Other than pure envy, it's hard to see how I could somehow be made worse off if Bill Gates' income suddenly doubled, but everything else remained the same.

Nobody reasonable begrudges anyone who is wealthy for creating commensurate value. The issue is with wealth that accumulates to those who don't, like CEOs who run their companies into the ground or bankers who crash the entire economy.

If you're creating value, the wealth society has given you is probably a bargain for society; if you're not, it's an inefficient allocation of resources, a symptom of a systemic fault that hurts everyone else.

It's actually rather more worrying if what they're giving their children is a strong education and an absolutely ferocious work ethic. An aristocracy that simply bequeaths money and social position to its children will eventually fall. And aristocracy that bequeaths the actual skills required to earn more money than everyone else is self perpetuating.

Strong education + ferocious work ethic + skills to earn money seems like a weird definition of meritocracy to me, especially given that later in the article we acknowledge that this combo doesn't actually seem to be getting good results. A strong education does not necessarily imply you know how to apply it, and there's certainly a long history of people without that advantage succeeding. The dirty secret of working long hours is that much of it is either for show or spent doing shit work. And the 'actual skills' in question are still very frequently having the right connections.

Don't tell me it got hostage to the wrong ideology--tell me why all those professors we paid millions of dollars to study economics couldn't provide a convincing rebuttal to that ideology in advance of the crash. Don't tell me that regulators were stupid or bankers got greedy until you first explain to me why tens of thousands of very well educated people, most of them graduates of colleges and professional schools that had aggressively winnowed them based on intelligence, barely outperformed a bunch of upstart micks, third-generation coupon-clipping WASP dimwits, and central bankers who still worshipped the barbarous relic of the gold standard?

I... what?

I've always thought that you got ahead by hard work, even while I spent most of my life being lazy. I didn't turn in home work or pay attention in high school; I couldn't afford college because I wasn't a protected class (unlike my best friend) and my parents simultaneously made too much money and had too many kids to pay it; and I scraped by as an adult, always being able to declare exempt on my taxes. But I knew that if I had really wanted to, I could have done something. Even the college thing was just an excuse.

Finally, when I was 25 I decided to work really hard. Within a couple years I was able to get a programming job, and a couple years after that I was making 90k. You can say all day long that it's an anecdote, but seriously, the only luck involved is superficial. If it hadn't been those "lucky" events, it would have been some other ones.

I had no connections. I hardly had any friends! My parents didn't help. They wouldn't even let me stay with them while I tried to make something of myself! Hard to say that it's just an anecdote when you lived it.

Finally, whenever this issue of how we measure economic mobility comes up on HN, I object. What is the ideal mobility from the bottom quintile to the top quintile, anyway? Genes matter. Parenting matters. Those two things matter way more than anything government has been shown able to do. It is absolutely possible to imagine a society, one with a lot of interventionist and redistributionist policies, where economic mobility is higher because it is more arbitrary rather than merit-based. How far are we willing to take economic mobility? Parents matter more than schools. Should we redistribute children to different parents?

TL;DR: the way you crack the 1% or 0.01% is not by working hard, but by getting other people to work hard. Which may or may not be hard work. Whatever the case may be, merit has little to do with it; it's all about scarce resources in high demand, which is a metric free of moral values.

But I've watched a lot of people do shit work, and even work hard doing shit work. Working hard may be necessary but it falls far short of sufficient. Those who have merit approach the shit work as a way of looking for problems to fix, as a way of finding what can be done to reduce the level of shit, and so forth. Those who do not just keep shovelling away.

I'd suggest that finding the right connections is often a matter of demonstrating to the right people that you fit in the former category.

There's something to be said for constructive laziness.

One gets ahead by providing things of value that others are willing to pay for. You can work hard at digging a hole and filling it back in again, but since that has no value for others, you won't get ahead no matter how hard you work at that. You can also work very little and get ahead if you are very good at creating things others value.

I.e. hard work is neither necessary nor sufficient in order to get ahead. It's being able to provide something that others value that matters.

While nominally true, this falls apart in the real world. Creating value is great, but if you aren't working hard at it then you will likely be outcompeted by someone who creates similar value per work unit, but works much harder than you. There are caveats and exceptions to this, but one cannot take the statement "hard work is not a necessary condition" to mean anything other than "hard work is a necessary condition" if one is to have any expectation of success.

Actually, the evidence that "working hard helps you get ahead" is not that much. Mostly correlation based on some people that got ahead in other ways (parents, environment, education, connections, chances, etc) but also work hard.

The counter-evidence though is enormous. Hundreds of millions of hard working people never get anywhere.

We just keep in our mind that CEO X that works 16 hours a day doing CEO work is a "hard working man", while we forget the millions pour sods doing real hard labor for the same amount of days...

In both cases the shareholders were harmed. In both cases, the company made a bad hiring decision.

If a CEO has the market power to demand a golden parachute and happens to be paid after she's fired, that's a byproduct of her initial market power, not corruption.

Unless you idealize a world in which all employees have equal market power then some employees are going to be able to extract better perks, severance, etc.

Suppose Nokia's chances of survival were 10% without Stephen Elop and 20% with him. That means he is worth 0.1 x value of Nokia if Nokia survives.

If you pay Elop based directly on the performance of Nokia (i.e., he only gets paid if Nokia does well), he'll stay at Microsoft. Why leave MS for an 80% chance of getting paid nothing? Obviously Elop demands some cash up front, a golden parachute, or something of that nature, and a rational board of directors will give it to him.

In 80% of situations like this, the CEO gets paid well for running the company into the ground. But that's a better situation than the alternative, i.e. 90% of similarly situated companies crashing and burning.

With respect, this is complete nonsense. It would only be true if there were no replacement for Elop who could not produce similar returns for a lower cost.

Supply and demand, not intrinsic value.

I realize Elop's pay is set by supply and demand, and if Nokia could find a cheaper person with the same qualities, they would and should hire him.

I'm just pointing out that it is in Nokia's best interest to pay significant amounts of cash comp to a good executive even if that executive "runs the company into the ground".

With many millions of dollars of shareholder wealth at stake, only people with a strong track record should be seriously considered.

Sure there are problems with corporate governance but ultimately we're talking about the risk of misallocating capital belonging to investors, whose job it is to oversee the allocation.

Sooo, it's the job of the board of directors to select who the CEO (an officer in Corporate Law-speak) is.

Personally I think there's a lot of freeloading off the small group of big players that do exercise control. I have a certain amount of faith that they won't vote in a way that's seriously adverse to my interests as a little fish.

(Yes, I'm ignoring the time value of money, risk, etc, to simplify.)

The best you could ever hope to do is "CEO candidates with this kind of background tend to have this kind of record when taking over this kind of company", which I'm sure is quite an illuminating sample.

I really don't get the point you are making. Are you telling me that a struggling company shouldn't try to get what they believe is the best possible CEO, provided his pay package is vastly smaller than the variance in possible outcomes for the company?

You realize that with the narrow exception of a few quant traders, you've pretty much described all business decisions.

The question is why the shareholders put up with it, and I don't have an answer to that question.

I guess many should be sorta happy since it allows untried upstarts to disrupt the market and truly well run companies to expand. I feel sorry for all the people caught up in the fail.

"You want me. If you don't pay me enough, I will go somewhere else that will!"

In other words, as Adam Smith correctly noted, it is a question of who has power in coercive negotiations. Consequently CEO's get paid so much because they are so much more powerful than workers in that negotiation process, not because they are worth that much more.

But a lot of market forces boil down to this sort of power difference analysis. We think of a free market where the consumer has the power and the company does not, but I wonder how often that is really true.

But a lot of this boils down to the reason I think folks should try to be able to be self-employed-- it means you negotiate with companies from a position of greater power. I suspect if 60% of the population was self-employed doing everything from janitorial services through database engineering, we'd have no need of minimum wage laws because anyone anywhere could turn down a job offer.

> We'd have no need of minimum wage laws because anyone anywhere could turn down a job offer.

And right now janitors can't turn down job offers? I don't understand. How does a self-employed janitor have more power? I think you greatly overestimate the advantages of being self-employed, and underestimate the downsides.

Most people esp. in the current economy, are not in a position to turn down a job offer. This means they want work more than the company wants to hire them. This is a major source of a power differential. If, on the other hand, the boundary between employment and self-employment is porous, this means that companies not only have to compete with eachother to hire said janitor, but they also have to compete with the fact that they could hire said janitor's ability to be self-employed.

The point is it is a clear shift.

Right now minimum wage laws are too low. We should at least set them high enough that people have no need of welfare when having a minimum wage job. As it is they are a nice way to tell us we are protecting the worker when in fact we are doing no such thing. When you combine it with welfare, you have solid incentives for low-paid workers not to become self-employed and thus the welfare and minimum wage scheme we have right now are actual tools in the class war by the wealthy against everyone else.

Adam Smith made the same point. Wages are a result of power differential in negotiations, not value to the organization. This is why being able to be self-employed is so important. If you do decide to take a job, you can negotiate from a much greater position of power than if you can't be self-employed.

Isn't it possible for the market itself to be screwed up? There is no such thing as The Market, there are many different markets with different rules and contexts. We can alter these rules and contexts, and they change on their own over time through technology and other things.

The question is whether the market we have right now is serving us well, or if we could alter it to serve us better.

This isn't true. One example off the top of my head, good looking people get paid more. They aren't more qualified, yet they get paid more. Even at the executive level.

Clearly the former is orders of magnitude worse (in every respect) than the latter, no?

> If a CEO has the market power to demand a golden parachute and happens to be paid after she's fired, that's a byproduct of her initial market power, not corruption.

The system need not be corrupt, just broken. In the sense that (I think) we're discussing the merits of modern american capitalism, your comment begs the question.

Wage inequality is not necessarily a sign of corruption.

If you're creating value, you're creating it, it isn't being given to you (nor is it being taken from someone else). For example, if I (as a great painter!) take $5 worth of art supplies and create a painting worth $1,000,000, I have gained a million dollars in wealth without taking it from society.

In a free market, people can and do create great wealth without deleting someone else's wealth.

If so, then yes, we hopelessly disagree.

If not, then you're agreeing that wealth can accumulate to some people who don't create value and/or can fail to accumulate to some people who do. I'd hope you would also agree that that's a problem, and that we'd be better off if we figured out how to fix it?

The latter, sadly, does not inherently hold true; many times people create value but do not manage to get any value for themselves. That situation has improved drastically, but I'd certainly love to see it improved even further.

For the former: ignoring theft and fraud, by definition they created value for someone, or they wouldn't have gotten paid. We can argue over whether we would prefer them to have created value in another way, but we don't get to choose that; that remains between them and whoever chose to give them money.

If you want to improve that situation to create value in ways you'd prefer, then I'd suggest working to ensure that good mechanisms exist to help people get value from activities you'd prefer to see rewarded, and try to get people to take advantage of them. For example, crowdfunding programs like Kickstarter enabled many creative people to benefit directly from the value they create. We could use a hundred more ideas as novel and useful as crowdfunding; that would help greatly.

Or, to put it another way, coming up with such an idea and implementing it would greatly amplify your own ability to create value, and in doing so it would allow you to create the kind of value you'd prefer.

Startups may be able to help: http://imaginek12.com

While I'd like to believe that startups could help, I find it fairly unlikely. Most entrepreneurs I see in the education space don't seem to be experts in education theory/research, so most of the time their products seem to be only making things worse. And if the general public were well-educated enough to tell the difference, there wouldn't be nearly as much of a problem to begin with.

John Hattie in his book Visible Learning: A Synthesis of Over 800 Meta-Analyses Relating to Achievement

http://www.amazon.com/Visible-Learning-Synthesis-Meta-Analys...

reviews a lot of research studies from a lot of countries and suggests that that view, although it is conventional wisdom, grossly underestimates the importance of schools. I agree with you, because the data agree with you, that the most stark differences in school performance are among different teachers in the same school rather than between one school and another, but throughout the Western world, students with tough home conditions tend to get the lousiest teachers and the most underperforming curricula.

Other writers who have important points to make about how to help learners with the worst home environments by improving schools include the collaborators from Teach for America who have put together the book and website Teaching as Leadership

http://www.teachingasleadership.org/

and Eric Hanushek at Stanford with his research on the effects of variance in teacher quality.

http://edpro.stanford.edu/hanushek/content.asp?contentId=60

There is a lot yet to be done that is very feasible (well, except for politically feasible in most states of the United States) to improve the education of the most disadvantaged learners and to help them reach significantly higher levels of academic achievement.

"reviews a lot of research studies from a lot of countries and suggests that that view, although it is conventional wisdom, grossly underestimates the importance of schools. "

I do think it's important to note though that you can believe that the achievement gap is mostly coming from home factors, while also not underestimating the importance of school. That is, you can believe that all kids are basically receiving an equally crappy education. You're certainly right though about the kids from the worst home conditions getting stuck with the worst teachers within schools.

In terms of data, here is the graph showing how SES effects achievement for school kids:

http://dl.dropbox.com/u/1655696/SES_and_school.jpg

It's a little difficult to read, but basically what you can see is that poor kids and rich kids learn roughly the same amount in school. The reason there is such a big gap is because A) there is a large gap that already exists when they get to Kindergarten and B) while rich kids are learn over the summer and get smarter, the poor kids are actually forgetting what they've learned the previous year.

If you want to learn about why there is already a 2 year gap before the kids get to kindergarten, you should read the book Meaningful Differences In The Everyday Experience of Young American Children.

The finding about within school differences vs. between school differences comes from the Coleman report, which is one of the largest social surveys ever conducted, and still one of the most important to date. I also have a blog post here explaining a bit about why within school differences are important:

http://alexkrupp.typepad.com/sensemaking/2009/02/the-most-im...

If I remember correctly efficacy of preschool is mixed, and it depends a lot on the type of preschool. However, even the best preschools can never be as effective as good parenting at imparting language schools, for reasons that the Meaningful Difference book explains. (However, preschools may be good for other reasons.)

"The disadvantages that poverty imposes on children aren't primarily about material goods. True, every poor child would benefit from having more books in his home and more nutritious food to eat (and money certainly makes it easier to carry out a program of concerted cultivation). But the real advantages that middle-class children gain come from more elusive processes: the language that their parents use, the attitudes toward life that they convey. However you measure child-rearing, middle-class parents tend to do it differently than poor parents; and the path they follow in turn tends to give their children an array of advantages. As Lareau points out, kids from poor families might be nicer, they might be happier, they might be more polite; but in countless ways, the manner in which they are raised puts them at a disadvantage in the measures that count in contemporary American society."

Undoubtedly?

> The issue is not so much, I believe, in the "goodness" of the parenting, rather, it is in the richness of the environment.

In the US at least, there are free yet rich environments. If you're poor, you do have to get out of the house and seek them out.

So, what definition of "better parenting" are you using?

I would argue that pre-school attendance could be a very strong indicator of parenting quality, if we can even try to quantify such a thing.

On the other hand, lack of pre-school could indicate a parent taking the pre-schooling responsibility upon themselves and providing a rather spectacular "home pre-school" environment.

I think Khan Academy is honestly about education more so than schooling.

The general public can tell the difference which is why choice in education is a no-go, and the compulsory system remains in place.

That's the problem I have with Khan academy. That is, the lessons are factually correct, but they have no soul, and at the end of the day I think that's bad pedagogy.

I.e., if we "reconceptualize education" to connect it to hinduism's 4 life stages [1], what outcomes will change? How can we measure the "soul" of a lesson, and what happens when a lesson lacks "soul"?

[1] As far as I know this is only a meaningful concept for Brahmin and Kshatriya men. But I guess since they are the highest castes, they are the ones who's mysticism we should adopt.

A good proxy would be just looking at whether something was made by an artist, or a committee. E.g. Feynman's lectures were those of an artist, whereas most textbooks are created by a committee. (And then they get someone with a PhD to add their name as the author after the fact.) It's clear to me that Kahn's lessons are more in the style of the typical textbook, rather than in the style of someone like Feynman. You can't measure it, that's the point. If you could measure it then that's the first sign that something is wrong.

"But I guess since they are the highest castes, they are the ones who's mysticism we should adopt."

I'm not advocating the hindu model per se, only using them as an example of a society where schooling is framed in terms of a larger model... In their case one that includes work, marriage, wisdom seeking, preparation for death, etc. It's not clear to me that this is the right approach for western society, but I do think it's worth looking at for inspiration.

In that case, I can tell you that you are very wrong. Khan's lessons have lots of soul. Not only soul, but also invisible dragons that breath the fire of knowledge!

http://www.godlessgeeks.com/LINKS/Dragon.htm

I'm sure this isn't universally true, but just like many other fields, expertise in technology should let new people disrupt the field. Education, being highly regulated, lacking real feedback mechanisms, government funded, etc., is perfect to disrupt.

Furthermore, the game may be rigged against poor students, but it isn't rigged by the rich. It's rigged by the teachers unions. Some schools that serve poor children have the highest per-student budgets in the nation (see: DC). But they still perform abysmally. Rich parents have the free time to browbeat administrators of low-performing schools until things change. Poor parents are too busy trying to make ends meet. Their children are stuck with whatever the bureaucracy gives them.

This is why school choice programs have displayed promising performance in many low-income areas. They allow students to escape quagmires of union-driven mediocrity. It's interesting that you would want to get rid of the best chance for poor children to get a good education! The DC opportunity scholarship fund increased high school graduation rates by 20% by sending poor kids to private schools. That's a big deal - having a high school diploma substantially increases lifetime earnings.

True to form, the unions killed the DC Opportunity Scholarship fund after only a few years of operation. It's hard to make change for the benefit of the poor! But fortunately, the house Republicans brought the program back with their electoral sweep in 2010, so we will get to continue to monitor its results.

I was explicitly told in school that it was. Sure, getting an education is important; but the race aspect - specifically, against repeating a year - was hammered home.

My state has had a state law that finances districts equally by enrollment since the 1970s.

http://www.house.leg.state.mn.us/hrd/pubs/mnschfin.pdf

Actually, the districts with the highest concentration of low-income families have long received extra funding per pupil compared to the majority of school districts in the state. For more than twenty years now, all public schools anywhere in the state offer open enrollment to all students anywhere in the state, up to the limits of the capacity of each school district to receive students.

http://education.state.mn.us/MDE/Academic_Excellence/School_...

So if students don't like what is on offer in their local school district, they can shop around, and take their state funding with them, by trying out another school district's offerings of courses and teachers (and classmates). More students enrolled means more state funding, so school districts make efforts to provide attractive programs that will bring students across district lines. This competition among school districts has promoted innovation in programs and resulted in a fair amount of interchange among students who live in different neighborhoods. School districts compete with one another by offeringprograms for fine-arts-inclined students, or students who desire language immersion programs (Spanish immersion and Chinese immersion programs are both hot programs in Minnesota), and students with many other characteristics. Some school districts gain almost half of their enrollment from open enrollment, and correspondingly some of the historically worst school districts in Minnesota have lost large percentages of enrollment to families crossing district boundaries to look for better schools. (Minnesota also has a huge number of charter schools, which is a distinct form of competition for publicly subsidized students, but they cannot offer some of the programs that public school districts can.) This competition keeps all districts accountable for providing a good learning environment, and helps change the psychology of teachers and principals dealing with families from one of treating learners as a burden to one of treating learners as an opportunity to be grateful for.

Any other state in the United States could do the same, and a few already have.

http://educateiowa.gov/index.php?option=com_content&task...

http://www.ecs.org/html/offsite.asp?document=http%3A%2F%2Fww...

abolishing private schools

Abolishing private schools is a distinctly bad idea (as shown by the example of the Netherlands, where multiple kinds of schools receive public funding on a per-capita basis) and anyway is unconstitutional in the United States. The last major effort to abolish private schools in a whole state was sponsored by the Ku Klux Klan (which didn't like Catholic schools) and was overturned by the United States Supreme Court.

http://scholar.google.com/scholar_case?case=6094501649208458...

The rich can run for office much easier than the middle and lower classes.

The rich can monopolize new markets by simply undercutting new entrants.

I'm sure there's many more examples than this of how by concentrating vast wealth to a few people you cut out opportunities for everyone else.

Indeed, much of this is predicted by public choice theory,

http://www.econlib.org/library/Enc/PublicChoice.html

http://perspicuity.net/sd/pub-choice.html

http://www.sjsu.edu/faculty/watkins/publicchoice.htm

which predicts that interest groups who have money to gain from a particular policy will fight harder to get their way on that policy than will voters in general who might gain more from a different policy.

In education policy, there is HUGE access to the legislative process (especially at the state level, where most education policy is made) for the schoolteacher labor unions. The general public doesn't get the same kind of place at the table, by far. But politicians are not embarrassed by that. They call special access for special interest groups "taking care to consider the point of view of stakeholders," and don't think about policy in terms of what's right in the abstract, but rather in terms of what's expedient for staying out of political trouble. A quiet majority of inadequately educated Americans struggling to find time for political participation while making ends meet has less voice in the process than a vocal minority of wealthy people whining about "class warfare," and also less voice than a minority of people employed by publicly funded schools who are not held accountable for results.

[1] http://www.abc.net.au/news/2011-11-06/disadvantaged-students...

[2] http://www.eliasfund.org/partners/albert-street-school

Most of our productivity comes from what we learn at our jobs, especially when our jobs (as you say) include a good portion of "school". Helping your children land good jobs is a very good way of passing on skills.

...As measured by standardized testing, on a good day, and when you analyze the data the right way. And who knows what sorts of longterm problems KIPP could be causing in these kids and within their communities.

The fact that the 'best' idea in educational reform is basically just taking kids away from their parents for virtually all of their waking hours shows that America is on its last legs. We no longer have the cognitive infrastructure necessary to transmit learning from parents to children, so I think KIPP is really just a hail mary attempt to try to buy some time before the whole system collapses.

This is an exaggeration. At most, programs like KIPP show that our lowest performing households no longer have the cognitive infrastructure necessary to transmit learning from parents to children.

EDIT: just read http://en.wikipedia.org/wiki/Knowledge_Is_Power_Program#Crit..., which is certainly interesting.

There's very little data, which is the main problem. In terms of books about KIPP, the one I've read is Whatever It Takes, which is about Geoffrey Canada, who founded the Harlem Children's Zone. I'm not sure if this school is technically affiliated with KIPP proper, but it used the KIPP model.

It's very difficult to explain the problems with KIPP. Basically you need to take a really good look at how the kids are actually spending their days, and then compare it with what we know about child development, educational research, best practices in various fields, research data on student achievement, etc. I don't think there is any way to understand it without having a solid background in education theory, education research, cognitive development, psychology, early childhood education, history, and even things like organization behavior and management theory, etc. The problem of what makes a good school and a good classroom is insanely complicated, which is why we've been using basically the same model since WWI.

Forget the theory. The theory might tell me why some measurable effect occurs and generate a complicated model of how it occurs. But without delving into theory, you can certainly tell me what the measurable effect will be. E.g., "KIPP students will have 10% lower math scores in year 2-4 of college," or something like that.

There isn't enough data to say.

"But without delving into theory, you can certainly tell me what the measurable effect will be."

Cognitively, I'd be most concerned about whether the program would be harming their executive function and their intrinsic motivation. I don't see any value of trying to predict specific metrics though, beyond identifying specific metrics to look at once more data exists.

http://en.wikipedia.org/wiki/Knowledge_Is_Power_Program#Crit...

Basically: they have prerequisites for parental involvement (i.e. your parents have to be willing to work at your schooling too), and a high attrition rate (i.e. they throw out the underperformers). That's not a random sample, it's self-selected for people who do well in it.

This doesn't mean that it's a bad idea, or that it doesn't work. But it means you have to be very careful about pronouncing it "working well."

Call me crazy, but if your assumption is that opening the doors to the unwashed masses and funding lots of education for poor people raises them up, and it doesn't? Perhaps you should verify your assumptions. Perhaps what really matters for accumulating wealth is the modeling of attitudes and virtues from an existing wealthy set of parents. Much the same way that watching a movie of a famous piano player won't help you play the piano, but working day-to-day with one might, perhaps all this structural, fact-based education actually misses the point of how wealth really accumulates? Perhaps wealth generation is actually more of a learned art, not an applied science. EDIT: I see pg says this could also be the quality of the schools, and I think this dovetails in with what I'm saying. It's better to be around folks who model and demonstrate the best wealth-generating lifestyles in order to generate wealth yourself. When we look at the word "education," we are measuring the wrong thing.

Don't know. Just putting it out there. I found this essay thought-provoking. Much better than the usual fare on this topic.

As Hilaire Belloc wrote, control over the production of wealth is the control of life itself. When we give the rich control over the production of wealth because they are rich and can afford to fund capital, we disempower the majority. The answer is not socialism or communism, which try to solve the problems associated with such concentration through further concentrating that control. The answer is to back off and recognize that the division between capital and labor which has developed is an unhealthy one, that laborers should own their own means of production not collectively but individually and that the role for big capital should be as restrained as possible. As Chesterton said, "Too much capitalism does not mean too many capitalists, but too few."

And as I say "In these economic woes, jobs are the problem, not the solution."

One reason Open Source rocks is that it gives economic ownership to the means of production to every willing programmer and user. This is a value that cannot be measured economically. And open source works often according to a real meritocracy, where those who contribute the most and the best rise to the top, absent corporate control and marketing.

So it is my hope that we recognize it is not meritocracy that is the problem but rather the level of concentration of resources and control that has been achieved that is the problem. These are good reasons to support small businesses, bank with credit unions, become self-employed, and encourage others to do the same.

Let me get this straight. A kid starting in a bracket that includes 40% of the population has a 60% chance of remaining in that bracket as opposed to the 40% if it was totally random. I would actually have expected a higher %.

"But in the new aristocracy, it is rarely enough to just get born to the right parents; you also have to work very hard. (Higher earning men are now more likely to work more than 50 hours a week than are men in lower earnings quintiles.) Whatever the systemic injustices, it's also quite clear to everyone ... even parasitic leeches of investment bankers ... that their salaries only come as the result of frantic effort."

Here's what I think is missing from that paragraph. I've tried to label each logical fallacy, but I could be fallacious (hah!) in my labelling. Argue to the point, I'm not interested in getting the fallacy names just perfect. (Here's a source if you want one: http://en.wikipedia.org/wiki/Fallacy )

1. How can she attack hard work and intelligence? She doesn't state what metric she is using, but I assume it's what she starts the next paragraph with: "one's parents to confer such enduring advantages is obviously unfair." If hard-working well-educated parents teach their children to be hard-working and well-educated, that does not prove hard-working poorly-educated parents cannot. "Hasty generalization" fallacy?

2. What justification does she have to write off "systemic injustices" with a summary "whatever"? Should that not have been the focus of the article? "Straw man" fallacy?

3. Why are investment bankers singled out? "Ad hominem" fallacy?

The old system was an aristocracy, where people were born into positions at the top of society, and this was obvious unfair. However, this system was not stable.

The new system is (supposedly) a meritocracy, where people have to work towards high positions in society. This system is not obviously unfair. But it is stable, because parents tend to instill the qualities required to succeed in their children.

Her point was that what these two systems have in common is that who your parents were is a good predictor of where you will end up.

Her arguments seem really lazy and not well justified.

Other areas of the economy are changing too. Most technological innovations exist b/c they do something cheaper or faster than the human labor alternative.

No matter how much a person may enjoy menial labor, someone else is working hard to make that work unnecessary. To fight against this trend is a doomed effort and frankly longs for the dark ages.

So I think it comes back to our educational system... both those who run it and those who consume it (the people). As a daycare/assimilation system it works great, which is not surprising since this is its primary purpose.

Your comment advocates a welfare state where I'd estimate the bottom 40% of earners would be on welfare. I'm not sure that such a system is good for peoples' sense of self-worth.

Instead, people should realize that the secret to success is personal empowerment, learning, etc. It's never too late to learn new skills, etc.

Many who share your view think that it's unreasonable to ask Joe Sixpack to learn anything new... that his pride at doing unneeded, outdated work is so precious that we should simply give him welfare.

As long as society's notion of a "normal" life includes working 9 to 5, watching sports and drinking beer on weekends, etc., then few will ever have the time to improve their lot in life.

Every successful person I know works like a dog and has earned what they have, at great sacrifice (skipping parties and fun activities, working weekends, late nights, etc.). The fact to be remembered is that motivation is not evenly distributed in society and that many of the people struggling are simply not all that motivated. In fact, many teach their kids to disdain learning and education, etc.

Why should anyone in the US be guaranteed comfort when there are children begging in the street in Mexico or India?

I think the social status quo would fall within a generation or two if the structural barriers to education were removed.

Humans have a strong desire to thrive intellectually and to understand the world. The US K-12 system has done much to stifle that and train people to be obedient workers.

The second was WWII and the GI bill which constituted the greatest downward transfer of wealth in US history, and created the huge, stable, Middle Class that has survived well up until recently. The New Deal was at most just icing on the cake (and I think actually destructive to the overall trends). The wages of war, the draft, and the on-going benefits were where the real successes were.

"Why should anyone in the US be guaranteed comfort when there are children begging in the street in Mexico or India?"

I also think the course of the argument goes the wrong direction when talking about the changing economy. I think technological progress is usually over-emphasized as a driving force and class warfare underestimated (Belloc's discussion of the factors involved in the creation of the industrial revolution in England is very good and explains various puzzles such as the relationship to Protestantism that had previously baffled me).

I also agree with this:

'As long as society's notion of a "normal" life includes working 9 to 5, watching sports and drinking beer on weekends, etc., then few will ever have the time to improve their lot in life.'

The problem here is in part how poorly integrated these activities are, and how this is used to control and keep down the masses.

'Every successful person I know works like a dog and has earned what they have, at great sacrifice (skipping parties and fun activities, working weekends, late nights, etc.). The fact to be remembered is that motivation is not evenly distributed in society and that many of the people struggling are simply not all that motivated. In fact, many teach their kids to disdain learning and education, etc.'

Agreed here too. However, the most successful people I know are ones who have this integrated with family time and so family, personal, and work time are not separate buckets but rather extremes, and most of life is spent doing all three to some extent. The doctor who reads stories to his kids while being on call in case of emergency is one example. So is "I am going to work on fixing bugs in this software while you do your homework, and if you have questions, I am right here, and can answer them" is another.

I don't know any small business owner who works less than 60 hrs per week. However, I don't know many small business owners who work more than 40 hrs a week away from family.

To live is to work. And we all work better when we are in charge of our work and work as free agents, not serfs of corporations.

BTW, there's a very dark side to welfare that is rarely discussed, and that is the use of welfare as a method of class warfare against the lower and middle classes. If Walmart can pay workers less and have them get Medicaid and Section 8 housing that means we are taxing mom-and-pop businesses to essentially subsidize a large corporation's operations. This thus acts to transfer wealth not from more fortunate families to less, but from middle income families to the very wealthy.

The answer is, in my view, to:

1) Tax lease income, encouraging sale over rent 2) Encourage self-employement as a means out of poverty. This means ensuring that what welfare benefits we offer don't go away just because someone starts a business, but rather get gradually phased out. 3) Corporate income tax should have a high marginal rate, and increases in corporate equity due to off-shore holdings should be taxed at full income tax rates.

I think overall technological change can lead to widespread social empowerment, but the most politically entrenched workers with the loudest voices are those who are least likely to benefit from it.

On the other hand, the kid in India using a $35 tablet to learn calculus or the people starting businesses using Kickstarter are hugely empowered by it.

The main reason I mentioned technological change is just to reinforce that productive work is a moving target, for all factors of production (including labor). It's sentimental to look back fondly on the blacksmith or the wheelwright or the person who made nails by hand... just as it is to look fondly upon the economic fluke that has allowed many Americans to live well above the poverty line with virtually no skills, in spite of living amid an economy that has transferred mostly to knowledge work.

I will look into Belloc's stuff too, links?

Belloc's view was that usually in class warfare the wealthy will win. I don't agree with all the religious nuance, but I have to say the look at ancient and medieval history is surprisingly good from an economic perspective.

"I think overall technological change can lead to widespread social empowerment, but the most politically entrenched workers with the loudest voices are those who are least likely to benefit from it."

Maybe. I think everyone tries to use it. However, I think we are at a point now where the real power in the newer high tech approaches is the power to decentralize both decision making and production. As you say, the kid in India, or the guy in rural America who starts a small business, not the factory worker.

But this is another reason why I say that in these economic times, jobs are the problem, not the solution.

I think the subgroup I was trying to mention was the class who has managed to pull itself up through social organization (unions, guilds, etc.) and in the process has increased the incentive to disrupt the status quo (by making doing so more profitable). This will tend to attract disruptive technology (ubercab, khan academy, etc.)

http://www.jstor.org/pss/2951338

My recollection is that the authors looked at the predictive power of a father's earnings on his son's earnings, but rather than measure changes in absolute (or inflation-adjusted) earnings, they measured earnings relative to the society (Sweden or the U.S.) as a whole. In other words, if my father was in the 50th percentile for earnings, I could use their "mobility" estimate to determine my odds of making it to the 75th percentile (or down to the 25th percentile).

That doesn't seem like a useful statistic on which to make qualitative comparisons when you're talking about societies with two very differently shaped income distributions (as the authors acknowledge is very much the case with Sweden and the U.S. on the freebie first page).

Suppose the middle 60% of Swedish males earn between $25,000 and $35,000 annually. A jump from the 20th to the 80th percentile (or vice versa) in absolute terms isn't that impressive. If the income curve gets narrow enough, any impact your parents have will get lost in the noise and you'll have a "perfectly mobile" society in which everyone makes almost exactly the same amount of money. But how is that mobility?

In contrast, if the earnings difference between the 20th percentile and the 80th percentile is, as in the U.S., a factor of four+, then moving from the 20th to the 80th percentile represents dramatically more "mobility" than in the Swedish case. AFAIR, the 1997 study would treat those movements equivalently.

Great that means that 40% of the top two-fifths will be from people who earned their way up, instead of being born into it. Tyranny of meritocracy indeed, I mean what kind of uppity lower class kids are we raising who think they can earn wealth instead of inheriting it!

Expensive education may be one part of the gap that appears to be widening, but as wealth disparity grows, so does power disparity. Money can't buy you happiness, or even 'true' friends perhaps, but it can buy you influence and it can keep people following you. This can let the wealthy 'open' job and experience opportunities where others might not be so fortunate.

I pump this from time to time, but MIT's OpenCourseWare does a great job of making a fantastic education widely available. Perhaps this is a model others could adopt more widely.

Commentator Alain de Botton explores the darker side of a western ideal: meritocracy. http://www.npr.org/templates/story/story.php?storyId=3200029

I wish there was a transcript of this. I think he covers the basic topic in some of his books.

The topic is pretty challenging, especially so for the left leaning where quite often the political policy related by affluent lefties is "to give people the same opportunity as me" to compete in a meritocracy.

Because many business and economics professors, esp. the prominent ones, make the majority of their income from consulting fees and by serving on boards of large corporations.

For example Frederic Mishkin a professor at Columbia Business School and a former member of the Federal Reserve Board of Governors authored a paper titled "Financial Stability In Iceland" shortly before the countries economy imploded from a credit bubble. As it turns out he was paid $124,000 to write it by the Icelandic chamber of commerce. http://en.wikipedia.org/wiki/Frederic_Mishkin

This and many similar examples are detailed in the documentary "Inside Job", though, it isn't something you hear about in the news much if at all.

In other words the study of business and economics has been corrupted by corporate money.

I could copy and paste this as a reply to a number of other people complaining about how misinformed this piece is, then going on to argue in the comment about how the meritocracy isn't. This piece is a fine bit of judo, getting a whole bunch of people who probably would otherwise be defending the dominant educational culture to condemn it, by its own standards.

The entire article seems to be about income inequality.

But it's really hard to see what the comparison is. Was there more upward-mobility in the old aristocratic system? Were the leaders too stupid to make gargantuan mistakes? The article certainly doesn't have any good comparison to make, and there were certainly problems in the Good Old Days (like, say, the Great Depression), too.

The whole article looks like it's trying to pin blame somewhere, and it has enough facts to get a decent start, but it has too many holes to be convincing.

It's unclear what definition of "meritocracy" Mz. McArdle is using.

"Don't tell me that regulators were stupid or bankers got greedy until you first explain to me why tens of thousands of very well educated people, most of them graduates of colleges and professional schools that had aggressively winnowed them based on intelligence, barely outperformed a bunch of upstart micks, third-generation coupon-clipping WASP dimwits, and central bankers who still worshipped the barbarous relic of the gold standard?"

As I suspected, she's confusing credentialed with educated and thinks that schools winnow only on intelligence.

At any rate I am still more concerned with inequality than with relative mobility within quintiles. There is always going to be a larger number who stay than those who move, and the numbers here are not as bad as the author makes them seem

Actually as I am looking at expanding my business, I am actually looking to an apprenticeship/guild model for scalability rather than a traditional corporate model.

Only if you see money as a fixed quantity of dollars. We're really talking about purchasing power here.

Bill Gates invented a way to make anyone who used his products more efficient. (You can do a lot more with Windows than older OSes.)

Since everyone is more efficient, your $1 can buy more. Of course, you will probably choose to give some of your money to Bill Gates, but since the rest is worth more it's a fair trade. (Also, no one can force you to give money to Bill. If you think it's not a fair trade, don't buy Windows; ignoring monopoly power here.)

In formal terms, the economy is not a zero-sum game. Your assertion that "money is like energy, which can never be created or destroyed" is incorrect, if we're talking about the purchasing power of money and not its numerical face value.

It seems very fundamental - maybe I miss something, but if you get money (spending power, whatever) it comes from other people. Therefore people can't get richer without making other people poorer.

http://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&#...

Inflation is a separate phenomenon that occurs through time and can be influenced by the money supply. The government encourages inflation to encourage investment (i.e. prevent people from hoarding cash) and for various other reasons.

I'm only looking at a snapshot: imagine you work for a year in 1985 and spend all your money the same year. Can you buy more or less than if you work for the same amount of time (with the same skills etc) in 2011, and spend all your money the same year? Turns out you can buy much more in 2011.

If you really want to look at the "through time" case, calculate what your $1.00 in 1985 would be worth if you invested it and what it could buy in each case.

Money is not really a resource in and of itself. It's kind of a 'point system' we use to allocate finite resources.

I do think that this is a very important concept that is very difficult for many people to grasp.

If you took 50% of each person's money on the planet and burned it in a fire prices would (eventually) drop by 50% on most products.

If everyone has less money, they buy less things, and so there is a surplus of things. This causes the price of things to drop so that an equilibrium is reached. It will also (ideally) cause a drop in wages, etc so that things are still distributed.

The purchasing power of your money depends on the amount of resources to be allocated and the amount of money the people that want the resource are willing to spend.

So if banks hoard money, it really does not effect your purchasing power negatively until someone tries to spend that money on resources you want.

This is the basic concept, it doesn't mean that there are no consequences to these actions. If you hoard everyone's money (same as burning, but it can come back) you basically get deflation.

Deflation is bad because things like salaries don't scale down easily. People get upset when you dock their pay and most companies would rather just cut hours and lay-off employees rather than upset the entire company.

This is bad because the company is now over-paying (and over-working) workers for their services and there are lots of unemployed that can't find jobs.

So these changes don't happen as easy as the simplified example above, but they are real and very significant effects that need to be taken into account.

Housing is the classic example, where the rich have pushed the pricing up so high that even moderately wealthy people can't afford to buy houses outright without multiple years worth of salary. The result is a shift towards renting rather than mortgaging, which mostly gives even more money to those people who drove the prices up to begin with...

Short-frame meritocracy means that resources are allocated to people who will do the most with them now. Long-frame means that resources are given to people who will produce the most with them in the future (i.e. we invest in people whose short-term performance may be mediocre). Short-frame meritocracy is pragmatic and efficient in the context of a static time-frame, but doesn't produce growth or social justice in the long run. Resources (VC funding, jobs, educational opportunities) are allocated to those who don't need them. Long-frame meritocracy is fairer and more productive in the long run but much harder to implement because it requires a certain foresight.

Most business decisions are made in the context of short-frame meritocracy. People aren't hired based on what they might become in 5 years, but based on what they're likely to be doing in 3 months. Schools are supposed to take more of a long-term outlook, but they have no real incentive to do so, and plenty of incentives (alumni and parental contributions) to kowtow to society at large and rubber-stamp the preselected winners.

The truth is that iterated short-frame meritocracy is not much better than oligarchy. It's oligarchy with a tiny Brownian motion term thrown in, and the annealing rate is always calibrated so as not to threaten the overall shape of society.

For a historic analogue, one might consider that it was very easy for the peasants of medieval Europe to believe that the nobility were of superior "merit". Merit at the time was physical might (and this wasn't unreasonable, since it also conferred the ability to protect others). First, the nobles were better nourished and much larger. Second, they knew how to use weapons, because they were trained. Third, they could ride horses. Feudal Europe was, fundamentally, a meritocracy (of the short-frame variety) for some definition of "merit".