Tyler Cowen Makes Two Mistakes

In today’s column in the New York Times Tyler Cowen says that rising inequality in the US isn’s as bad as we think it is and also that insofar as it does exist we shouldn’t worry about it. He makes two mistakes:

1. He says that because much of measured inequality in incomes can be traced to differences in education that it isnt a result of policy or of basic unfairness in the system. This would be true if there were a level playing field in terms of education in the first place. However, there very obviously isnt. If you are born to a high income family you are very likely to live in a school district with excellent schools and even if you don’t your parents can pay to send you to a private school. If you are poor, your school district may not even have enough money to buy you a textbook and often wont have the kinds of advanced placement courses that are becoming so important in getting into the best colleges. In terms of college the situation is very much worse. Apart from a handful of top universities rich enough to pursue a need-blind admissions policy, going to college in the USA is a very very very expensive proposition. Just about every other industrialized country will pay for your college if you are smart enough to get into the best schools, but not in the USA.

Bottom line – If the deck is stacked against poor people in terms of educational opportunity then we can’t say that tracing income inequality to education shows that “the contemporary American economy isn’t rigged in favor of the rich” to use Tyler Cowen’s terminology.

2. Cowen goes on to say:

“The broader philosophical question is why we should worry about inequality — of any kind — much at all. Life is not a race against fellow human beings, and we should discourage people from treating it as such. Many of the rich have made the mistake of viewing their lives as a game of relative status. So why should economists promote this same zero-sum worldview? Yes, there are corporate scandals, but it remains the case that most American wealth today is produced rather than taken from other people. What matters most is how well people are doing in absolute terms.”

To this, I can only say that it takes a white middle aged economics professor with tenure to come up with a statement like that. Maybe in Cowen’s world people don’t care if they work just as hard but get less money than others but in the real world it makes people distrustful of the system and causes them to lose faith in the fairness of society. General belief in the social contract is a long term asset to us all and one we should be very worried about losing. Only a very narrow view of the world could conclude otherwise.