Sunday, June 23, 2013

Economists arguing over child enrichment

The story: Economist 1 writes a piece "Defending the 1%." Economist 2 writes a blog post criticising that article on the basis of "equality of opportunity." Economist 1 returns fire noting that Economist 2 doesn't have kids and so at least on one point doesn't know what he is talking about.

So now the details. At the basis of some arguments defending income and wealth inequality is that the rich are getting what they deserve because of effort in at least exploiting their naturally endowed skills. The objection is that that outcome does not occur because there is inequality of opportunity and so the rich are getting more than they deserve because their parents were and are rich. A pretty simple and old story really.

What about going to the evidence? Economist 2 in the above is Paul Krugman and he displayed this graph. 

It shows what parents spend on enrichment activities for their children. You know, piano lessons, high quality child care, private school and summer camp. Krugman then writes:
Maybe all that spending is wasted — but I doubt it. We have become both a more unequal society and a society with more unequal opportunities.
Economist 1, Greg Mankiw, then countered:
I am a parent of three, and as far as I know, Paul does not have any children.  So I have probably spent a lot more on this category than he has.  And I can report that much of it is consumption, not investment.
A book I probably should have cited in my article is Judith Harris's The Nurture Assumption.  The main thesis of this great book is that, beyond genes, parents matter far less than most people think.  Raising three children has made me appreciate Harris's conclusion.  It is frustrating how little influence we parents have.
Since we are going mostly on experience, it is clear to me that Economist 1 is right here. My kids are just being packed off to summer camp and I know it is pure consumption. They are very happy and we are very happy to have a month off. That said, I am hoping one of them can come back with a marketable iPhone app.

I think it is a reasonable hypothesis that Economist 2 didn't know what he was talking about because (a) he didn't read the actual evidence which tips us that most of these expenditures do nothing and (b) he doesn't have kids. There are times where that matters.

But here is the thing: so frigging what? We are now going to move what some people thought of as investment into the consumption bundle. But consumption for whom. If it is consumption for the parents, then it is I guess part of the 'reward' for 'high effort' if you believe in that. But if it is consumption for the children, then it is just an early passing of the rich wealth to them. In other words, they are rich right now because their parents are rich. If the basis for defending the 1% is that the individual gets the reward because self-interest matters but you have to tweak this to the individual's dynasty getting the reward to make it hold together, then that seems to make Economist 2's point that there is inequality of opportunity for consumption at least. Either way, if the goal of all this discourse is to educate the public on the debate, we aren't quite getting anywhere with this one.