Inequality, Technology, and Education: What Are the Linkages?

November 18th, 2013 at 9:03 am

If you follow this debate and know the players, there’s an interesting and IMHO, progressive, consensus forming.  Over at the NYT Economix blog.

Print Friendly, PDF & Email

7 comments in reply to "Inequality, Technology, and Education: What Are the Linkages?"

  1. smith says:

    When Eisenhower tax rates took 90% of income over 2 million dollars ($250,000 in 1959 dollars) that discouraged excessive compensation. When 30% of labor was unionized, that critical mass pushed up white collar workers in management above them, and dragged non-unionized workers below them. Increase marginal rates, restore and legislate modern labor practices (40 hour work week, leading to 35 hour work week) Remember, it’s a zero sum game plus maybe 1%/year increased productivity.

    Here is clear evidence and statistics refuting lack of education and technology demands cause inequality.

    Page 303, The State of Working America 12th Edition

    “Real wages of college graduates fell for every key occupational group from 2003 to 2011, except for computer and mathematical science. From 2002 to 2011 there were four occupational categories with positive real wage growth for college graduates; however, even the occupation with the best real wage growth – computer and mathematical science – had growth of 3.2 percent over those nine years, an increase of about a third of 1 percent a year. It is fair to say that there was no occupation providing college graduates on average with good real wage growth after 2002 or 2003.”

    This analysis was conducted to address immigration issues but it provides clear evidence new technology and lack of education and the intersection of the two are not creating inequality.
    “the supply of graduates is substantially larger than the demand for them in industry”
    “Wages have remained flat, with real wages hovering around their late 1990s levels.” (downwardly nominal wage rigidities!)

  2. Perplexed says:

    I posted the following comment to your Economix blog post:

    “Have there been any academic studies on the relative importance of factors that drive the prohibition of economic ‘scientists’ to discuss, measure, and explain the real role of rents and rentiers in the economy? There seems to be no “scientific” reason for it. Is it self interest and financial awards? Fear of retribution from other economists? Fear of retribution from all academics who share in these rents through copyrights and other forms of protection? Fear of retribution from the rentiers operating the world largest monopolies ever constructed in history? Is it ‘marginal products’ theology; fear of being struck down by the ‘marginal products gods’? I read the article over a couple of times thinking that the word must have been there and that I had just missed it but my search application couldn’t find it either.

    Fortunately, not every economists follows this prohibition; some are just fearless (or non-believers?). Gabriel Palma has done some great work in articulating the role of rents in the production of inequality and the channels through which they operate.

    He has captured many of these effects in the Palma ratio which is more responsive to this information which is somewhat obscured by GINI.

    Strange his name didn’t get mentioned here. Is it because you’re not familiar with his work or do you find problems with it?”

    As Palma’s work seems to provide a more persuasive model of how this operating it would be great to have your opinion on it. Is there something about his work or assumptions that would lead you to question the implications? Am I missing something important here?

    • smith says:

      Anything would be better than GINI. Back on September 17, 2013, I left a link to this:

      There is no reason the shape of this graph is any harder to see or understand than a number like the ratio top-ten/bottom-forty

      It just needs a name (income slide? looks like a children’s slide)

      One could use both, but I’d argue the graph is even easier to understand and keep in mind.

      The previous comment also included this:

      “In other countries with less inequality, the big difference is the very top are not so over the top, and the bottom has a higher floor.”

      It’s possible to find European income distribution by country broken into quintiles, which my comment above comes frome, but I couldn’t find again just now, and bogus though interesting pushback appears too

      This was the original comment:

      • Perplexed says:

        “Anything would be better than GINI.”

        True, we need better ways to convey the underlying information but the GINI measurement is still pretty effective and intuitive, even if the visual representation doesn’t convey the information as powerfully as it should. People tend to look at the “line” as opposed to the “area.” e.g. a graph of the U.S. wealth GINI displaying the .87 coefficient doesn’t convey the reality of what’s going on well as the verbal interpretation that 87% of the “area” between equal distribution of wealth and one person owning everything is gone. The reality that we are only 13% of the “area” away from one person owning everything should be enough to expose how ridiculous any “marginal products” explanations are relative to real-word data. Why would any discipline that holds itself out to be a “science” not be discussing such an obvious contradiction?

        • smith says:

          I get the need to be able to quote a number, and compare that number to other countries, and compare that number to what the number was in the past.

          But please also consider as another useful tool, how powerful the simple graph would be in explaining everything. Anyone can understand a simple bar graph. For those at first unfamiliar, thoughtful discussion and explanation would provoke greater interest in what it represents.

          T-shirts and buttons would become iconic. The advantage over the slogan 99% is that there is a ton more information conveyed in a simple easy to understand format.

          Wonder why the top 10% to 20% don’t rebel against the 1% taking all the gains. Look at the graph. They enjoy a hugely beneficial position in the current system, taking in 3 to 4 times the average income of everyone else. Plus the boss of the 10% is the 1%. It’s not aspirational sentiment to reach the 1%, but reluctance to mutiny that keeps them in line.

          • Perplexed says:

            -“But please also consider as another useful tool, how powerful the simple graph would be in explaining everything.”

            No quarrel here, I’m very much on board with anything and everything that gets the story across. IMHO, the biggest obstacle is “economist science” pushing the marginal products myth. Economists are in a very powerful position to explain that marginal products fall far short of explaining what’s driving this yet they don’t do it. I thought this comment I saw recently helped put it in perspective: “In our current economic model, we have made it possible for a few to accumulate truly massive amounts of savings in excess of 25,000 years of the median income ($1 billion / $40K = 25,000).”

            Few people in history have ever made that kind of “marginal products” contribution and most of them never “cash in” on it when they do (Norman Borlaug & Jonas Salk come to mind here). To propose that we have over 1,000 such people living with us currently (and a number of those with 30 or 40 times that amount) is beyond ridiculous. Is putting together and managing a monopoly now a “marginal products” achievement? It seems that all of the “evidence” is strongly supporting the “rents” story. IMHO, the sooner we get it out there, measure it, and start focusing on “solutions” to it, the better off we’ll be. It seems that the economics profession for the most part (with very few exceptions) is standing in the way of that discussion taking place instead getting it out in front where it belongs and leading it. Who’s responsible for the welfare impact of that?

            You’re right about the top 10 – 20% enjoying a “hugely beneficial position.” Makes one wonder if they understand that for the top .5% to increase their share of the wealth and close in on that 13% GINI gap left that it has to come from them. There’s little to gain now from the other groups, they’ve pretty much been impoverished already from a wealth standpoint. Monopolies don’t create wealth, they only redistribute it.