Economics, Current Events

Human Capitalism

Thanks to the folks at Bleeding Heart Libertarians for inviting me to blog here about my new e-book Human Capitalism: How Economic Growth Has Made Us Smarter – and More Unequal (Princeton University Press). This is a work of empirical analysis, not political philosophy, but I think it raises some pretty interesting philosophical questions. In this blog post I’ll lay out the basic argument of the book, and then in a follow-up post I’ll flag some of the implications for both free markets and social justice. With any luck I’ll motivate one or more BHL regulars to weigh in.

In an earlier book called The Age of Abundance, I examined the transformative cultural changes unleashed by the advent of mass affluence. Here I look at the other side of the coin: the transformative cultural changes that have made mass affluence possible.

My central thesis is that economic development has stimulated and depended on cognitive development. The richer and more advanced a country’s economy grows, the more complex that economy becomes: more and more knowledge and know-how are distributed throughout the system, and the division of labor grows ever more specialized and intricate. This ongoing growth of social complexity has imposed increasingly heavy mental demands on us, causing us to invest heavily in “human capital” and stretch our cognitive abilities far beyond the prevailing norms of times past. In this way, capitalism has morphed into “human capitalism” – a social system in which achievement and status hinge largely on possessing the right knowledge and skills.

The bottom line: economic growth has made us smarter. We can see this in the dramatic rise in education levels. Back in 1900 only about 6 percent of young Americans graduated high school, compared to 75 percent today. Back in 1950, only 8 percent of young Americans completed college, compared to 32 percent today. We can also see it in the “Flynn effect”: the remarkable rise in raw IQ scores over time. And we can see it in the transformation of how we work. Back in 1900 almost 80 percent of working Americans were farmers, manual laborers, or domestic servants; today, some 60 percent work in white-collar office jobs. Back then, managers and professionals – i.e., the most cognitively demanding occupations that dominate the socioeconomic elite – comprised only 10 percent of the workforce; today, they account for 35 percent.

When I say we’re getting smarter, what I really mean is we are becoming more fluent in highly abstract ways of thinking. Abstraction is the master strategy for coping with complexity: broad categories and general rules are the mental shortcuts we use to keep information overload at bay. In the intellectual realm this is obvious enough in the rise of mass literacy and numeracy and the increasing importance of abstract “book learning.” But we also employ abstraction to interact successfully with far more people than we could ever know personally: we jump in and out of the thin identities of countless abstract roles (driver, pedestrian, customer, employee, etc.) and expect people on the other side of the interaction to know their parts as well. And we use abstraction to guide us through the dizzying barrage of personal choices that confront us: every day on countless different margins, we trade off the interests of an abstractly imagined future self against the concrete impulses and desires of the moment.

So far, so good – but alas there’s more to the story. I argue that this same dynamic is behind the big rise in class-based inequality over the past generation. At the heart of the matter is a chicken-and-egg relationship between socioeconomic class and cognitive culture. If the skills we now call human capital (whose common denominator I identify as fluency with abstraction) represent a cultural adaptation to social complexity, it makes sense that the groups most exposed to modern complexity will show the highest degree of adaptation.

Which is exactly what we see. Although Americans generally don’t like admitting that class is a real phenomenon and that real social as well as economic differences between classes exist, it is and they do. The elite occupations that require analytical sophistication, strong people skills, high motivation, and meticulous planning will generally be filled by the people most flush with those skills, which they will hone even further over the course of their working lives. These elite workers will naturally tend to pass those skills along to their children – through their own parenting in the home, and through the influence of the communities in which they congregate. Working-class occupations, by contrast, don’t require much fluency with abstraction, and they will tend to be filled with people who are less adept at coping with complexity. These workers will in turn create families and communities in which fluency with abstraction does not figure prominently. Thus do the requirements of the workplace ultimately translate into strong cultural differences along class lines. There is a rich sociological literature documenting these differences that I review in the book.

Okay, you might say, cultural differences between classes exist. But that’s nothing new, so why did class-based inequality decline over much of the twentieth century only to start re-emerging in recent decades? I’ll offer here a very simple explanation in lieu of the much more involved account in the book. Once upon a time, when the world was much simpler, there were more people with the requisite skills to handle elite occupations than the number of elite slots. Many of those scarce slots were rationed on a decidedly non-meritocratic basis: basically, they went to white men with the right surnames from “good” families. (Happily, the economy was dynamic and entrepreneurial enough to allow a certain number of talented people with the “wrong” demographics to push their way into the elite as well.)

But then the world got more complicated. And as it did, the racist and sexist restrictions that maintained the elite as a preserve dominated by male WASP’s became increasingly dysfunctional – and, gradually, they withered and died. This period –the middle decades of the twentieth century – was one of declining class differences, as the descendants of the Great Migration from the turn of the century now found the paths of upward mobility more open than ever before.

But the world kept getting more complicated. In response, the elite buckled down and focused more intensively than ever before on preparing their kids for an increasingly competitive world – hence the rise of what we now lampoon as “helicopter parenting.” But the rest of society, for complicated reasons I describe in the book, veered off in the opposite direction: a dramatic rise in single motherhood and divorce led to a family and community environment for developing human capital that is arguably much less favorable than before.

In this era, class differences have grown and sharpened. Consequently, the market price of highly skilled workers has been bid up and the result has been a rise in income inequality (not the only reason for that rise, but a big one). Coming from the right family is once again greatly important for socioeconomic success. But the reasons have changed: from family-based advantages rooted in “who you know” to ones based on “what you know.” Thus our current predicament: the meritocratic class society.

I conclude the book with policy prescriptions for how to revive broad-based human capital development – and, with it, greater opportunities for upward mobility for all those who didn’t win the parent lottery. My policy proposals are an eclectic mix, and while I think they all push in the right direction, one stands out in my mind as a potential game changer: structural reform of K-12 education to allow more competition among schools for students. Public schools are supposed to help realize the promise of equal (or, realistically, sufficient) opportunity by imparting to all, regardless of background, the knowledge and skills they need to thrive in life. At present, though, rather than mitigating class-based differences in the home and community, America’s public schools merely perpetuate them. Elite kids start school with big advantages in cognitive skills, and those advantages continue to widen during the primary and secondary school years. Unless that can change, the sharp disparity between human capital have’s and have-not’s will be with us as long as fluency with abstraction remains important for socioeconomic achievement.

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  • Paul Gowder

    “But the rest of society, for complicated reasons I describe in the book, veered off in the opposite direction: a dramatic rise in single motherhood and divorce led to a family and community environment for developing human capital that is arguably much less favorable than before.”

    This strikes me as the most loaded and potentially troublesome part of the argument, just from the summary — care to give us a sneak preview?

  • Javier

    I support school choice. I also think that schools should compete for students more (I’m assuming that Linsey’s reference to “structural reform of K-12 education to allow more competition among schools for students” is an endorsement of vouchers, charter schools, and the like).

    But there is good reason to doubt that school choice will really have a big impact on outcomes. I may be wrong and I’m no expert, but my read on the empirical evidence is that school choice has, at most, modest positive effects on student achievement on the whole. So, my question for Linsey is: where’s the evidence that greater competition in K-12 education would be a “game changer”?

  • Scott Kern

    The argument for school choice is based on alot more than outcomes. There are fundamental moral issues at stake such as individual freedom and control over one’s labor. However, the right kind of school choice WOULD lead to increased skills among the people and greater egalitarianism in general.

  • jahouse

    My initial thoughts are that, at least in my experience, many non-elites have fared quite well in the modern, complex knowledge economy. I know many who are 1st generation Americans of Chinese, Korean, and Indian descent, and whose parents are not from upper classes in those respective countries, who have fared quite well in “elite” fields like biomedical engineering and computer programming. My own mom is 1st generation American, her father was an orphaned immigrant from Portugal, and she became a successful computer systems analyst.

    I look forward to reading your book to see if you can resolve these apparent difficulties.

  • Fallon

    When the government, the political means of attainment, is increasingly the center of the social universe– healthcare, public schools, military, prisons, unions, regulations, contracts, bailouts, central banking, inflation, research, airports, trade agreements, immigration, courts, credentialing, licensing, taxation, heirarchy, bureaucracy, welfare, social security, pensions, laws upon laws, ….the list goes on and on, what can be said of the term “human capital”? If success is access to government power for gain, the results necessarily meaning forced loss in real capital and opportunity for others, does “human capital” explain or obfuscate the difference with market based meritocracy?

    Can human capital as a concept account for the way in which the rise of political power creates and reinforces class? Is the fundamental problem knowledge, as Lindsey would have you believe, or violence (politics)?

    Mr. Lindsey’s desire for public school reform introduces egalitarian fallacy. Public schooling serves as a welfare program for the middle class as teachers/admin/students, as well as for connected pharma, textbook, consulting, banking, construction and food provision co.’s. The teaching and admin corp are disproportionately white. Public schooling has been around in full steam and in virtual constant reform for more than a hundred years. So what does this reflect? Previously accumulated “human capital”. Yet, it is better labeled political capital in these situations.

    And nobody should confuse reforms– even Cato style– with free markets. The call for Reform has a long history, and at no time has the core issue been addressed: government. In fact, Reform, nebulous as “human capital”, is akin to the Drug War or the War on Terror: it and they are destructive and exploitative regardless of the motives behind them. No institution based on the very things it is charged with reversing, class and political privilege in public schooling’s case, can serve the stated purpose, can it? Public schools retard social mobility.

    • Sean II

      I wish I’d seen your comment before writing mine. One cannot understand this issue without first coming to grips with just how many middle and upper income people now owe their social status to cartels, monopolies, and unproductive or frankly counter-productive sinecures paid for in confiscated dollars.

      Once you grasp that, the shadow of “human capital” doesn’t seem so imposing.

      The doctor you must pay to obtain a lousy bottle of codeine cough syrup is not getting your money because there’s anything special about his brain. He’s getting it because if you try to do without him, cops will come to the pharmacy and take you away.

      Just think of how many people and how many professions the same can be said, to one degree or another!

      • Fallon

        Foxwoods has it 100:1 that Lindsey will not respond.

        • Sean II

          Damn…what is it actually called? Foxbridge? Foxford? Foxfeld? The place where they make the mysterious glowing pad I’m holding right now. Whatever it is, that’s what I meant.

          • good_in_theory

            Foxconn

          • Fallon

            Heh, does it still work with Foxwoods? Plus, not to be too cynical and ironic but, any bets that googling Foxconn will unearth a list of human rights violations, some of them true?

          • Sean II

            Sadly, the folks at Foxwoods are just another bunch of grasping license Rajahs. Back in 2006, they conspired to stop me and millions of other Americans from playing poker online, which – given the level of human capital I’d developed as a hustler – was enriching me at the dizzying rate of $3 per hour.

            I think that’s well below the prevailing wage at Foxconn, so maybe we should focus on my human rights instead.

  • Sean II

    This is definitely a good place to visit if you’re looking for people who’ll take dead aim at the center of your premises.

    I’ll grant you there is some class stratification going on, although many would dispute even that. And I’m right there with you in thinking it’s bound to be a very bad thing.

    For you and Charles Murray, that stratification comes from the rise of a cognitive elite in a complex economy that demands the same thing Ulysses Everett McGill thought valuable in a leader, i.e. “the capacity for abstract thought”. (That Murray calls this “intelligence” and you call it something else seems a trivial difference to my ears).

    For me, the stratification is not a feature of the “complex market economy”, but a bug lodged parasitically in its gut. For me the stratification comes from the rise of a new class…a class which is defined precisely by the clever and devious way it insulates itself from market forces whenever possible.

    What are the attributes of this class?

    They’re good at acquiring credentials, which doesn’t necessarily mean they’re good at learning. They’re really good at finding jobs – in government, in quangos, in white collar management at large corporations – where their work product is not exposed directly to subjective evaluation, which means they have little or nothing to fear from actual paying consumers with the power to rebuke or reject them. The new class excels at navigating that part of the economy where competition is either inhibited or simply banned.
    They’re good at fitting in, which means they’re good at NOT standing out in point of creativity. They’re good at moving up in hierarchical organizations, which means they’re masters in the art of moral compromise. They’re good at saying things like “we need to leverage employee engagement moving forward”, which pretty much means they’re NOT good at thinking clearly or critically.
    If the new class is defined by any cognitive skill, it’s not abstract reasoning, but rather double-think, mental cheating, moral flexibility, and simple bullshit.

    I don’t get you can look at the elite of today and think: “Obviously, these brainiacs got where they are because the economy needs their unique smarts more than it did in the past.”

    Meanwhile the people who make the stuff I actually value, and whose complex work actually defines the modern economy, don’t work at Wharton or McKinsey or Latham & Watkins or Wells Fargo.

    They work at Foxwoods.

    • Fallon

      I lol’d. This is great. You could expand and hone for a full opinion piece.

    • martinbrock

      Well put, but I don’t understand “Foxwoods”.

    • TracyW

      What data sets are you drawing on to say that the ones who have made a lot of money recently are the ones in the class you describe?

      I was under the impression that a lot of the wealth came from working in the financial markets, where one’s work product is exposed directly to subjective evaluation, namely did you make money? But I don’t have any data to hand on this point.

      • martinbrock

        Why does the post refer to “managers and professionals”? Aren’t managers professionals? Don’t professionals manage things?

        I’m a professional software developer, and I certainly manage things. I manage abstract objects and their properties and relationships between objects, and the methodological processes transforming objects into other objects. The particular objects that I manage these days represent components a power distribution network.

        I manage many things, but I’m not a manager, because I don’t so much manage rules governing other people in administrative hierarchy? Isn’t that true?

      • Sean II

        You think the people in financial markets are exposed to risk?

        Were you traveling off-planet in the fall of 2008?

        • martinbrock

          Everyone is always exposed to risk. Are people in “financial markets” exposed more to market risk (in the libertarian sense) or more to political risk?

          • Sean II

            Political, of course. Though given the fact that they always seem to flee away from market risk and toward political risk…we can assume the latter is much less trying to their nerves.

          • martinbrock

            Have a look at this presentation by Doug French at the Mises Institute, on the FDIC’s new TAG program. It’s scary stuff … if you’re into that.

        • TracyW

          No, I know quite a few people in financial markets who’ve lost money, and their jobs.
          I don’t have much sympathy for them, what they make in a couple of years is enough to insulate them against such outcomes. But it doesn’t strike me as a cushy job.

      • Sean II

        TracyW

        I apologize for that first response. There’s no excuse for me to be rude like that. Sometimes, when something seems obvious to one person and not another, it can be tempting to snap out a remark like that. Let me try to offer you a better one now.

        We’re talking about human capital here. For a long time, a lot of people (certainly including me) looked at those running the financial markets, and thought “check out the big brain on these guys, they must be some smart mother…”.

        I think it’s fair to say that was a popular belief from about the mid 1980s to about four years ago. Even people who didn’t like Wall Street or the Tech boom or the McMansion industry tended to criticize those things from a moral or aesthetic perspective. Very few, vanishingly few people made any claims against the actual competence of the geniuses who stood at the controls.

        You dropped your money in whatever instrument they recommended, you got back 40%, 70%, 300%, whatever. Had Brink Linsey put this very same argument to me back then, I would have been like “Oh, yeah, obviously, human capital is off the hook. These guys really are the smartest in the room. Everybody should just get out of their way and listen up.”

        Now we know. Now we know: they never really had any idea what they were doing. They had no system. They had no real plan. Their science was pseudo-science from day one. Far from building some immensely sophisticated array of human capital, they had three key skills, each of which is older than murder itself: 1) Go where the crowd goes, 2) Make sure everyone knows that if you drown, they drown, and 3) Make friends with power.

        Now if Linsey wants to call that human capital, okay. Wait, no…not okay. That’s not what that is. Fallon found the correct term below: what I just described is “political capital”, and that kind of capital is not just wholly unrelated to productive activity, but poisonous to it.

        • TracyW

          Thank you for your apology.

          Very few, vanishingly few people made any claims against the actual competence of the geniuses who stood at the controls.

          Not my experience. Back in the 1990s, my finance lecturer at university had us read “A Random Walk Down Wall Street” (published 1973) and personally since then I have always been rather convinced by the evidence in it that the people in financial markets aren’t, on average, doing any better than chimps throwing darts (Warren Buffet may be an exception, or just the lottery winner). In other words, I on the whole think that the semi-strong EMH is a pretty good rule of thumb. I think that finance is an area highly exposed to competition. That’s quite different from thinking that the guys in finance are smart or competent.
          I suppose of course that finance lecturers and economists are a vanishingly small proportion of the overall population, and of course who I happen to run into is not a random sample, which has probably led me to assume that the EMH is common knowledge.

          I’m still interested in what data set you were drawing on when you made your earlier statement.

          • TracyW

            By the way, Econlib has an article on the Efficient Markets Hypothesis (which is that people don’t beat the market), with a bunch of references, almost entirely dated before 2000 (including A Random Walk Down Wall Street), if you want a list of more people who didn’t think that the traders were that smart pre-2008.

          • Sean II

            As you may suspect, I have no data set. If they published a “Who’s Who in Rent-Seeking 2011”, I’d gladly refer to that, but alas…the Fortune 500 is merely an approximate reference (though the overlap is growing more perfect all the time!).

            Instead I reason thus: If you work for the state, if you work in a non-profit, and if you need a license to do your job, chances are you are NOT highly exposed to competition. Lots of people fall into those three categories, and they seem to be doing marvelously well…judging by the long queue of people waiting to join them.

            Obviously it is impossible to draw a clear, bright line. Perhaps it would help if I simply tell you where I see meaningful competition and where I don’t.

            The lady that cut my hair for $17 dollars yesterday needs a license, but somehow I didn’t feel like the victim of a cartel when I sat in her chair. The hot dog vendor from whom I’ll buy lunch in 20 minutes needs a license, but he seems very much exposed to competition.

            The broker-dealer from whom I might buy Singaporean bonds after wiping the mustard from my chin, well…not so much. The doctor who will need to bypass my arteries after years of bad eating and sedentary work, not at all. The mortician who will bury me when the doctor fails, no. The lawyer who will execute my paltry estate, no. The coke dealer who sells my son a heavily stepped-on eight-ball with whatever is left of the Sinagporean bond money, no. The policeman who arrests my son for doing that, definitely no. The social worker who will help him through rehab, again no. And so on, since by now you’ve certainly got the idea.

            Competition doesn’t just mean that a number of other brands or providers or people are available to supply a given good. By that definition one would’ve said there was plenty of competition among East German auto makers!

            It means having everyone as a potential competitor all the time. It means people can avoid you completely if they wish. It means that the price you charge somehow resembles an actual price.

            I wish I had a better definition, or more data, but I don’t.

          • TracyW

            Unusual definition of competition you have. I think I prefer the first one you gave that “a number of other brands or providers or people are available to supply a given good”, with the add-on that “and can supply it, if the price is right”, to distinguish this from the centrally-planned system. This may not be a water-proof definition, but then I don’t think your second one is either. One can always imagine people too disabled to make a hot dog (in my father’s case, he’s handicapped by having appalling taste in food).

            I also know a number of people who are lawyers, and financial advisors, they seem to be in competitive industries. My understanding is that the same is true of drug dealing.

            On the issue of the data set, the data I’ve seen, admittedly only for the USA, is here:
            http://web.williams.edu/Economics/wp/BakijaColeHeimJobsIncomeGrowthTopEarners.pdf

            They find that about 41% of the top 0.1% of earners are working as executives, managers or supervisors for non-financial firms, and of that 41% a bit over half of that group are working in mostly salaried positions – the others making large shares of their income from the business’s earnings or other sources.

    • Brink Lindsey

      I agree that credentialism and state-granted privileges exacerbate social stratification, but they don’t explain all of it. For example, doctors and lawyers have a lot of human capital — they’ve mastered bodies of arcane, technical knowledge. On top of that, they benefit from occupational licensing regulations that artificially restrict supply and thus boost their incomes. But that doesn’t mean their human capital is bogus and consists solely of membership in a government-created cartel: they really do have valuable expertise. And note that in the book I argue in favor of scrapping occupational licensing restrictions.
      When I’m talking about the elite, I’m talking about the whole upper third of the workforce — basically, college-educated managers and professionals. That class handles much more complex tasks than the rest of the workfoce does, and it accounts for a much bigger share of the workforce than it did it in the past. This is happening in all countries as they get richer regardless of the vagaries of their political systems — because it’s rooted in the objective reality of rising social complexity.

      • martinbrock

        … college-educated managers and professionals. That class handles much more complex tasks than the rest of the workforce does, …

        I’m skeptical that college-educated (baccalaureate and up) managers and professionals generally handle much more complex tasks than the rest of the workforce. Some do, but many do not.

        If you haven’t already, listen to this EconTalk podcast.

        http://www.econtalk.org/archives/2012/02/adam_davidson_o.html

        The entire podcast is worth your time, but start around 49:00 to hear this:

        “I feel like I’m pretty bright, I’m pretty well-educated, I’m pretty good at math and computers; and I’m fairly sure I could never develop that 3-dimensional thinking that you need, or 9-dimensional thinking that you need to be able to troubleshoot an incredibly dynamic physical process, just looking at numbers on a screen. I just feel pretty confident that with 10 years of schooling I still would not get it.”

        That’s Adam Davidson, who has a college degree, discussing his experience with numerically controlled machine tool operators, who typically do not. I have developed software for numerically controlled machine tools, and he’s right.

        These highly skilled and extremely able operators often earn less than their more credential managers. The degree of specialization is a factor. More specialization in a highly complex task is not more always more valuable, because the market for the skill is more limited.

      • Sean II

        I don’t think rent-seeking and crony capitalism explain all of our social stratification either. That would be silly. But the part of that stratification which seems to be most conspicuously growing, and especially the part which is troubling to my libertarian soul, owes a great deal to non-market and anti-market forces.

        That’s not just my opinion. It’s the overt strategy of most top professions when they act as a group. Doctors, lawyers, university professors, MBAs, people with securities licenses – if their advantage in human capital is so great, when don’t THEY feel confident enough to rely on it? Why instead do they always find it necessary to erect barriers with the aim of keeping their potential competitors at bay?

        If those potential competitors really were deficient in human capital, there would be no need to fear them, no need to organize the state against them. They would fall naturally into the blue vest of a Wal-Mart greeter, there to live and die without any troublesome designs on the paychecks of their betters.

        But the doctors and the lawyers and especially the elementary school teachers and the electricians don’t believe that. And I think, in a sense, you’re not listening to them. THEY are telling you: “We’re afraid. We claim to be specialists rich in human capital, but standing on the other side of wizard’s curtain…we know that others could do our jobs faster, better, cheaper. That’s why we must always work in concert to stop them.”

        Meanwhile, look at how many of the really valuable things in life we’re NOT made by your new elite: the Chinese kid who assembled this computer, the Indonesian child who stitched my incredibly comfortable and affordable shirt, the Guatemalans who prepared this delicious Trader Joe’s burrito I’m having, the American nerds who wrote the code we’re using to have this conversation…probably half of them without getting paid.

        So really I’m raising two challenged to your position: 1) The good and even the complex things in modern life are not accurately described as products the top third, and 2) The top third doesn’t seem to have near as much faith in their own abilities as you do.

        • Egyptsteve

          The problem is that the market does not work instantly. Society needs a proxy for human capital that can be evaluated much more quickly than market forces can engage. Hence, guilds and credentials. Granted, the quack doctor will probably eventually be relegated to the status of Walmart greeter — but how many have to die while we wait for the invisible hand of the market to push him out of an operating room?

        • Brink Lindsey

          The fact that people with real advantages use the state to make themselves even better off doesn’t mean that their underlying advantages don’t exist. Lawyers and doctors really do know stuff the rest of us don’t, and they will be paid well for their expertise. But they’ll be paid even more if they get the state to restrict supply artificially, so they do. Powerful incumbents routinely use the state to block competition from outsiders.
          Your examples of non-elite workers who produce things of high value are ill-chosen. Three of the jobs you mention are low-skill assembly jobs; the high-skill jobs involve designing those products, not putting them together. As to nerds with computer-programming skills, they do have scarce and valuable skills, which is why as a group they make well-above-average incomes.

          • Sean II

            Of course you’re right about that: I can’t locate the line between authentic human capital and artificial advantage gained through political capture, and neither can you. I’m simply betting the line is much further to one side, while you bet the opposite. Neither is a position to shoot the other with a silver bullet.

            But you missed my point about the Trader Joe’s burrito (never thought you’d hear that in a conversation, did you?).

            Your argument assumes a tight connection between “complexity” and economic growth, and between both of those things and social stratification. I’m not convinced the complexity and the growth are as closely related as you think, and I’m definitely not convinced either is driving the stratification we both fear.

            The Trader Joe’s burrito people – from the design scientist down to the bean pickers – are all alike in producing something people 1) subjectively want, and/or 2) objectively need (qua food).

            But…have you ever tried to guess at the number of people whose jobs couldn’t pass either of those two tests?

            The lawyers you just mentioned, for example. Their knowledge is complex, sure enough. But it is not knowledge of the world, it is merely knowledge of an infinitely confusing and contradictory set of made-up rules. Mostly what lawyers know is one big, dark, ugly secret: the law is not really “the law”, it’s just a publicly presentable costume for clashes of power.

            So you tell me: do lawyers owe their livelihood more to what’s in their brains, or to that gun the bailiff wears on his hip?

            I know my answer: take the gun away tomorrow morning and I think people will start ignoring lawyers by mid-afternoon. With any luck, a good half of them will be out folding burritos by the end of the week.

            “Capital” is what humans use to produce things humans want and need. If a human isn’t producing anything anyone really wants or needs, how can the knowledge in his head be called “capital”?

  • The rich are so awesome and smart and beautiful and awesome and good and smart.

    • martinbrock

      I’ll pay for awesome, smart and beautiful, especially when it’s all in one package, but how awesome, smart and beautiful are Ted Turner and Ross Perot, really?

      “All awesome, smart and beautiful people are rich” does not imply “all rich people are awesome, smart and beautiful”.

  • TracyW

    When was farming a low-intelligence occupation? Adam Smith used the lack of guild requirements for husbandry as an example of why legally-required long apprenticeships and the guild system were not necessary for other, mentally-easier, areas of work. (He attributed the lack of such requirements for husbandry to the difficulty of farmers combining to form a lobby group).

    And managing on a tight budget, which a lot more people were doing back in 1900, is very cognitively-demanding.

    The college/high school isn’t that impressive, many people back in 1900 couldn’t afford to stay in school that long.

    And you need to read The Nurture Assumption. There’s a whole body of evidence that once we control for genetic, parenting has very little effect on children’s outcomes, see for example http://marginalrevolution.com/marginalrevolution/2009/08/the-inheritance-of-education.html, adopted children’s incomes was not correlated with parental income (while biological children’s income is).
    On the whole I’m sympathetic to your overall case, and I agree with you about the importance of schools but I’m doubtful about your starting positions.

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  • BL wrote: “I argue that this same dynamic is behind the big rise in class-based inequality over the past generation.”

    Well, but that trend is worse in the US than in most other comparable wealthy societies. You present here a plausible enough sketch of how things might have worked to have wound up this way; but why did it go that way here, but not in, say, Germany?

    I’m sure you’re aware of the book already, but on the off chance you haven’t, you might find Benjamin M. Friedman’s “The Moral Consequences of Economic Growth” worthwhile to your topic.

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  • Edward

    “But the rest of society, for complicated reasons I describe in the book, veered off in the opposite direction: a dramatic rise in single motherhood and divorce led to a family and community environment for developing human capital that is arguably much less favorable than before. In this era, class differences have grown and sharpened.”

    This is not due to capitalism but socialism i.e. the interventionist welfare state. Charity in the welfare state subsidizes failure and encourages a new form of segregation. Charity in a capitalistic society strives to uplift and reintegrate into society. Read De Tocqueville’s ‘Democracy in America’ to see the incredible generosity and social cohesiveness of early American society. Today we’ve delegated compassion to the state. “It’s what I pay my taxes for.” Nothing in my view has done more to alienate us from each other while slowly reintroducing privilege.

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