Even after winning the Nobel Prize, the elite economists continue to compete. In this piece,   Joe Stiglitz makes his case for why he is our best liberal scholar.  We will see if Paul Krugman can match this by publishing a better piece in Vogue or perhaps Elle.  I have published in Reader’s Digest but that’s a story for another day.Â
If you click on the Stiglitz piece, you will learn that Rob Lowe has an old tattoo and you will learn the troubling fact (unless you are one of them) that the top 1% of the U.S own 40% of the nation’s wealth.   So Dr. Stiglitz’s point is that the remaining 99% should be grateful for their 60% share.   (I’m kidding).
There is only one viable strategy for reducing income inequality and this is investing in children’s skill formation. I would favor financing such investments through taxes on the top 5% of the income distribution (and I believe that would include my two worker household). What would these “investments” be? Another Nobel Laureate named  James Heckman offers a promising vision via his Heckman Equation.
Will Matthew Kahn please explain how increased skills lead to higher returns in a winner-take-all economy? More skilled undercompensated losers will only mean more for the overcompensated winners.
“There is only one viable strategy for reducing income inequality and this is investing in children’s skill formation.”
Terrific. The whole progressive movement has been reduced to preschools.
Skill formation is a really vague idea. What do you mean? What sort of skills? Carpentry is a skill but it doesn’t pay well anymore.
“There is only one viable strategy for reducing income inequality and this is investing in children’s skill formation.”
Wow. There really should be a prize for that.
1. Not (wealth = income).
2. The wealth on which the usual wealth distribution profile is based contains dollar-denominated wealth only.
3. “Investing in children’s skill formation” does NOT imply tax-support of schools, compulsory attendance statutes, operation of schools by State (government, generally) employees, or a policy which restricts parents’ options for the use of the taxpayers’ sub-adult schooling subsidy to schools operated by dues-paying members of the NEA/AFT/AFSCME cartel.
1. Not (wealth = income).
2. The wealth which determines the usual wealth distribution population profile contains dollar-denominated wealth only.
3. “Investing in children’s skill formation” does not logically imply compulsory attendance statutes, tax support of schools, State (government, generally) operation of schools, or policies which restrict parents’ options for the use of the taxpayers’ sub-adult schooling subsidy to schools operated by dues-paying members of the NEA/AFT/AFSCME cartel.
Sorry for the duplication.
@Malcolm:
1. Agreed; wealth distributions are inherently more skewed than income distributions. Are you arguing that the recent increase in wealth inequality has not been accompanied by an increase in income inequality?
2. ????
3. Agreed, as a matter of logic. But what alternatives do you suggest?
Scrooge,
We have to stop meeting like this. It seems we meet when we face in opposite directions. Education is like health care, which to me means “none of the State’s business”. Information assymetries argue against State operation of an enterprise (but not against regulation), seems to me.
Without dollar denominations, we all get 24 hours of use out of the universe every day. My starlight and sunlight budgets are the same as yours (considerations of latitude and smog excluded). I make as much use of the Earth’s gravitational field as does Bill Gates. I get my daily ration of O2 for free, like everyone but divers and astronauts. I used to catch a bus from my $100/month room in Manoa (back in the 70’s) to the North Shore and body surf Log Cabins, Ke Waena (Rockpile), Off-The-Wall, and Pipeline, and smile to see the mainland tourists standing on the beach taking pictures. They would have died in the water (I hear Meg, a Makapu’u lifeguard, once rescued Mark Spitz). Then they got on their tour busses and went back to their $200/night hotels. They paid $ thousands more than I paid for less use of this place. Who’s wealthy?
What’s the alternative to tax-supported, compulsory, State-operated schools? First, do no harm. Why suppose that organized violence (the State) can make a positive contribution to the education industry? Every law on the books is a threat by a government to kidnap (arrest), assault (subdue), and to forcibly infect with HIV (imprison) someone. My ideal policy would give to individual parents the power to determine for their own children the course study and the pace and method of instruction. This means: repeal compulsory attendance statutes and repeal tax support of schools. Repeal barriers to on-the-job training: child labor and minimum wage laws.
I could be wrong. There are too many “r”s in “revolution. I’ll happily compromise and accept Parent Performance Contracting.
Sure, if by “viable strategy,” you mean only actions acceptable to the GOP. What a predictable view for an academic economist.
Malcolm,
I can’t say you’re not clear enough.
I put my stripped-down view front and center so people can know where I start my analysis. I figure it’s courtesy to make it easy for people to follow or criticize my argument. It may look like I’m staking an extreme position as a negotiating tactic, but that’s not what I’m doing. I’m in no position to negotiate anything, anyway. If “investing in education” is really about helping kids or reducing human misery, why the reflexive resort to threats of violence? “Tax the wealthy to support schools” is an illusion. Corvee labor is a tax. The largest tax burden of compulsory schooling is the opportunity cost to poor kids of the time that they spend in the NEA/AFT/AFSCME cartel’s wretched schools. Another large cost of the current State-monopoly system which tax-funded “investment” maintains is the opportunity cost to society of the lost innovation which a competitive market in education services would generate. A State-monopoly enterprise is like an experiment with one treatment and no controls: a retarded experimental design.
Matthew: “There is only one viable strategy for reducing income inequality and this is investing in children’s skill formation. ”
Bull f-ing sh*t.
Listening to people like you is how we *got* here.
I don’t know WTF Mark invited you here, except for the fact that he has a weakness for hippie-bashing.
Go back to your tenure-protected job, and leaving fixing the country to people who actually want to.
Yes, that is the only possible viable strategy. Which is why inequality has been getting worse at the same time investment in education has been rising. That liquid squelching sound? That’s my eyes rolling.
(Barry): “Listening to people like you is how we *got* here.”
What aspects of the current political/economic situation do you attribute to economists? Seems to me governments at all levels have made more promises than they can keep. If “here” means unsustainable entitlement commitments and political corruption, it describes Greece, Ireland, Portugal, Great Britain, Iceland, Russia, China, and just about everywhere. People ascend the political hierarchy in democratic polities by making promises to everyone and subsidizing influential constituent groups. In one-party bureaucratic dictatorships, they ascend the hierarchy by promising support to superiors and favors to subordinates. Wnen the wealth of the entire society is at their disposal, the result is a classic tragedy of the commons.
Malcolm: My starlight and sunlight budgets are the same as yours
Yes but that’s because we are both poor slobs relatively speaking. Now Goldman Sachs, their sunlight budget looks a little different:
Malcolm: I get my daily ration of O2 for free and body surf and smile to see the mainland tourists standing on the beach taking pictures.
Isn’t it wonderful that we can be so glib about the air and the water? That our ancestors cared enough to preserve them? And provided us with an education to appreciate them?
Tax The Rich,
Citing BLM favors to Goldman Sachs does not make the case for a free market, seems to me. To my ears, half the arguments for socialism sound like “powerful people get access in any system, so (!!) let’s just go to the endgame straight away”. We’ll die eventually. Why not kill ourselves today? That argument does not work for me.
“Our ancestors cared to preserve them”? Maybe. Privatization limited damage to the commons.
I’ll try again to express my point about non-dollar-denominated wealth. Humans have available the mass of the Earth, a steady rain of meteor dust, and a solar energy budget. That’s pretty much all. They apply their attention and skill to these resources. The sun shines, rain falls, and the Earth sustains plants. Sporadic vulcanism and variations in solar output excepted, most of the geographic variation and inter-temporal fluctuations in the variables we call “economic” are induced by people. Humans are the cause of most preventable human misery. While I’m not philosophically opposed to all violence, the burden of proof falls on the advocate for violence, not on the advocate for free exchange, seems to me.
“There is only one viable strategy for reducing income inequality and this is investing in children’s skill formation”
So an inheritance tax (which has existed before, and which HAS worked) is NOT viable, but magic pre-school pixie dust that will overcome the myriad obstacles to both better education and better outcomes in the US IS viable?
Malcolm: Privatization limited damage to the commons.
Yes. And no. Or better: A half truth is never a full truth. Unless of course you are an ideologue. Then treating half truths as full truths becomes par for the course. And plugging your ears to counter-evidence becomes a way of life:
You need to up the amperage to your bullshit-detector Malcolm. Then when you read Ayn Rand you’ll laugh at the half truths being passed off as full ones. And you’ll become more adept at winnowing out noise and hearsay: I hear Meg, a Makapu’u lifeguard, once rescued Mark Spitz…
Tax the Rich,
The full truth would take the age of the universe to relate. “Ideological” is an uncomplimentary way to say “systematic”, and I regard it as courtesy to be systematic. Antonyms include “scatterbrained” and “unscrupulous”. I did not witness it but Meg, whome we called “Rope-hair” because her blonde curls looked like unlaid hemp whe wet. used to hang with my surfing buddies. She was cute, so maybe Spitz just faked an emergency.
Who knew that the depression and ww2 were the heyday of investment in the skills of children. Learn something new every day.
Of course, this really depends on which skills you’re talking about. There are some skills you could teach kids — given a free hand — that would flatten the wealth distribution dramatically.