Becker-Posner on Inequality

The Becker-Posner blog delivers a one-two punch to inequality tub-thumpers. Other bloggers are blogged down with Mary McCarthy, the Duke lacrosse team, and Michael Hiltzik's sock puppetry, so let's check it out.

Becker's comments are aimed at the income inequality generally caused by the increasing gap in compensation between high-skilled and low-skilled workers. (He's not really responding, for example, to Krugmanesque resentment aimed against those at the tippy-top 99th-99.99th percentile of the income distribution.) His conclusion:

… the forces raising earnings inequality in the United States is [sic] on the whole beneficial because they were reflected higher returns to investments in education and other human capital.
The flip side of this, I think, is that to reduce inequality at this scale would mean decreasing the differential returns on such investment somehow, probably via a state-decreed thumb on the scale; that doesn't sound like a hot idea.

Becker argues instead for educational reforms to increase the percentage of kids who get out of high school and move on to college. This is very similar to the kind of thing advocated by Smilin' Al Greenspan and disdained by Paul Krugman. (And discussed here last month.)

Posner starts where Becker leaves off, in a slightly more philosophical vein. He points out that, other things being equal (heh), we're likely to see an increase in income inequality driven by "differences in IQ, energy, health, social skills, character, ambition, physical attractiveness, talent, and luck." Active measures to "fix" such inequality, he argues, are likely to make us all poorer.

But it still might be a good idea to "fix" such inequality if it presented us with otherwise insurmountable social problems. Does it? The Pos (his friends call him "the Pos") argues convincingly that it almost certainly doesn't. Americans aren't particularly resentfully envious; the lower class isn't large enough to make the whole structure unstable; we're a considerably more egalitarian society in non-monetary measures.

Both mini-essays are well worth reading in full; click away! [Link to Becker via Poor & Stupid.]