Recently, I stumbled upon a 2008 essay by frequent collaborators Arnold Kling on Nick Schulz on what they call “the Sergey Brin effect,” after the Google co-founder. The authors argue that Brin represents many of the forces that have increased income and wealth dispersion in the United States. Though most of the ideas will be familiar to regular readers of The Agenda, it serves as an invaluable corrective to conventional thinking about the sources of inequality. To put it another way: it’s a smart, breezy read that doesn’t make any sweeping claims and that is the perfect thing to send to your friends who get all of their news from the major national newspapers and TV networks.
Rather depressingly, I encountered a “rebuttal” to Kling and Schulz’s essay that seemed to have missed the point entirely. The conclusions suggests that mitigating market income inequality through state intervention might prove more difficult than is commonly understood. Early childhood interventions, one possible vehicle for building cognitive skills early in life, are acknowledged as promising. Even if we assume unlimited resources, however, a focus on early childhood interventions would impact market income inequality at a glacial pace, far slower than those who fixate on Gini would likely countenance. Given that resources are in fact constrained, whether or not we raise taxes on the top 2% of earners, the only group the White House believes should pay more in tax, we then enter more difficult political terrain: do we shift resources from less effective interventions, particularly in K-12? That would be a sensible strategy. But of course this approach would encounter, and has encountered, fierce political resistance.
If at some point we decide to go beyond the president’s tax increases to embrace a far larger increase in revenue, we’d still have to reckon with Baumol’s cost disease and the growing rent extraction capabilities of a large public workforce. That is, as the size of the workforce grows, so does its political muscle, which strengthens its ability to strike favorable compensation bargains. This, in turn, also magnifies political voice, no matter how tightly we constrain campaign finance. More affluence means a greater ability to consume “leisure,” including leisure in the form of political activism and engagement on behalf of one’s interests.