Speaking of equality of opportunity (which I was earlier today), occasional Troppo contributor and legendary economist Fred Argy gave an excellent speech on the subject (or more specifically, on social investment directed at enhancing social mobility, which amounts to the same thing) a couple of nights ago in Canberra (hat tip to Andrew Leigh).
The literature tells us that free markets help create more economic opportunities but without adequate and well targeted social investment, it is mainly those born to rich, well-educated and motivated parents that will be best able to take up the better economic opportunities. The US experience illustrates this well: it has the freest and most productive economy in the world with abundant employment opportunities – but because of its relatively low rates of social investment it does not rate well on social mobility in world rankings. And the countries which rate highest the Nordic countries and smaller European countries like the Netherlands put considerable resources into social investment.
He also has a more detailed discussion paper at the Australia Institute website.
Social investment sounds good, but when it spells out in the form of welfare packages like the US New Deal and and the Great Society program of the 1970s it makes things worse instead of better. Rather like the passive welfare that has been provided for Aboriginals.
The Scandanavian experience looks ok but they had the benefit of social homogeneity and a good moral framework to start with, not to mention free trade in Sweden, so the downside of cradle to grave welfare took longer to appear.
Rafe, my talk makes a clear distinction between passive welfare and active social intervention. Here are two extracts: “we all know that passive redistribution has one big limitation: it does nothing per se to develop human capabilities. In particular it does nothing to correct the underlying structural inequalities of education, health, employment, housing and location – or the distortions these create in the distribution of market incomes from work”.
“Active social intervention differs in three ways from “passive”
Rafe
Social investment does not equate to “cradle to grave welfare”, and that is certainly not what Fred Argy is talking about. The paragraphs preceding the one I quoted in my primary post should give you an idea of the sorts of “social investment” he’s talking about:
Ah! The man himself beat me to the punch.
Thanks for those replies, it is good to see that we are all on a learning curve and it will be interesting to see how far we each move as we learn more.
However to move in the direction tbat we may both want to to, the Titanic of inappropiate public interventions will need to be turned around. It will help if we can collaborate on projects where we can agree.
Rafe is too much into Argy bargy!!
Fred is merely facilitating the market so it works effectively.
“The US experience illustrates this well: it has the freest and most productive economy in the world with abundant employment opportunities – but because of its relatively low rates of social investment it does not rate well on social mobility in world rankings.”
I’ve seen contrary studies that refute this and I wish I was able to dig it up. I’ll se if I can.
Social mobility in the US is effected by several things but the issue with markets/intervention isn’t one of them.
1. large disparity of IQ levels between differnet racial groupings.
2 Undesirable illegal border jumpers that place enormous pressure on available service without helping to fund these obligations.
I can’t see how Europe would be the example to follow. Some parts of Paris and other big cities have 50% unemployement in the immigrant youth groups. Scandinavian countries have only been marginally better if one can 40% immigrant youth unemployment marginally better.
JC
I would have thought that the US would have high overall mobility of economic outcomes because of its high migrant intake, most of whom start with a low status and a high ambition. But I would also expect the underlying structural mobility to be low – by which I mean second generation welfare recipients would beget a third generation and so on.
I didn’t understand the comment about IQ’s. The differences between ethnic groups are pretty small, and IQ doesn’t explain that much anyway – just look at GWB!
Chris and JC
I’ve adopted a fairly laissez faire approach to this and other current threads. But please keep in mind that neither immgration nor IQ are even tangentially related to the topic of this post, so any further comments on either subject will be deleted.
Joe C is a notorious derailer of discussions on other blogs, and his standard tactic seems to be to throw in inflammatory statements about issues having nothing to do with the thread, and then ride the resulting outrage from other commenters. I don’t like censorship, and blogs like Larva Rodeo and Tim Blair are often too heavy-handed IMO, but I’m certainly not going to allow that sort of calculated derailment to happen here. I’m perfectly happy about discussion going off on interesting tangents, but they need to bear some reasonable relationship to the topic of the original post.
IQ has an extremely high correlation to incomes and social mobility. It’s an almost perfect. Europe is relatively homogeneous, while the US obviously isn’t with blacks consisting of 13% of the population where IQs have been consistently been 15 points below the white number (100) and Asian groupings
GWB, he was a fighter pilot for the National Guard. He has an MBA from Harvard. So he left a trail to obtain an estimate from his military testing and GMAT score (entry to MBA school) putting his IQ at 130. Is he lazy in terms of having an inquiring mind? Possibly, but who knows. Is he plane dumb? No, unless 130 is considered not too bright.
Kennedy’s estimated IQ from law school testing was about 115. Nixon about 145.
Thanks for the kind words Ken. But I suggest you look at yourself in the mirror about derailing comments such as the one you linked to yesterday from Cat.
I think it wazs the coments I posted there that has you back up. Truth is kind sometimes
So go screw yourself, Ken.
Don’t worry I won’t post here again
I wish I could say I was sorry about this news.
Very last post so popel know what the score is
Hey Ken
you ought to be last one talking about inflammatory statements”. And that false veneer of ‘reasonableness’ bullshit that you attempt to convey is pretty hilarious after letting Jason’s comment about me slide threw the cracks yesterday. Tell us you never saw it, right?
If you were anyway man about it or decent, you would have said something.
Rafe perhaps the Titanic of public intervention doesn’t need to be turned around. Maybe it just needs to be steered in a more useful direction.
From your position ss a card carrying Libertarian, it may seem like the ship has sunk but I think that it is ideology (not masturabation) that makes people blind.
Do you think that the side effects of modern capitalism might have some influence on the development of the ‘welfare mentality’?
Surely, the messages that we get from advertising and other capitalist media are not those that promote behaviours and values that encourage people to move from welfare to work?
JC did make one point that’s directly relevant – he said that lots of people think that the US is very socially mobile.
It’s true that this is a common perception, but it just happens to be wrong. Regardless of whether you’re talking about mobility over the lifecycle or mobility across generations, the US is a very static society. I have papers on both which are actually quite hard to get published, because to those who work in the field, my results are so familiar.
“I think that it is ideology (not masturabation) that makes people blind.”
You think about that Julie!
On low social mobility in the US, it that surprising in view of the state of the public education system, the welfare system that has generated poverty traps and the underclass, and other unhelpful interventions like affirmative action?
Rafe
Perhaps I am blind myself – I have lots of problems but my attitude toward welfare in particular comes from experience not any leftist ideology.
It seems quite obvious to me that blaming welfare as the sole or even major cause of the problems that prevent people from particpating in the good life that is on offer.
So what is it then, apart from your ideology, that makes you so sure that welfare is a bad thing? Have you experience in dealing with people on welfare?
I am sure the economists on the blog are familiar with the modelling work briefly summarised in this link:
hbswk.hbs.edu/archive/2906.html
This work appears to show that welfare policies are ineffective in changing the distribution of wealth.
Is there empirical evidence to demonstrate that the modelling works’ conclusion are incorrect?
Furthur I believe that this type modelling work has also shown that the less restricted the market is the more rapidly the members of the population go from poor to rich and back again (of course in a population sense rather than any one individual).
Is there any empirical evidence that the rapidity of social mobility is more rapid in less regulated economies?