Argy on equality of opportunity

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.

About Ken Parish

Ken Parish is a legal academic, with research areas in public law (constitutional and administrative law), civil procedure and teaching & learning theory and practice. He has been a legal academic for almost 20 years. Before that he ran a legal practice in Darwin for 15 years and was a Member of the NT Legislative Assembly for almost 4 years in the early 1990s.
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Rafe
15 years ago

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.

Fred Argy
Fred Argy
15 years ago

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”

Tony Harris
Tony Harris(@tony-harris)
15 years ago

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.

Homer Paxton
Homer Paxton
15 years ago

Rafe is too much into Argy bargy!!

Fred is merely facilitating the market so it works effectively.

JC
JC
15 years ago

“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.

Chris Lloyd
Chris Lloyd
15 years ago

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!

JC
JC
15 years ago

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.

JC
JC
15 years ago

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

JC
JC
15 years ago

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.

Julie
Julie
15 years ago

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?

Andrew Leigh
15 years ago

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.

Rafe
15 years ago

“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?

Julie
Julie
15 years ago

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?

taust
taust
15 years ago

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?