Economic Inequality in the United States

By Lars Osberg | Go to book overview

9

STRUCTURAL INTERPRETATIONS:
THE IMPORTANCE OF CONSTRAINTS

9.1 Introduction—An Analogy

Suppose that, instead of being determined by complex market processes, individual earnings were determined by one's success at a simple task, such as hitting a baseball. In particular, suppose that at age 21 you faced a pitching machine which threw one thousand baseballs over the plate and your earnings for the rest of your life were determined by the number of hits you obtained. Those who hit home runs every time become billionaires. Those who strike out become skid row bums. The rest of us are somewhere in between.

Such a process might generate a distribution of earnings not unlike our own and analysis of it could be approached from different angles. Those who emphasize ability (see Chapter 6) would argue that genetically inherited ability is the primary reason for the inequality of batting averages and of income which one would observe. Tests of eye/hand coordination, reflexes, and strength and their similarity between parents and children might be used to test this theory. The policy implications would be ambiguous—some might argue that one cannot do much to remedy inequalities in reflexes and coordination and therefore not much to equalize the distribution of income, but others would argue that one ought, for example, to provide eyeglasses to those with genetically weak eyesight.

By contrast, human capital theorists (see Chapter 8) would examine the time that individuals had spent practicing before the age of 21 and would argue that this investment of time would largely explain the differences one observed in batting averages. "Equal opportunity" would mean that every child is excused from household chores for an equal amount of batting practice time and all have equal access to expert coaching—but, if people prefer not to practice, that of course is their business. A human capital theorist would argue that, even with equal opportunity, some inequalities of incomes would remain, as a result of differences in tastes and abilities which society should not seek to alter.

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Economic Inequality in the United States
Table of contents

Table of contents

  • Economic Inequality in the United States *
  • Contents *
  • Preface ix
  • Economic Inequality in the United States *
  • 1 - Introduction 3
  • 2 - Inequality in Money Income 9
  • 3 - Economic Inequality 32
  • 4 - Poverty and Inequality 61
  • 5 - Of Laborers and Capitalists— the Issue of Factor Shares 85
  • 6 - Of Chance and Ability 100
  • 7 - Of Race and Sex 115
  • 8 - The "Neoclassical" Perspective: the Implications of Choice 130
  • 9 - Structural Interpretations: the Importance of Constraints 162
  • 10 - An Eclectic Summary 184
  • 11 - The Acquisition of Property 195
  • 12 - Growth And/Or Equality? 220
  • 13 - Government and Inequality 234
  • 14 - Conclusion 256
  • Bibliography 267
  • Index of Names 291
  • Index of Subjects 296
  • About the Author 307
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