Inequality and Opportunity
Is our problem that the very rich have too much money? Or that the rest of us don't have enough?
Last week Ezra Klein observed that,
The top 1 percent, for instance, has gone from capturing about 8 percent of the national income to 18 percent. But there’s no obvious skills differential between workers in the top 1 percent and the workers directly beneath them. It’s not like hedge fund managers are the only guys able to use Excel.
Matt Yglesias and Alex Tabarrok push back, arguing that modern technology has enabled the very best to leverage their success in a way that they couldn’t decades ago, simultaneously inflating the value of being number one and diminishing the value of being merely very good.
Klein responds that they’re right but the outcome reflects changed structure, not added value.
Kobe Bryant can make more money because the Chinese watch his basketball games and pay him to endorse their products (that’s not a random example, incidentally).
But saying that the rise in inequality is partly the result of technological change is not the same as saying it’s the result of skills-biased technological change. It’s not that satellite television has created a need for more basketball players and that need isn’t being filled. If that were the case, the answer would be easy: Train more basketball players. It’s that satellite television has made it much, much more lucrative to be one of the world’s top basketball players. It’s not about skills, but about the opportunity to make money. Training more basketball players won’t really help reduce inequality or spread opportunity in that world. Higher tax brackets for the super-rich, however, might.
Yglesias, not surprisingly, suggests the same thing in his post. Tabarrok doesn’t mention it but I’ll go out on a limb and guess that he’d oppose the idea.
What’s particularly interesting to me, though, is this turn of phrase from Klein’s penultimate sentence: “Training more basketball players won’t really help reduce inequality or spread opportunity in that world.”
These are, at best, loosely related concepts.
There’s the old joke about the Russian peasant jealous that his neighbor has two cows while he only has one. Granted a wish by a genie, the peasant says: “Kill one of my neighbors cows!” That’s one way of reducing inequality. But it makes the peasant’s life better only by comparison.
Should our focus really be on the problem of a handful of people getting much richer than the rest of us? Or on giving more people the opportunity to make their lives better?
While higher tax brackets might be justifiable on other grounds, they’re unlikely to do much in the way of spreading opportunity. They’d, by definition, reduce inequality, of course. But it’s not clear what good that does anybody.
Now, I suppose, we could spend the additional revenue gleaned from such a policy (yes, there’s the Laffer curve to consider, but a politically salable hike would likely keep us on this side of it) in such a way as to create additional opportunity. We could, say, beef up our high school vocational training system to get more kids the skills needed to get decent jobs. I could be talked into paying more taxes for such a thing.
But too many “soak the rich” types seem mostly interested in killing one of Kobe Bryant’s cows.