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Prof. Simon Kuznets

“Education is the Most Powerful Weapon Which You Can Use to Change the World.” – Nelson Mandela

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.