Greg Mankiw’s stochastic mumbo jumbo on rising inequality
from Lars Syll
Harvard economist and George Bush advisor Greg Mankiw is having problems with explaining the rising inequality we have seen for the last 30 years in both the US and elsewhere in Western societies. He writes:
Even if the income gains are in the top 1 percent, why does that imply that the right story is not about education?
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If indeed a year of schooling guaranteed you precisely a 10 percent increase in earnings, then there is no way increasing education by a few years could move you from the middle class to the top 1 percent.
But it may be better to think of the return to education as stochastic. Education not only increases the average income a person will earn, but it also changes the entire distribution of possible life outcomes. It does not guarantee that a person will end up in the top 1 percent, but it increases the likelihood. I have not seen any data on this, but I am willing to bet that the top 1 percent are more educated than the average American; while their education did not ensure their economic success, it played a role.
To me this is nothing but really one big evasive attempt at trying to explain away a very disturbing structural shift that has taken place in our societies. And change that has very little to do with stochastic returns to education. Those were in place also 30 or 40 years ago. At that time they meant that perhaps a CEO earned 10-12 times what “ordinary” people earns. Today it means that they perhaps earn 100-200 times what “ordinary” people earns.
A question of education? No way! It is a question of income and wealth increasingly being concentrated in the hands of a very small and privileged elite, greed and a lost sense of a common project of building a sustainable society.
Income does not have anything much to do with levels of education. It has a lot to do with power and illegality, that is, the ability of those in command of economic organizations to set their own salaries. The issue is wealth and privilege not brains and education level. Haven’t these people read Pierre Bourdieu? Rich and powerful dominate everything, including education.
Probably the top 1 percent all have 10 to 12 PhDs, but they are just too modest to tell us about them.
Poor poor sad Mankiw- still trying to stick to his neoclassical (the market has worked it all out and these people in the 1% have a higher market value because they are more educated).
Nothing to do with powe,r lobbying and bribery is it?
Mankiw line is traditiomal human capital perversity, and even Blaug felt that it was dramatically wrong. Its is sufficient to ask oneself wath happens to income differentials if everybody received the same education: nothing, of course. So it is income distribution that determines education and “human” capital, not the other way around.
Paulo – said better than I could – money buys education. Amyone who thinks otherwise (education buys money – lives in the same dream world Mankiw is trying to live in.
What can we say to Mankiw? Thanks. we admire your name, your dedication (??) but we dont like your ideas and when was it again, you were retring?