What Americans generally want from their economic system are higher incomes and ample security in their everyday lives. A healthy economy is not an end in itself but a means to an end—the realization of what we expansively and vaguely call "the American Dream." We want stable jobs, better living standards and protections against life setbacks (illness, disability and old age). We want government to be funded adequately so that it can provide the public services that we believe essential to a decent society and our own personal well-being. We want enough prosperity and predictability to safeguard our families from economic harm. These aspirations seem reasonable to most Americans, and many scholars and commentators treat them as if they've been etched into the national consciousness since the earliest days of the republic. They haven't.

The American creed has always emphasized personal opportunity and getting ahead. But these widely held values and hopes did not exist in a vacuum. Americans were realists as well as romantics, and before World War II, they recognized that their personal advance was hardly guaranteed. They expected to struggle and knew they would face adversity and, possibly, failure. Hard work and grit were necessary; but in the end, they might not be sufficient. Success was not ordained. It is not that today's postwar Americans have forsaken the commitment to hard work (international surveys show that Americans work longer than people in most wealthy societies) or the necessity of persistence. But expectations have changed. The assumption now is that people who embrace these middle-class virtues will be crowned, more or less automatically, with the rewards of a decent middle-class life. Striving for success, though perhaps not ensuring every outsized dream, should at least result in a "fair" level of economic well-being and stability.

We hear this refrain constantly: "People who play by the rules"— meaning that they get an education, work hard and are generally responsible in their personal lives—deserve a piece of a prosperous society. They've earned it, and if it's somehow revoked or reduced, then they've been cheated. The informal social contract has broken down, and someone should be held responsible. These beliefs are deeply embedded in popular psychology and are reflected in political rhetoric. I and others have a name for this sense of deserving: "entitlement." It is, I think, a feeling that crystallized only in the decades after World War II, nurtured by the unexpected prosperity of the early postwar decades and the belief that the economic system could be controlled.

What we have learned from the Age of Inflation is that this sense of entitlement is exaggerated and, to some extent, unrealistic. The economy that we imagined could be controlled for our benefit turns out to be—at least at the level of individual workers and firms—more chaotic and uncertain and less controllable than we expected. Some of our economic desires are at cross purposes, at least partially. We want higher incomes and the "new and improved"—the faster computer, the cheaper airfare, the breakthrough medical device. But the very process of "creative destruction" that brings forth these gains may undermine or demolish the stability and security that we also crave. Alan Greenspan often argued approvingly that "flexibility" was one of the chief strengths of the U.S. economy. By that, he presumably meant its ability to re spond to change and move people and capital to the areas of greatest opportunity. This is surely true. But it's also true that there's another side to "flexibility": declining industries, bankrupt companies and lost jobs.

The new economic order maintains an uneasy standoff between our conflicting wants. It provides the opportunity that most Americans expect, a yearning that goes back to the republic s earliest days, even if the gains are distributed increasingly unevenly. It also provides a fair amount of order and security for most Americans, but that order and security are much less than many have come to expect almost as a birthright. Americans dislike the potential precari-ousness and capriciousness of their economic system. The Great Moderation is the glue that has held this shaky arrangement together. It provides enough forward momentum to keep the worries at bay. But should it prove a passing phase, the new order might find itself under furious assault.

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