Inequality and Policy

In his interesting post responding to Brink’s new Nostalgianomics paper, Matt Yglesias writes:

I think that in a lot of ways the most interesting recent research on inequality turns out to be about skill-biased technological change after all. Specifically, Claudia Goldin and Lawrence Katz argue in The Race Between Education and Technology that we shouldn’t look at SBTC as something that just comes along and causes inequality. Rather, it causes inequality when society fails to respond to SBTC by expanding the quantity of educated citizens. Seen in this light, the SBTC component of growing inequality is, indeed, a policy failure.

The issue isn’t “quantity of educated citizens,” it is the “quantity of citizens with economically remunerative skills,” which just isn’t the same thing. The pre-schooling distribution of ability to acquire economically-valued skills may put a pretty hard limit on the usefulness of pushing people to spend ever more time in college. (Here’s Cato Unbound’s debate on whether more college is worth it.) You can think of this in IQ terms, like Charles Murray, or in early childhood development terms, like James Heckman. But it remains that inequalities in skill-acquisition abilities may not be ameliorable by getting more kids to spend more time in college. Moreover, Goldin and Katz provide basically no evidence to the effect that education can or will keep up with SBTC given their preferred policies. If certain new technologies continuously and disporportionately increase the productivity of people over the 3rd standard deviation of skill, say, then wage gaps will stretch out no matter how many people you put through grad school. Please read Kling and Merrifield

That said, I think there’s a huge amount of wasted potential out there, and bad policy is to blame. I think inequalities in the quality of primary education are very important, and that policies that would improve the quality of primary instruction promise both large gains in equality and overall economic performance. The problem is, to provide an aggravating Yglesias-style diagnosis, is that the Democratic Party has the public education cartel as one its major clients. So if increasing economic mobility and reducing inequality requires fundamentally reforming the structure of the primary education delivery in the U.S. so that it can deliver higher-quality instruction to a broader range of people, then too effin’ bad!

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