Monday, July 30, 2012

Economic Mobility and Meritocracy

There seems to be a little debate going on between Tyler Cowen, Paul Krugman, and others so I thought I'd add my two cents. While people in America like to think of ourselves as a bootstrappy country where someone can rise from the depths of poverty into a world of wealth, there is actually less income mobility in the US than in Europe. Tyler argues, rather ineloquently even if I might agree with him, that income mobility is overrated because if someone is moving up in class then someone else must be moving down in class. Thus, we are overall no better off and may even be worse off from a utility standpoint because of habit formation and reference effects. Basically, poor people are OK being poor because they've never known anything else. Alex tries to support his colleague, again rather ineloquently even if I agree, that growth is more important than mobility. Paul Krugman objects to Tyler's argument and frames it as if Tyler is arguing in favor of a regimented caste-like state while Brad DeLong mischaracterizes Tyler's remarks as being against income mobility.

The real issue (in my humble opinion) is not mobility but meritocracy. The relationship between mobility and meritocracy really depends on the relationship between ability and heredity. If ability and heredity are highly related, then able parents will have able children (and less able parents will have less able children). If they live in a meritocracy, then the able parents and their able children will both be successful (and the less able parents and their children will be less successful). Thus we will have no mobility. If there is a weaker relationship between ability and heredity, then you will have more mobility even if we have a meritocracy. Less abled and unsuccessful parents can have able and successful children. If success depends on parentage regardless of ability (a caste sytem or aristocracy instead of a meritocracy), then there will be less mobility no matter what the relationship is between ability and heredity.

So, is America's relative lack of mobility the result of a lower level of meritocracy or the result of a greater relationship between ability and heredity? I think you can make a stronger case for the latter rather than the former (although I would love to see any studies on this). I would argue that Europe still has a much greater social aristocracy even if they've moved to a more economic meritocracy. This reults in people marrying members of the same social class even if they have different abilities  producing a weaker relationship between ability and heredity. In America, parents are more likely to marry someone with the same level of abilities which results in a stronger relationship.

Again, this is just conjecture and I'd love to see the evidence, but the main point is that a lack of mobility does NOT mean that there is a lack of meritocracy.

Wednesday, July 4, 2012

Gone Fishin'

We all know the saying that if you give a man a fish then you have fed him for a day. If you teach a man to fish, then you have fed him for a lifetime. I think many people would agree with this sentiment and would be willing to help teach people how to fish. The challenges arise when this old saying fails to hold true.
Some people don't want to fish and would rather just be given the fish. If you don't give them fish then you're forcing them to starve. If you try to make them fish then you're making them slaves.
Some people, for whatever reason, suck at fishing. You can spend all of your time trying to teach them how to fish, but they will never be able to be self sufficient from fishing. Should these people be left fishless? If you just give them fish, then other people will want to be given fish as well. Instead, we need to figure out what they CAN do and have them do that in exchange for fish.
Some people would rather do something other than fish. They have the ability to fish and they may already know how to fish. But fishing is too pedestrian for them.They want to do puppetryteach medieval history, or become an artist. I'm all for artists and puppeteers, but don't whine about not having enough fish just because you'd rather do something else.

Two Statements about Health Care Reform

In the debate over health care, there are two statements that I feel reflect the dilemma.

Rich people should get higher quality health care if they are willing and able to pay for it.
Poor people should get lower quality health care since they can't afford it.

Of course, these statements say the exact same thing. People who favor a single payer system would likely disagree with these statements. People who favor a more market-based approach would likely agree with these statements. But many people would agree with the first statement and disagree with the second statement. Psychologists know that phrasing is very important in poll questions and that is why it is often difficult to gauge public opinion.
Our current system stinks and I know that. Our idea of universal health care is the Emergency Room, but if you have insurance you can see a doctor, get an MRI, and call in a prescription pretty easily. At the other extreme you have a single payer system where health care is free, but you have to wait six months to see a doctor.
In my mind, the real question in the health care debate is determining what level of health care people have a "right" to. I'm basically OK with preventative medicine, periodic check-ups, vaccinations, and other treatments which will lead to full recovery for the patient. I'm generally opposed to expensive procedures that simply prolong death. I think a lot of people might even agree with me on these points (or maybe not), but someone would have to draw the line between what level of health care is a right and what level is a privilege. Can you say Death Panel?