Head Start for Rich Kids

In episode 205 of the Making Sense podcast, Sam Harris spoke with Daniel Markovits about problems with meritocracy. Markovits is a Professor of Law at Yale Law School. It was an especially engaging and challenging episode that provided many statistics that I hadn't before heard or appreciated. Here's an excerpt I transcribed:

Daniel Markovits: A poor district in America spends maybe eight to $10,000 per pupil per year. Middle Class public schools spends maybe 12,000 to $15,000 per pupil per year, a really rich public school in a town like Scarsdale, New York, where the median household income is over $200,000 a year, spends about $30,000 per pupil per year. And the richest and fanciest private schools in America 80%, of whose kids come from households that make over $200,000 a year, spend maybe $75,000 per pupil per year. So that there's massive inequality in educational investment. This means that if you look at a place like Yale, where I teach, or Harvard or Princeton, or Stanford, there are more kids in those universities whose parents are in the top 1% of the income distribution than in the entire bottom half.

And if you took the difference between what's invested in a typical middle-class kids' education, and what's invested in a typical one-percenter kids’ education, and took that difference every year and put it into the S&P 500, to give it to the rich kid as an inheritance when her parents died--because that's the way aristocrats used to transmit privilege down through the generations--that sum would exceed $10 million per child. So why am I saying this? I'm saying this, because it gives you a sense for the enormity of the educational inequality that exists in our society, between not just or even primarily the middle class and the poor, but between the rich and the middle class. And then if you look at the jobs that pay the most money, at elite law firms, at elite investment banks, elite management jobs, to graduates of elite business schools, all these jobs, specialists, medical doctors, all these jobs, almost require people who do them to have gone through some version of this fancy education.

Sam Harris: So what we have is a system of stratification and exclusion that runs through the central elite institutions of school and work in our society, in which those institutions exclude middle and working class families and children, not excluding them by any intent, but by surely the contingent fact of what it takes to jump through all the hoops you need to jump through to land in Yale or Princeton, or Stanford or Harvard.

Daniel Markovits: Exactly. Stanford admits fewer than 5% of its applicants. That means that if you're applying to college and anything serious ever went wrong in your childhood, you know, parents lost jobs, you had to move all of a sudden, somebody died, and you had to pick up some burden to earn some income for the family, you're not going to have a record that puts you in the top 5% of the already elite pool that tries to apply. . . . There are exceptional people, there are exceptional people always. But unless you're incredibly exceptional, you won't be able to get ahead if you don't have a lot of privilege behind you. And then this privileged class . . . asserts that they've earned their advantage and that they have got there on the merits and that those who are disadvantaged deserve to be disadvantaged because they're not as hard working. They're not as skilled. They're not as virtuous and now those who are excluded get appropriately angry and resentful and turn against the institutions, the schools, the professional companies, the forms of expertise, that people on the outside correctly think are underwriting their disadvantage and exclusion.

And a populist like Trump exploits that resentment. And a lot of people on the left think, "How can class resentment go with Trump rather than against him, given that he was born to a massive inheritance?" And the answer is, yeah, he inherited a lot of money. But he is not part of this system of training, education and professional certification that people correctly see as the principal source of their exclusion. It's not his inheritance that's maybe unjust, maybe not unjust--we can disagree about it--but it's on the margins of our society. Whereas all the doctors and lawyers and bankers and CEOs and elite managers who are training their kids like nobody else can and getting them into the best schools and buying houses in the best neighborhoods and getting them into the best colleges. That's the system that is keeping most Americans down. And so the populist resentment turns against it, in some sense accurately.

Sam Harris: So what is the alternative to meritocracy?

Daniel Markovits: Well, it can't be aristocracy or a caste system based on breeding or on race or on gender. That's, I think, important to say out up front, this you know, if this is a going concern as a social and political project, it can't be backward looking. It has to be forward looking.

Continue ReadingHead Start for Rich Kids

About Rent-Seeking

Until a few years ago, I hadn't heard the term "rent seeking." In the past few months, I've heard the term repeatedly and I'm writing this post to anchor this important multifaceted concept in my understanding and to share it with interested others.

I knew concept of "rent seeking" long before I learned the phrase. I've repeatedly had this fantasy where every person who earns a wage needs to step up to onto a big stage in front of the other 300,000,000+ Americans and tell us these three things in simple language:

1) What is your job title?

2) How much do you make?

3) Justify your wage in terms of what you do for your job. In other words, how does your work make your community a better place?

I imagine that many essential workers would come out of this process as shining heroes. A person who works for $15/hour at a typical grocery store could succinctly state "I help keep my fellow citizens alive by making food available for them.

On the other end of the scale, a big shot at Goldman Sachs. A 2019 article at Investopedia indicates: "The average Goldman Sachs employee makes $367,564 on an annual basis, according to the firm’s most recent financial disclosures." Bonuses exceed $40,000. What does this company do to improve the community? Good question. I look forward to hearing how this sort of money is justified in terms of community betterment.

I have sketched out these two examples in order to introduce the concept of "rent seeking." The following is from Investopedia: 

    1. Rent seeking is an economic concept occurring when an entity seeks to gain wealth without reciprocal contribution of productivity.
    2. The term rent in rent seeking is based on an economic rent which was defined by economist Adam Smith to mean payments made in excess of resource costs.
    3. An example of rent seeking is when a company lobbies the government for grants, subsidies, or tariff protection.

Here's another definition, this one from The Library of Economics and Liberty:

People are said to seek rents when they try to obtain benefits for themselves through the political arena. They typically do so by getting a subsidy for a good they produce or for being in a particular class of people, by getting a tariff on a good they produce, or by getting a special regulation that hampers their competitors. Elderly people, for example, often seek higher Social Securitypayments; steel producers often seek restrictions on imports of steel; and licensed electricians and doctors often lobby to keep regulations in place that restrict competition from unlicensed electricians or doctors.

Here's a third definition from CFI:

Rent-seeking is a concept in economics that states that an individual or an entity seeks to increase their own wealth without creating any benefits or wealth to the society.

Rent-seeking activities aim to obtain financial gains and benefits through the manipulation of the distribution of economic resources. Economists view such activities as detrimental to the economy and the society. The practice reduces economic efficiency through the inefficient allocation of resources. In addition, it commonly leads to other damaging consequences, including a rise in income inequality, lost government revenues, and a decrease in competition.

The concept of rent-seeking was developed by American economist Gordon Tullock in 1967. However, the term was offered by another economist, Anne Krueger. . . [T]he term “rent” is referred to as one of the sources of income generation that was conceptualized by Adam Smith. According to Smith, rent is an activity of lending one’s own resources in exchange for some benefits. Relative to other sources of income (profit, wages), rent is the least risky and the least labor-demanding source of income.

The corruption of politicians is related to rent-seeking activities. In order to gain certain benefits, the rent-seekers may bribe politicians. However, G. Tullock determined that there is a significant difference between the cost of the rent-seeking (bribery) and the gains from this practice. This paradox is called the Tullock Paradox.  The Tullock Paradox states that rent-seekers generally obtain large financial and economic gains at an enormously small cost.

With these definitions in place, I'd like to share an excerpt Episode 205 of the Making Sense Podcast, "The Failure of Meritocracy," in which Sam Harris interviews Yale Law Professor Daniel Markovits. It is a thoroughly engaging podcast, repeatedly touching on critically important economic issues we are facing. I'll end with this discussion of rent seeking (though that term is not used).  The speaker is Daniel Markovits:

[Re Silicon Valley and Finance] you see certain forms of seemingly rapid technological advancement. But these are not places that necessarily produce an enormous amount of increased social well-being or growth. And so what we need is a careful, deliberate eye to what kinds of skills our society needs. Let me give some examples of this idea to answer your question starting with ones that I think are easy for me and ending at ones that are hardest for me, just to be fair.

So the easy ones are fields like law and finance. We've had enormous innovation in law and finance, set asides, Silicon Valley, derivative securitization. But there is no--literally--no evidence that our super-skilled, super-elite financial sector produces any increase in economic productivity or well-being for the society. It's interesting, people don't realize that from 1950 to 1970, finance was neither better paid nor better educated than the rest of the economy. Whereas today, it sucks up the most educated people in the society and pays them vast amounts. Law is the same.

If you look at other countries’ legal systems, a system like Germany has much less elite or competitive legal education and loitering, but produces more effective justice at a lower cost. So there are some fields where what we're doing is we're creating intense training, genuine expertise, enormous innovation, but the innovation is just producing greater private wealth for the people who have the skills rather than a greater social product. I think that's true in management also, and we could talk about it.

But the hardest case for me is a case like medicine, because surely medical innovations produced by super trained, super creative people, cure diseases make us all better off. And of course they do. But even there, our system of meritocratic, hierarchical exclusive training leaves a lot of social good on the table. So take heart health as an example. Very well trained, very brilliant doctors and scientists have figured out how to transplant hearts, how to build an artificial heart. But here's some things we don't know about heart health. We don't know whether it's better for your heart over the long run, to exercise really intensively for one hour once a week, moderately for half an hour, three times a week, or just always to walk into take the stairs. We don't know the answer to that question. If we did know the answer that question and if we knew how to train people to do whatever is optimal, that would be a lot better for our population's heart health than the ability to transplant hearts for the very small number of people who get access to the heart and the surgeon.

Continue ReadingAbout Rent-Seeking

On Redemption

This is critically important. Dovetails well with something I keep reminding myself about: A meaningful relationship must proceed any meaningful discussion about any contentious issue. That's because all of our spoken opinions are all anchored deeply by ineffable aesthetics that can only be shared, imperfectly at that, after a meaningful relationship has been established. Filtering others for perfection and setting rhetorical tripwires are incompatible with the human condition.

Continue ReadingOn Redemption

What Justifies Dramatic Changes in Language?

Claire Lehman (Founding Editor of Quillette) is asking a perfectly honed question here:

Here's an analogy that I've often used in conversation: Let's start with some numbers: "In the United States, there are 41,000 registered persons who had an amputation of hand or complete arm."  Since there are about 328M people in the U.S., this means that 1 out of 10,000 Americans has only one arm.  Does that mean that when I'm presenting to a group that I would  be  bigoted and insensitive if I ever said, "Raise your hand if you have a question or comment"?  Does the fact that only .01% of the population lacks an arm (and that 9999/10,0000 have two hands) mean that I need to change my language? Can the rare people who lack an arm really not figure out that I'm not making fun of them or insulting them in such a situation? Who is being unreasonable?

I'll conclude . . . what are those numbers for carefully diagnosed gender dysphoria (versus self-reports by high schoolers)?

Gender dysphoria occurs in one in 30,000 male-assigned births and one in 100,000 female-assigned births.[46] Estimated rates of those with a transgender identity range from a lower bound of 1:2000 (or about 0.05%) in the Netherlands and Belgium[47] to 0.5% of Massachusetts adults.[48] From a national survey of high-school students in New Zealand, 8,500 randomly selected secondary school students from 91 randomly selected high schools found 1.2% of students responded "yes" to the question "Do you think you are transgender?."

Continue ReadingWhat Justifies Dramatic Changes in Language?

About Calls to Prayer

For several years I have taught week-long courses at law schools in Istanbul, Turkey. Those visits have been put on pause due to COVID. I was a couple weeks from traveling to Istanbul once again in early March, 2020, but I reluctantly cancelled that.

I often think of the many people I repeatedly visit when I'm in Turkey. Like most of my friends in the U.S., digital technologies have made it possible to keep in touch, but I look forward to the day when I can once again take it all in through all five senses.

Back here in St. Louis, Missouri, I tend to my ordinary life. Every week or so, however, I fondly think of something that I couldn't have predicted before I first visited the Middle East. I often think of the call to prayer.

In the Middle East, the muezzin calls out from the top of nearby minarets five times each day (sometimes more than one at the same time if you are between minarets). It's a call, for sure, and almost seems like a song, but I've been told that it is not singing. The calls seemed like intrusions on my ears until I heard many of them. Gradually, over my repeated visits, the call to prayer became an exceptionally beautiful moment for me. I write this as an atheist who doesn't understand any of the words of the call to prayer. For me, its beauty is about the sounds and the moment, coupled with images of the venerable mosques I visited (I took these photos in Turkey and Egypt). Also coupled with the second-to-none hospitality of the people I met in the Middle East. It's different than church bells, because it's only five times each day and because you are not hearing a mechanical bell--you are hearing a human being earnestly calling out to you.

As I repeatedly visited Turkey, I started looking forward to the calls as opportunities to stop and think about life and my place in the world. I also took it as a reminder to always be tending to things that really matter because the day is always slipping away. It is also a reminder that you are part of a much bigger community because that call is to everyone in hearing distance, not just you.

There are many reasons for craving an effective vaccine for COVID. For me, this is a reason that I didn't anticipate. This is a good example of a reason that you should travel to new places: If you travel with the right state of mind, you will be changed by what you encounter.

Continue ReadingAbout Calls to Prayer