
Greg Mankiw's Blog: Educating Oligarchs - Anon84
http://gregmankiw.blogspot.com/2011/11/educating-oligarchs.html
======
jellicle
> [Education] does not guarantee that a person will end up in the top 1
> percent, but it increases the likelihood.

Only very slightly, which is the point that Krugman et al. are making. The
main determinant of whether you, personally, are in the top 1% is whether your
father was.

> 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.

Mankiw is doing what is called out in this article as bullshitting:

[http://nymag.com/daily/intel/2011/11/inequality_and_bullshit...](http://nymag.com/daily/intel/2011/11/inequality_and_bullshit.html?mid=377924&rid=122578258)

Mankiw is bullshitting. He is attempting to obfuscate a fact which he knows to
be true, by throwing a bunch of other half-truths (of course education has
some increasingly minimal effect on your life outcomes; that will always be
true, it will still be true even when that effect is a hundredth of a percent)
and seeing if any of them stick. Mankiw is fully aware that he's bullshitting.

The purpose of his post is to give people who are already inclined to believe
the whole thing is a "liberal plot" a handhold for their beliefs, a rope to
grasp at. He knows it's fake, but if you WANT to believe that inequality isn't
increasing due to a class of crooks running the U.S. for their own benefit,
now you have something to hang your pre-existing belief on, courtesy of
Mankiw.

What an embarrassment.

~~~
rudiger
What evidence is there the main determinant of whether you are in the top 1%
is whether your father was? And that other determinants like education are
relatively insignificant?

Beyond this, maybe the focus should be less about getting in the top 1% and
more about something attainable by more than one in a hundred people. A life
in the broad middle class is much better predicted by education.

------
RockyMcNuts
So the fact that dropouts like Mark Zuckerberg and Bill Gates and Steve Jobs
became billionaires is due to increasing returns to education? (why did Zuck
drop out? why isn't everyone getting Ph.D.s?)

How much of Mankiw's wealth is due to his education, and how much to the
industry structure's ability to make people pay $233 for his textbook?

<http://crookedtimber.org/2011/11/04/occupy-greg-mankiw/>

[http://www.amazon.com/Principles-Economics-N-Gregory-
Mankiw/...](http://www.amazon.com/Principles-Economics-N-Gregory-
Mankiw/dp/0030259517)

It should not be that hard to take income (or labor income) and regress
against educational level and get a pretty good sense of how much inequality
is related to educational achievement, and how returns to education have
changed. My gut feeling is it explains some of it, but education has not that
much to do with the vastly increasing income share of the top 1%. One man's
'stochastic' is another's 'uncorrelated'.

[http://krugman.blogs.nytimes.com/2011/11/03/inequality-
trend...](http://krugman.blogs.nytimes.com/2011/11/03/inequality-trends-in-
one-picture/)

~~~
john_horton
That regression (which is called a mincerian wage equation & economists have
been running it for about 40 years) will give you the average percentage
increase in earnings (if you do it in logs) from another year of education.
That average measure can be consistent with lots of different dynamics---which
is Mankiw's point. Perhaps another year of education increases earnings by 10%
across the board (deterministic view) or perhaps is increase by 10% the chance
that your income will increase 100% but 90% of the time does nothing.

Note: All of this is just correlational---there are serious problems w/
treating these regressions as establishing causality, but that's another
issue.

~~~
RockyMcNuts
Mankiw's logic seems a little circular... education buys you the golden
ticket, but then the process for determining the winners is stochastic. What
determines the distribution of the stochastic process?

If more people get educated, and the stochastic process stays the same,
doesn't the distribution of outcomes stay the same? So in what sense is the
distribution related to education?

If in some areas network effects got more important, and Windows became
ubiquitous, or Mankiw's textbook... and then industry got pretty powerful and
able to defend the cash streams, without worrying about taxes or checks on
market power... then the stochastic process became more winner-take-all.

------
angelbob
His point isn't totally wrong, but it's, like, 95% wrong.

The 1% are more educated than average, but not nearly enough to support this
argument.

Education gives you a better chance at a huge jump into higher income, but not
enough to support this argument.

It's not a coincidence that _really_ rich people have enormous initiative, but
rarely enormous education (often including dropping out before they get a
degree).

------
icebraining
The fact that the 1% are better educated in average doesn't prove that the
latter leads to the former; "Empirically observed covariation is a necessary
but not sufficient condition for causality" and all that.

One possible underlying common is inheritance: I'd be willing to bet that the
child of a family in the 1% is much more likely to be in the 1% in adulthood,
even if they drop out. And of course, a child in a 1% family has much more
chances of being able to afford higher education.

Citing from _The Inheritance of Inequality_ :

 _Recent evidence points to a much higher level of intergenerational that was
previously thought to be the case. America may still be the land of
opportunity by some measures, but parental income and wealth are strong
predictors of the likely economic status of the next generation._

[http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.115...](http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.115.2507&rep=rep1&type=pdf)

------
jbooth
Seems like a case of median vs the mean. Krugman's saying that we haven't seen
a broad-based increase in pay as productivity rose, because of what he calls
oligarchic trends.

Mankiw is saying that the education input into that equation has highly
variable returns to the individual, but the average of incomes is rising in
the line you'd expect from education.

Basically, Krugman's talking about the median, Mankiw's talking about the
mean. I think the interesting question is why they've diverged much more
radically in the last 3 decades than the preceding 4-5.

PS Mankiw's intro book is awesome.

------
hxa7241
> while their education did not ensure their economic success, it played a
> role.

That half concedes the original opposing point.

> think of the return to education as stochastic

To say that the effect of education is stochastic means it includes some
either purely random factor, or something else not understood or not
considered -- i.e. the thing having a big effect is not the basic factor of
education but something else. Well, that really does seem to concede the
original opposing point.

------
ap22213
Yes - there is correlation between income and education, but there are other
forces that produce that correlation.

For instance, how would this correlation change if companies no longer
required a degree for hiring? It would change a lot.

~~~
john_horton
This is why there's a huge literature in economics on trying to measure the
causal impact of more schooling. They've used everything from state-level
changes in compulsory schooling laws, proximity to college, changes in grants
policies, variation around cut-offs that determine eligibility etc. In all of
these studies, the picture is quite clear: more schooling has a positive,
causal effect on average earnings, with the estimates around ~6-10%.

------
Spearchucker
Stochastic? Oligarchies? Non sequitur?!? And then there's the structure of the
sentences. Mankiw should look at <http://www.plainenglish.co.uk/>.

That aside, I know many people in the top one percent. Many of them have a far
better education than I do, and yet they're idiots. Granted, they're idiots
with a lot of money. And also granted, when you have a lot of money you don't
need an education.

Besides all that, the article is, as jellicle said, bullshit. My other half's
an economist at the Bank of England. She read it and burst out laughing. 'Nuff
said.

------
chrismealy
This is ridiculous. Mankiw's just playing dumb.

------
michaelochurch
People need to stop using the term "top 1 percent". We _do_ have a serious
(and dangerous!) problem with oligarchs in this country, but a 99.0th-
percentile income does not buy entry into the upper class (which might
comprise 0.05-0.1 percent of the US population). Not even close.

The upper class (as opposed to "the rich", which is a much larger and looser
set) is a socially closed, parasitic network of people who maintain position
by peddling favors and influence, and who have done a great job (in comparison
to historical counterparts) of making the process appear meritocratic, even
though hard work and education are actually contrary to their values. Now, not
all rich people are upper class (Jobs wasn't, Gates is debatable) or parasitic
crooks. Most rich people aren't. Likewise, not all upper-class people are rich
(although they could easily become rich, or famous, if desired).

The reason average people in the US are so parasite-friendly is that, when
they think of "rich people", they think of scaled-up versions of the
$500,000-per-year neurosurgeon (statistically "top 1%") or small
businessperson who has been working her ass off since age 4-- _not_ scummy
investment bankers and well-connected influence-peddlers (e.g. the Bush
family). If they understood how society actually works, they wouldn't fall for
that ruse.

No one wants to "soak the rich". On the other hand, most of us who are awake
deeply desire an end to the culturally underaccomplished, corrupt plutocracy
that has brought a nation to epic embarrassment and idiotic, endless war to
two foreign countries.

------
adabsurdo
Mr. Krugman's point, very succintly, is that money is power, political and
otherwise, and that as it concentrates into fewer hands (as has happened to a
huge extent in the last 30 years), those at the top start to behave like a
ruling class - an oligarchy.

it will always be the case that politicians are more responsive to those with
money, especially with the current judicial doctrine in the USA, that money is
speech and therefore all attempts to regulate its use in politics is basically
unconstitutional. that's the real issue with wealth inequality.

Mr. Mankiw is just arguing sideways to Mr. Krugman by making the very obvious
point that more education betters your life's odds. And since Mr. Mankiw is a
very bright guy, I can't help but think that he's doing this on purpose to
muddy the discussion.

