Thursday, January 30, 2014

A Case for 1) Not Worrying About Inequality, but 2) for Offering Minimal Income Support

As (mostly) business students (and as a business professor), we tend to support equality of opportunity but tend not to worry about equality of outcomes.

Equality of opportunity means that we want to gear society so that anyone can succeed. But actually succeeding is up to the individual.

Equality of outcomes means that we look at how peoples’ lives actually turn out, and then make adjustment afterwards.

The orientation of “business people” tends to be that if you have equality of opportunity that you shouldn’t correct for inequality of outcomes. Unequal outcomes are viewed as a result of not exploiting the opportunities that are available to everyone.

Except … what if … outcomes depend on your last name?

Gregory Clark has a new book out, entitled The Son Also Rises. Clark’s last book was … hmmm … controversial.

The new book argues that income mobility hasn’t improved … ever. What Clark did was construct a data set of last names for a large group of countries. He then showed that the names are highly correlated with your position in the income distribution … both now … and centuries ago. More specifically, the rich are likelier to have last names today — such as Percy, Talbot, Montgomery, Neville, or Darcy — and were likelier to have those last names several hundred years ago.

There are two implications of this sort of result. One is that inequality is exceptionally persistent. If that’s the case, social policy aimed at reducing inequality, say, within an electoral cycle or a generation, are probably a waste of money. The second implication is that if inequality is something that we just have to live with, then there’s a role for aid over the course of a lifetime that is based not on your current status … but on your birth status.

This dovetails in an interesting way with a recent Swiss policy proposal. It has been derided in many parts, but leftists in Switzerland have a referendum on the ballot to guarantee a minimum income for everyone in the country (of about $35K). Perhaps this is something to take more seriously.


FWIW: Clark published a paper on Swedish surnames. I’m 1/4 Swedish (I’m a Benson), and 1/4 Norwegian (I’m a Tufte). The paper contains this tidbit:

Nina Benner, a reporter for Sverige Radio, has a nice story from her own family of  how  such  surname  changes  took  place.    Her  grandfather  and his  four brothers changed  their  surname  from  Andersson  to  Benner  in  1916,  when  her  grandfather was 16. His oldest brother was studying to become a doctor, and his professor made it clear that Andersson wasn´t a suitable name in that profession. The name Benner stems from the small village of Bennebo, where her great-grandfather grew up.

This caught my eye, since Tufte is not a patronymic. Instead, it’s the name of a place. Perhaps my Norwegian ancestors were peasants, who tried to make it big at one point by changing their last name.

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