Dylan Matthews at Vox reported on a recently issued report by Nobel laureate Joseph Stiglitz through the Roosevelt Institute and offers a great summary starting with the argument that the economy’s "sluggish growth and booming inequality" is not an indication of a need for better redistribution but that the system is inherently broken. The report asks how it is even possible that wealth has grown significantly faster than income, that the return from capital remains high but wages are stagnating. According to Stiglitz, the issue is that the rise in wealth is coming from rent seeking instead of productive investments. Rent-seeking is generally viewed by economists as "economically counter-productive" especially when it "becomes so lucrative as to provide a more attractive outlet for people's money than real investments.”
According to Stiglitz, many of these "rents" are created by government policies. Government programs that are fingered are tax cuts and protections for intellectual property. The report recommends limiting banks' opportunities to profit without actually creating wealth. Matthews highlights as the most striking proposal in the report its recommendation to “replace the current housing finance system, in which government and quasi-governmental agencies like Fannie Mae/Freddie Mac and the Federal Housing Administration back up private loans from banks to ensure mortgages remain affordable, with a 'public option' for mortgages, in which the federal government just loans money for houses directly. That would largely eliminate banks' involvement in consumer housing finance, depriving them of an arena rich in rent-seeking opportunities."