. The effects overlap somewhat.

Dr. Katz added that education plays a complementary role to bargaining power in determining wages, citing a historical increase in wages for Black workers as an example. In the first several decades of the 20th century, philanthropists and the N.A.A.C.P. worked to improve educational opportunities for Black students in the South. That helped raise wages once a major policy change — the Civil Rights Act of 1964 — increased workers’ power.

“Education by itself wasn’t enough given the Jim Crow apartheid system,” Dr. Katz said. “But it’s not clear you could have gotten the same increase in wages if there had not been earlier activism to provide education.”

Daron Acemoglu, an M.I.T. economist who has studied the effects of technology on wages and employment, said Dr. Mishel and Dr. Bivens were right to push the field to think more deeply about how institutions like unions affect workers’ bargaining power.

But he said they were too dismissive of the role of market forces like the demand for skilled workers, noting that even as the so-called college premium has mostly flattened over the last two decades, the premium for graduate degrees has continued to increase, most likely contributing to inequality.

Still, other economists cautioned that it was important not to lose sight of the overall trend that Dr. Mishel and Dr. Bivens highlight. “There is just an increasing body of work trying to quantify both the direct and indirect effects of declining worker bargaining power,” said Anna Stansbury, the co-author of a well-received paper on the subject with former Treasury Secretary Lawrence Summers. After receiving her doctorate, she will join the faculty of the M.I.T. Sloan School of Management this fall.

“Whether it explains three-quarters or one-half” of the slowdown in wage growth, she continued, “for me the evidence is very compelling that it’s a nontrivial amount.”

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Biden’s Proposals Aim to Give Sturdier Support to the Middle Class

Skeptics have warned of government overreach and the risk that deficit spending could ignite inflation, but Mr. Biden and his team of economic advisers have, nonetheless, embraced the approach.

“It’s time to grow the economy from the bottom and middle out,” Mr. Biden said in his speech to a joint session of Congress last week, a reference to the idea that prosperity doesn’t trickle down from the wealthy, but flows out of a well-educated and well-paid middle class.

He underscored the point by singling out workers as the dynamo powering the middle class.

“Wall Street didn’t build this country,” he said. “The middle class built the country. And unions built the middle class.”

Of course, the economy that lifted millions of postwar families into the middle class differed sharply from the current one. Manufacturing, construction and mining jobs, previously viewed as the backbone of the labor force, dwindled — as did the labor unions that aggressively fought for better wages and benefits. Now, only one out of every 10 workers is a union member, while roughly 80 percent of jobs in the United States are in the service sector.

And it is these types of jobs, in health care, education, child care, disabled and senior care, that are expected to continue expanding at the quickest pace.

Most of them, though, fall short of paying middle-income wages. That does not necessarily reflect their value in an open market. Salaries for teachers, hospital workers, lab technicians, child care providers and nursing home attendants are determined largely by the government, which collects tax dollars to pay their salaries and sets reimbursements rates for Medicare and other programs.

They are also jobs that are filled by significant numbers of women, African-Americans, Latinos and Asians.

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Biden’s Spending Plans Could Start to Tackle Inequality

The coronavirus pandemic has threatened to rapidly expand yawning gaps between the rich and the poor, throwing lower-earning service workers out of jobs, costing them income, and limiting their ability to build wealth. But by betting on big government spending to pull the economy back from the brink, United States policymakers could limit that fallout.

The $1.9 trillion economic aid package President Biden signed into law last month includes a wide range of programs with the potential to help poor and middle-class Americans to supplement lost income and save money going forward. That includes monthly payments to parents, relief for renters and help with student loans.

Now, the administration is rolling out additional plans that would go even further, including a $2.3 trillion infrastructure package and about $1.5 trillion in spending and tax credits to support the labor force by investing in child care, paid leave, universal prekindergarten and free community college. The measures are explicitly meant to help left-behind workers and communities of color who have faced systemic racism and entrenched disadvantages — and they would be funded, in part, by taxes on the rich.

Forecasters predict that the government spending — even just what has been passed so far — will fuel what could be the fastest annual economic growth in a generation this year and next, as the country recovers and the economy reopens from the Covid-19 pandemic. By jump-starting the economy from the bottom and middle, the response could make sure the pandemic rebound is more equitable than it would be without a proactive government response, analysts said.

disproportionately hurt women of all races and men of color, she said, “If we tailor the relief to those who are most affected, we are going to be addressing racial and ethnic gaps.”

From its first days, the pandemic set the stage for a K-shaped economy, one in which the rich worked from home without much income disruption as poorer people struggled. Workers in low-paying service jobs were far more likely to lose jobs, and among racial groups, Black people have experienced a much slower labor market rebound than their white counterparts. Globally, the downturn probably put 50 million people who otherwise would have qualified as middle class into lower income levels, based on one recent Pew Research analysis.

But data suggest the U.S. policy response — including relief legislation that passed under the Trump administration last year — has helped to mitigate the pain.

“The CARES Act to the American Rescue plan have helped to support more households than I would have imagined,” Charles Evans, the president of the Federal Reserve Bank of Chicago, told reporters during a call earlier this month, referring to the early 2020 and early 2021 pandemic relief packages.

across the board after slumping early last year, foreclosures have remained low, and household consumption has been shored up by repeated stimulus checks.

While the era has been fraught with uncertainty and people have slipped through the cracks, this downturn looks very different for poorer Americans than the post-financial crisis period. That recession ended in 2009, and America’s wealthiest households recovered precrisis wealth levels by 2012, while it took until 2017 for the poorest to do the same.

income inequality — the gap between how much the poor and the rich earn each year — might soon decline. Lower income inequality could, in theory, lead to lower wealth inequality over time, as households have the wherewithal save more evenly.

start of 2007, the bottom half of the wealth distribution held 2.1 percent of the nation’s riches, compared to 29.7 percent for the top 1 percent. By the start of 2020, the bottom half had 1.8 percent, while the top 1 percent held 31 percent.

Researchers debate whether monetary policy actually worsens wealth divides in the long run — especially since there’s the hairy question of what would have happened had the Fed not acted — but monetary policymakers generally agree that their policies can’t stop a pre-existing trend toward ever-worse wealth inequality.

By offering a more targeted boost from the very start of the recovery, fiscal policy can. Or, at a minimum, it can prevent wealth gaps from deepening so much.

Monetary policy “is naturally trickle-down,” said Joseph Stiglitz, an economist at Columbia and Nobel laureate. “Fiscal policy can work from the bottom and middle up.”

That’s what the Biden administration is gambling on. Paired with packages from December and last April, Congress’s recent package will bring the amount of economic relied that Congress has approved during the pandemic to more than $5 trillion. That dwarfs the amount spent in the last recovery.

The legislation is a mosaic of tax credits, stimulus checks and small business support that could leave families at the lower end of the income and savings distribution with more money in the bank and, if its provisions work as advertised, with a better chance of getting back to work early in the recovery.

There is no guarantee Mr. Biden’s broader economic proposals, totaling about $4 trillion, will clear a narrowly divided Congress. Republicans have balked at his plans and this week offered a counterproposal on infrastructure that is only a fraction the size of what Mr. Biden wants to spend. A bipartisan group of House moderates is pushing the president to finance infrastructure spending through an increased gas tax or something similar, which hits the poor harder than the rich.

Still, the president’s new proposals could have long-term impacts, working to retool workers’ skills and lift communities of color in hopes of putting the economy on more equal footing. The president is set to outline his so-called American Family Plan, which is focused on the work force, before his first address to a joint session of Congress next week.

While details have yet to be finalized, programs like universal prekindergarten, expanded subsidies for child care and a national paid leave program would be paid for partly by raising taxes on investors and rich Americans. That could also affect the wealth distribution, shuffling savings from the rich to the poor.

The plan, which must win support in a Congress where Democrats have just a narrow margin, would raise the top marginal income tax rate to 39.6 percent from 37 percent, and raise taxes on capital gains — the proceeds of selling an asset, like a stock — for people making more than $1 million to 39.6 percent from 20 percent. Counting in an Obamacare-related tax, the taxes they pay on profits would rise above 43 percent.

The new policies won’t necessarily cut wealth inequality, which has been on an inexorable upward march for decades, but they could keep poorer households from falling behind by as much as they would have otherwise.

Betting big on fiscal policy to return the economy to strength is a gamble. If the economy overheats, as some prominent economists have warned it could, the Fed might have to rapidly lift interest rates to cool things down. Rapid adjustments have historically caused recessions, which consistently throw vulnerable groups out of jobs first.

But administration officials have repeatedly said the bigger risk is underdoing it, leaving millions on the labor market’s sidelines to struggle through another tepid recovery. And they say the spending provisions in both the rescue package and the infrastructure could help to fix longstanding divides along racial and gender lines.

“We think of investment in racial equity, and equity in general, as good policy, period, and integral to all the work we do,” Catherine Lhamon, a deputy director of the Domestic Policy Council, said in an interview.

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Beyond Pandemic’s Upheaval, a Racial Wealth Gap Endures

“I want to emphasize that,” he added. “Through no fault of their own.”

The pandemic has hit African-Americans and Latinos hardest on all fronts, with higher infection and death rates, more job losses, and more business closures.

Proposals that confront the wealth gap head on, though, are both expensive and politically charged.

Professor Darity of Duke, a co-author of “From Here to Equality: Reparations for Black Americans in the Twenty-First Century,” has argued that compensating the descendants of Black slaves — who helped build the nation’s wealth but were barred from sharing it — would be the most direct and effective way to reduce the racial wealth gap.

Vice President Harris and Senators Bernie Sanders of Vermont, Elizabeth Warren of Massachusetts and Cory Booker of New Jersey have tended to push for asset-building policies that have more popular support. They have offered programs to increase Black homeownership, reduce student debt, supplement retirement accounts and establish “baby bonds” with government contributions tied to family income.

With these accounts, recipients could build up money over time that could be used to cover college tuition, start a business or help in retirement.

Several states have experimented with small-scale programs meant to encourage children to go to college. Though those programs were not created to close the racial wealth gap, researchers have seen positive side effects. In Oklahoma, child development accounts seeded with $1,000 were created in 2007 for a group of newborns.

“We have very clear evidence that if we create an account of birth for everyone and provide a little more resources to people at the bottom, then all these babies accumulate assets,” said Michael Sherraden, founding director of the Center for Social Development at Washington University in St. Louis, which is running the Oklahoma experiment. “Kids of color accumulate assets as fast as white kids.”

Without dedicated funds — the kind of programs that enabled white families to build assets — it won’t be possible for African-Americans to bridge the wealth gap, said Mehrsa Baradaran, a law professor at the University of California, Irvine, and the author of “The Color of Money: Black Banks and the Racial Wealth Gap.”

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Why the Markets Need a Strong Government Hand

More to the point, there is also substantial waste in the private sector, much of it caused by individual purchase decisions that impose costs on others.

Suppose, for example, that everyone owned a car weighing less than 2,500 pounds and someone then bought one that weighed 5,000 pounds. That person would face less risk of injury and death than before, while all others would face more. Their best response may be to buy 5,000-pound cars themselves, in which case everyone’s risk would be higher than when all were driving smaller cars.

Similarly, at crowded gatherings in enclosed spaces (remember them, before the pandemic?), when all speak more loudly to hear better, they don’t hear as well as they would have if all had spoken more softly.

In these cases, individually rational behavior is collectively irrational. Buying 5,000-pound cars when 2,500-pound cars would be better for almost everyone is waste, pure and simple.

Taxing vehicles by weight would be a relatively unintrusive remedy. But opponents of government might object, saying such measures are social engineering. Yes, but so are speed limits and traffic lights. Policies that try to bring individual and collective interests into closer alignment exist in all countries, for good reason. And as long as we have to tax something, why not tax activities that cause harm to others? Every dollar raised from such levies can be a dollar less from the many taxes currently imposed on beneficial activities.

Former President George W. Bush once said, “We don’t believe in planners and deciders making decisions on behalf of Americans.” Yet that’s exactly what all societies entrust government bureaucrats to do, again for good reason: Even if people are just as rational and markets just as competitive as Mr. Friedman believed, individually rational actions often yield demonstrably bad outcomes. That simple, incontestable fact has always been the central rationale for government involvement in economic life.

The government requires catalytic converters on cars, for instance, because each individual’s decision to install one would be costly and yield no measurable impact on air quality. Yet when everyone installs a catalytic converter, the benefit of the improvement in air quality far outweighs the corresponding cost.

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If the Economy Overheats, How Will We Know?

“I don’t think anyone will be too surprised to see massive airfare inflation” in the short term, for example, as the economy reopens, said Wendy Edelberg, director of the Hamilton Project at the Brookings Institution. “Instead, I worry if we start to see signs that people, businesses and financial markets are responding to the level of overheating as if it were permanent.”

That situation would leave policymakers, especially at the Federal Reserve, faced with two bad choices: Allow inflation to take off in an upward spiral, or stop it by raising interest rates and quite possibly causing a recession.

“Ultimately we’re worried about an outcome in the real economy, which is rapid growth in 2021 followed by a significant reversal in 2022 or 2023 with anything like a recession, negative growth or a sizable increase in the unemployment rate,” said Jason Furman, a former Obama administration economic adviser. “Much of what we call ‘overheating’ is mostly a concern insofar as it triggers that outcome.”

Mr. Furman says annual inflation rates of 3.5 percent or higher in late 2021 or 2022 would “create a substantial risk of macroeconomic reactions that create genuine instability and problems in the economy,” and that even a notch lower than that, 2.5 percent to 3.5 percent, could create some problems.

Julia Coronado, president of MacroPolicy Perspectives, by contrast, argues that it would take several years of inflation at 3 percent or higher — not just a bump in 2021 or 2022 — before she would worry that inflation expectations could become unmoored, leading to either an inflation-tamping recession or a 1970s-style vicious cycle of ever-higher prices.

“It is strange to me that for years economists pined for a better mix of monetary and fiscal policy, and now we have it and there is a narrative among some that it has to end in disaster,” Ms. Coronado said. “I am more optimistic about the macro outlook than I have been in a long time and am far more focused on how quickly the labor market returns to health than any threat from inflation.”

As economists view it, inflation — at least the kind worth worrying about — isn’t a one-time event so much as a process.

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