Tag: education

Scarcity and its implications

~ MilesCorak ~ 1 Comment

Scarcity defines the economic way of thinking

Scarcity is a simple idea, yet it has major implications.

If, as individuals or as a society, we have multiple objectives, and if our desires for these goals exceed the time and resources that can be used to attain them, then given that these resources can be used in different ways it matters how we allocate them. It matters because our goals differ in their significance.

Robbins
Lionel Robbins, who taught at the London School of Economics, defined economics as “the science which studies human behaviour as a relationship between ends and scarce means which have alternative use” in a book published in 1935.

We have to choose, we have to recognize the terms of the trade-offs between the choices available to us, and we have to do this in a way that gets us as much as we possibly can from the scarce resources available to us.

The economic way of thinking gives us guideposts for making these choices, most notably that we should pursue an objective up to the point that the additional benefit we get from taking an extra step toward it just equals the additional cost in all the things we have to give up in making that step.

Economics certainly should not inform all public policy discussions.

But when it should and doesn’t, the decisions made are usually done from an overly short-term perspective, are not mutually consistent, generally have hidden or unintended consequences, and are not sustainable in the long-term.

In the next two lectures of our course Economics for Everyone we detail the logic of scarcity, the rules it implies for maximizing our social benefit, and the pitfalls that sometimes confound policy makers. Scarcity also takes us toward a discussion of an important policy, “Free Trade,” and our discussion also helps us highlight some of the blind spots of simplistic economic reasoning.

Download the presentation for Lectures 2 and 3, but if you want to prepare in an entertaining way listen to Billy Bragg sing out his thoughts on Free Trade, a 2010 song from Britain foreshadowing many of the debates that have motivated recent American policies.

Here are the lyrics, but I’ve added a quote from another famous economist, David Ricardo, who has a very different view. Our goal is to understand these two competing perspectives on the benefits and costs of Free Trade.

Income Inequality, Equality of Opportunity, and Intergenerational Mobility

~ MilesCorak ~ 29 Comments

The summer issue of the Journal of Economic Perspectives will feature a collection of articles on inequality and the top 1%, some of which are now being circulated by the authors.

The paper by Tony Atkinson and his coauthors, “The top 1 percent in international and historical perspective,” is available in this post, and “The Pay of Corporate Executives and Financial Professionals as Evidence of Rents in Top 1 Percent Incomes,” by Josh Bivens and Lawerence Mishel, is available on the Economic Policy Institute website.

Greg Mankiw has also posted a copy of his paper, “Defending the One Percent“, on his blog.

My contribution to the collection is based on the notion that the inequality literature has paid little attention to the intergenerational consequences of increasing top income shares, and it can be read as a counterpoint to Mankiw’s piece, or at least to his claim that inequality of opportunity is not a reason to worry about the top 1%.

Here is the final draft: Income Inequality, Equality of Opportunity, and Intergenerational Mobility. But if you just want a quick read, an excerpt from the conclusion follows. Either way, feedback is—as always—welcomed.

[NOTE added December 10, 2013: the published version of this paper is available from the American Economics Association website for the Summer 2013 issue of the Journal of Economic Perspectives, as is the table of contents for the entire issue.]

Continue reading “Income Inequality, Equality of Opportunity, and Intergenerational Mobility” →

Inequality and social mobility, an interesting discussion

~ MilesCorak ~ 4 Comments

Canada2020 event February 26 2013

“The idea that all citizens should have an equal chance to succeed in life, regardless of where they start, is fundamental to liberal societies and emblematic of the American—and Canadian—dream” is the way a Canadian think tank, Canada2020, introduces a panel discussion it hosted that explored the idea of economic mobility, why it is important, and how it is related to inequality of outcomes.

I was a member of the panel and had a very interesting—and at times humorous and entertaining—discussion with Zanny Minton Beddoes the economics editor of The Economist, Carolyn Acker the founder of Pathways to Education, and Ron Haskins a senior fellow at the Brookings Institution. You can view the entire discussion, which was moderated by Diana Carney, by clicking on the following screen shot (and waiting a bit for it to load):

The short presentation I made at the beginning of the talk is, if you are interested, available here: Equality_of_Opportunity_A_Canadian_Dream_for_Canada2020

I plan on revising the background document I wrote for the event—which you can download from the Canada2020 website—and would therefore be very pleased to hear your views on the discussion, and any specific feedback you might have.

The right way to think about social and economic rights

~ MilesCorak ~ 2 Comments

The Universal Declaration on Human Rights, which we celebrate every December 10th, offers both a powerful and beautiful statement of what it means to be human and the goals we should pursue as a society. But the Declaration is an incomplete guide to designing the programs to meet these goals: it offers inspiration to advocates, but not a guidebook for pragmatists.

Pragmatists and policy makers need to read the Universal Declaration through the lens of economists, rather than don the robes of lawyers.

Human Rights Day 2012, click to enlarge

Continue reading “The right way to think about social and economic rights” →

The US Senate wonders about tax policy for the American Dream: why are schools failing to promote social mobility?

~ MilesCorak ~ 28 Comments

The American education system is of relatively more advantage to the relatively advantaged. As a result it does less than it could to promote opportunity.

In response to my July 10th testimony to the Senate Committee on Finance hearing on “Helping Young People Achieve the American Dream” I received some homework, a series of questions asking me for a good deal more detail. You can review all of the questions on my November 11th post, but a couple of questions posed by the Committee Chairman, Senator Max Baucus of Montana, speak to probably the most important driver of social mobility, and raise particularly important issues for public policies.

Continue reading “The US Senate wonders about tax policy for the American Dream: why are schools failing to promote social mobility?” →

Immigration policy should make children a priority

~ MilesCorak ~ 6 Comments

The Obama administration has offered a temporary reprieve from deportation for up to 1 and 3/4 million immigrants who came to the United States as children.

Whatever the immediate merits of the Deferred Action for Childhood Arrivals, it signals a much broader principle all immigrant receiving countries should recognize: children experience migration differently than adults, and  public policy can create both great opportunity and great risks for their long-run capacity to become independent and successful adults.

Continue reading “Immigration policy should make children a priority” →