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| Prof. Simon Kuznets |
Whilst watching an interesting TED presentation, the speaker referenced the influential economist Simon Kuznets (who at one time during his long and distinguished career was a Penn faculty member.) His research focused on using statistics to analyze empirical data which is foundational to econometrics, a branch of the dismal science made infamous at Wharton.
What makes
his research particularly relevant to today's economic challenges is that his general
theories of economic growth explained the phenomenon of income inequality. Kuznets discovered
the Inverted U-shaped relation between income inequality and economic growth. In
poor countries, economic growth due to a shift from an agricultural to an industrial economy increases the income disparity between rich and
poor. In the long run, mass education decreases income inequality by providing greater
opportunities and fostering more political empowerment.
While most
nations in Africa (notwithstanding their endemic corruption) offer strikingly obvious examples of income inequality due to the tectonic shift from
agriculture to industrial economies. Less clearly
identifiable is the impact that innovation has had on increasing income
inequality in more developed economies. Simply
put companies like Microsoft, Apple, Intel and Hewlett Packard have transformed
the US economy and turned the page on a new chapter of economic growth which is largely the
result of a well-developed educational delivery system and an environment that
generally facilitates entrepreneurship. Consequently, astute
observers have concluded that the conversation about income inequality should
be more appropriately focused on educational inequality which is attributed to
disparities that often fall along racial lines. For example, family background has
been identified as the most influential factor in student achievement. Unfortunately,
15% of white children are raised in single-parent homes, as compared to 54% of
African American children. On the campaign trail, Barack
Obama talked about how there are more college age blacks in jail (or
on probation) than in college. Professor Ivory Toldson at Howard University who
has studied the issue concludes that the real problem is that because just getting into any college is considered a success there are not enough
black students in competitive universities while over represented in
community colleges. Of course, this is just another
systemic example of where as a country we are settling for mediocrity in the name of democracy.
However, as
long as there is income inequality the simplistic and pernicious argument is that
inequality is rooted in pervasive discrimination - no matter the wealth of
evidence that students who are better prepared and are the product of stable
family backgrounds perform better in school, thus assuring more chances of
economic and other success in adulthood. Simple solutions like income
redistribution do not solve a problem as complex as income inequality, or more correctly educational inequality.
