Wednesday, December 14, 2011

anti-mankiw links; or, education and income inequality -- in which direction does the causal relationship go?


In this article from a few days ago, Mankiw links to a post which suggests that increased education, particularly graduate school training, is a way of lessening income inequality in the U.S.

How does Greg see the relationship between education and income distribution? For him, increased opportunity, fostered through more education, leads to gains in an individual's productive potential. This does not necessarily imply, for him, that education will automatically lead to gains in income -- just that the potential for gains will be increased. This view is reflected in this article from his blog.

But what if the causal mechanism actually goes the other way -- i.e., from economic backgrounds and economic inequality to human capital growth? That is the story behind this Crooked Timber article and the associated New York Times article it quotes. A collection of other works questioning the role of education as an engine for social mobility can be found here, at the Legal History Blog.

When "class matters" to human capital accumulation, we are, all of a sudden, in very different territory -- not just because financial resources become important -- but because of the disproportionate impact the rich have on democratic institutions (an argument which, we believe if push came to shove, Mankiw would not disagree with).

But, thankfully, it is not unfamiliar territory. As education theorists have known for decades, economic elites have a disproportionate impact on the educational system in terms of funding and also in terms of influence. A classic in this line of literature is Bowles and Gintis' Schooling in Capitalist America, which argued that classrooms operate as training grounds for an obedient and productive workforce. The Bowles-Gintis theory of human capital seems to be supported by more recent discussions on the importance, or lack thereof, of creativity in the classroom (via MarginalRevolution). Though Tabarrok is a libertarian, we are certain he would agree with a corollary of the argument advanced in his article that educational policy (influenced by elites with political power) promotes a docile student body.

In summary, there seems to be two main ways in which one can view education and the "human capital" question. One may view education as a source of increased opportunity for a productive workforce. On the other hand, one may think that the problem lies in economic inequality and its egregious influence on educational institutions -- which means that more education will not address the problems of inequality in society and that it may in fact promote such problems. Let us not forget that there is, historically or cross-sectionally, no unidirectional relationship between the average education of a society and economic inequality!

We at Anti-Mankiw believe that more attention should be placed on this latter issue, given that there is more convincing evidence of that thesis.

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