Income Inequality: Issues and Policy Options

by Alan Greenspan

Income inequality has become an increasingly important public policy issue in industrialized countries in recent years. Although macroeconomic conditions have been favorable in many of these countries, the distribution of income within and across countries has remained uneven. In fact, in several countries, income inequality has risen. As a result, policymakers have become concerned that large segments of the population are not reaping the benefits of economic growth. To gain a better understanding of these issues, the Federal Reserve Bank of Kansas City sponsored a symposium titled "Income Issues and Policy Options" in Jackson Hole, Wyoming, August 27-29, 1998. The symposium brought together a distinguished group of public officials, academics, and private-sector representatives. The sessions were far-ranging and insightful.

432 pages, Paperback

First published March 1, 2002

About the author

Alan Greenspan is an American economist who served as the 13th chairman of the Federal Reserve from 1987 to 2006. He worked as a private adviser and provided consulting for firms through his company, Greenspan Associates LLC.
First nominated to the Federal Reserve by President Ronald Reagan in August 1987, he was reappointed at successive four-year intervals until retiring on January 31, 2006, after the second-longest tenure in the position, behind only William McChesney Martin. President George W. Bush appointed Ben S. Bernanke as his successor. Greenspan came to the Federal Reserve Board from a consulting career. Although he was subdued in his public appearances, favorable media coverage raised his profile to a point that several observers likened him to a "rock star". Democratic leaders of Congress criticized him for politicizing his office because of his support for Social Security privatization and tax cuts.
Many have argued that the "easy-money" policies of the Fed during Greenspan's tenure, including the practice known as the "Greenspan put", were a leading cause of the dot-com bubble and subprime mortgage crisis (the latter occurring within a year of his leaving the Fed), which, said The Wall Street Journal, "tarnished his reputation". Yale economist Robert J. Shiller argues that "once stocks fell, real estate became the primary outlet for the speculative frenzy that the stock market had unleashed". Greenspan argues that the housing bubble was not a result of low-interest short-term rates but rather a worldwide phenomenon caused by the progressive decline in long-term interest rates – a direct consequence of the relationship between high savings rates in the developing world and its inverse in the developed world.