Cowen, Peltzman, Taleb, Trump, and the Complacent Class

Tyler Cowen’s latest, The Complacent Class, is getting a lot of talk already. I haven’t yet read it, but some initial thoughts based on what I have heard.

Book thesis summary

In the Complacent Class, Cowen argues that people are taking less risks and seeking more comfort and security, leading to less dynamism in the economy. For example, people move less for new jobs, they seek security in discussion, they aim to control pain and distract themselves.

Cowen vs Peltzman

I wondered whether Cowen’s thesis was due to government making dynamism harder, which incentivises people to take less risk. But, as per the Peltzman Effect, if risk is artificially reduced, people will take more risk to get back to their preferred level of risk. Thus, the Peltzman effect suggests the opposite of Cowen’s thesis (if in fact there is an cause outside of the individual of the reduced risk). How do we reconcile these? Perhaps people are taking less risk in certain areas (such as moving jobs and house) and more risk in others (such a drug-taking and alcohol abuse), to ensure their overall level of risk remains the same. Or perhaps people simply do not like discomfort, and things like safety regulation (which Peltzman wrote about) were discomforting, while drug-taking and steadiness in employment and living are comforting. Or, perhaps it is not so much about risk for us as it is about the ongoing search for comfort and pain alleviation. Human history would be very different without this propensity, and perhaps, having achieved all the major breakthroughs with respect to modern innovation and the comforts they bring (as set out in Cowen’s The Great Stagnation), we are content to enjoy our comfort as we have been trying to do forever, thereby leading to ever lower levels of risk-taking (which is counter to Peltzman). Or, as alluded to above, perhaps our risk-taking has spilled into other domains. Daniel Bell’s The Cutural Contradictions of Capitalism, argued that capitalism saw us partying by night and working steadily by day, with the contradiction of capitalism being this inconsistency in our approach to life. Perhaps Bell was more prescient than we thought.

Cowen vs Taleb

This one is straightforward, it seems. Cowen apparently argues that greater individual safety may lead to greater collective risk. This is roughly what Taleb argued in Antifragile. Attempts at imposed security and stability only lead to vulnerability, like being on a salary but then losing your job. Consider this on a mass scale and you have the financial crisis of 2008, where seemingly stable jobs were no longer, and the more stable those jobs, the greater the losses (see this Italian labour market study as supporting evidence). Worker protection, or the desire for comfort, stability and security, only makes us more vulnerable.

I view this in the following way: we have ‘perceived risk’ and ‘true risk’ or ‘underlying risk’. We may not see the true state of risk until it hits us in the face, at which point underlying and perceived risk collide. Risk still exists, but we are doing our best to cover it, for the sake of personal comfort, all the while contributing to the risk and making ourselves more fragile.

Returns from risk-taking

If there is less-risk taking, shouldn’t there be greater returns to risk-taking? That is, if less people are being entrepreneurial, shouldn’t there be bigger opprtunities for those that do take a chance? Or, is it that there is less entrepreneurship because there are fewer potential returns? The Great Stagnation thesis supports the latter, although may it is peoples’ search for comfort and stability, which has now been conquered by many, may be diminishing the urge to be an entrepreneur. Perhaps we just really don’t like risk. If we don’t like risk, and we think we have the means to remove it, we grab that opportunity and build our dream – a stable, secure environment for us to divert ourselves pleasurably and trivially with entertainments and comforts, with people just like us.

Or perhaps returns for entrepreneurship really are down at the moment. The money to be made may instead be during the transition from our secure state to a new equilibrium, brought about by a decline or disruption. In such an environment, people will be spurred into action as new patterns of behaviour, production and consumption emerge.

So do we act now because no one else is acting, or act when we really need to, because only then will it be worth it?

Or perhaps the returns are available now, but the potential downside is bigger than ever? So while money can be made, we can lose more than we could have ever lost before. So we sit tight.

Cowen’s book in the Trump era

Perhaps entrepreneurship has been declining in an intellectual environment increasingly hostile to markets, profit and business, reinforced by a regulatory state that hampers business and dynamism. Perhaps the Trump administration will spur a resurgence entrepreneurship, through changes to culture, action and institutional setting, enabling us to avoid a decline and instead spur the required resurgence. Trump’s positive rhetoric about America’s potential, his apparent plan to make it happen, and his efforts to increase the status of everyday workers and business people, may well be the inevitable reaction to our ongoing complacency.


PS: see my earlier discussion on complacency, where I argue that complacency is the underappreciated reason for declining educational attainment.



Should education be compulsory?

If there’s someone that’s going to put up an interesting argument against compulsory education, it’s the late libertarian economist and philosopher Murray Rothbard. While it doesn’t seem like he had much involvement with schooling, his perspective is so different to mainstream thought that it’s worth discussing here. When I’ve previously read Rothbard, I’ve been both stimulated and disappointed by his work, but it always makes you think, and the clarity of his exposition is rarely matched. If he’s wrong, we will all see it.

His political philosophy centres on the use of force, and particularly his opposition to the government’s monopoly thereon. He also employs a priori reasoning to create a theory, through which he then views events. Bearing these considerations in mind, we know we will get a certain perspective in this text. But therein lies the interest for me.  Below is a short summary and discussion of the first chapter of Rothbard’s Education: Free and Compulsory.

Rothbard starts with a child’s process of growing up, involving developing goals (ends) based on the individuality of the self, and a growing understanding of how to achieve them (means). Forming this rational means-ends framework is the process of growing up, and there is much useful knowledge to be gained in this process, of which formal instruction to convey intellectual knowledge is but one part. This involves reason and observation, and once these basic skills are learnt (through reading, writing, arithmetic), the learning of science, moral sciences (economics, politics, etc) and imaginative studies (literature) can occur. Outside of this, people formulate ideas about the world, how people relate to each other and how to achieve subjectively-determined ends within this world.

(There is much of this type of perspective in Thomas Sowell’s A Conflict of Visions and Knowledge and Decisions, wherein distinctions are made between ‘articulated knowledge’ such as that which is formally taught in schools, and other, less- or non-articulated knowledge, which is not formally taught. One can position Rothbard as respecting both sets of knowledge, while those whom Rothbard criticises later, as wishing to design a system based on their conceptions of useful knowledge, ignore unarticulated knowledge. Importantly, though, Rothbard criticises such people more for their willingness to control people through emphasising articulated knowledge, the instruction of which they control.)

Rothbard notes the individuality of children and people is a natural phenomenon, and that the growth of civilisation, brought about through specialisation (a form of knowledge creation), makes us more unequal. The push for uniformity to achieve equality of outcomes will stifle a student’s individuality and societal progress. Instead, equality should be emphasised by allowing students to develop their faculties and personalities, and to do so, they must be free from coercion and equal before the law. (One can also include freedom from economic constraint, one of the bases upon which a different strand of liberalism is underpinned. One can thus see the underlying tensions inherent in debate about free schooling – it depends upon one’s conception of liberalism.)

Therefore, Rothbard favours individual instruction, provided by parents, as the best means to educate children. It is voluntary, context-dependent, utilising the fullest knowledge of the individuality of the child, and not being burdened by the uniformity inherent in classroom teaching. Economic means are required to provide this education, and without such means, voluntary, individualised group-based schooling, focusing on the particular needs of the child, and without central direction backed with the use of force, will enable the individuality of a child to emerge, and allow a greater accountability mechanism to be used (exit). (Again, economic constraint is an issue here. Inherent in Rothbard’s analysis is that economic means can buy a better education. While some will argue this is bad for poor students, the lack of school choice now  – even when it’s free – has a similar effect.)

Rothbard provides other reasons for favouring voluntary educational methods: education can occur at appropriate paces, thereby tailoring education to a specific child’s needs; the level at which subjects are taught can be tailored to the specific capabilities of the child; the subjects that are taught can be tailored to the particular strengths of children;the amount of schooling can be tailored, allowing some students who have strengths in other areas to pursue their learning in those areas [this relates again to Rothbard’s (and Sowell’s) belief that there are many valuable forms of knowledge that can be attained, through various means].

Rothbard does not consider the downside of individualised instruction – the lower average ability of the teachers as more become involved in teaching. Rothbard seems to value the individualised instruction more than the average quality of the tuition, placing the emphasis of his argument on individualisation. It seems that a good middle ground is private schooling, and Rothbard is in favour of this.

Compulsory schooling laws, Rothbard argues, constitute an injustice on children, even those in private schools, by imposing by force standards of instruction that do not respect, and cannot consider, the individual needs of the child. The result is to move instruction to a lower academic level. To the extent that compulsory schooling laws allow for differentiation, this does not seem correct, but in reality, many schools, particularly comprehensive schools, seem to suffer from mixed abilities in one classroom, preventing appropriate differentiation. Indeed, my postgraudate teaching degree emphasised the need to differentiate within a lesson to cater for all needs, an impossible task that nonetheless is barely recognised as such. Good intentions often dominate over realism. Perhaps it is the best response we have to the system we are to work in. Try your best to differentiate.

Rothbard’s argument really centres on the uniformity and bluntness of centralised, compelled education. Each child is different, yet the force of law is going to force children into a situation that is not best for them. Rothbard also points out that the state, in assuming responsibility for education, is substituting itself for the parents in the child’s life, thereby stripping the family of the dignity of choice and responsibility, while imposing an inferior authority into the child’s life, one that does not have the incentive nor the information to do right by the child. In exercising it’s responsibility, the state will inevitably seek to control the child. Rothbard compares the horror of public education to the concept of a nation-wide chain of publicly run newspapers, with everyone compelled to read them. Naturally, this would be opposed by most people, and yet public education stirs but a few opponents. The ‘domain dependence’ in this type of thinking is revealed.

While Rothbard doesn’t consider some of the benefits of public education, he makes an interesting case against it. Human dignity and differentiation, and confidence in parents, form the basis of his perspective, as does his repulsion against the use of force. I tend to see myself as more utilitarian with respect to force, and am less offended by it than Rothbard. But Rothbard makes a good, albeit narrow case. If one accepts his premises on differentiation, dignity and force, it may be difficult to mount a counter to his argument. Expedience may be one. And of course the underlying notion in society that education is a human right and must be provided or at least funded by the state is an ideology that is not going anywhere fast. It is tied up in the notion of formal equality of opportunity (although it could be argued that substantive equality of opportunity is also a goal of public educationists, by stripping students of unearned advantages). While the intention to provide formal equality of opportunity is admirable, I wonder what the benefits of stripping the government of it’s role entirely, including of funding, would be on the education system? Perhaps greater inequality but an overall improved situation? One’s level of aversion to inequality will be critical in how one thinks of this type of situation, but as Rothbard quite rightly notes, people are different, ability and interest in education differs, so should we be aiming for equality at all, or is it an arbitrary, utopian vision that ignores the very nature of man? Indeed, the type of liberalism that will impede deregulated education from occurring is underpinned by the notion that humans are malleable and perfectible. This is inconsistent with reality.

Pre-service teaching degrees: accountability and control

I’ve thought for a while now that the pre-service teaching degree is one of the few instruments of control the government exercises over teacher quality. They have little ability to control teachers once they are in the job (aside from certification requirements), given the strength of the union and worker rights.  In exercising control, the government determines what is required for a teacher to be qualified and certified. It has attempted, in NSW, to wrest back control of teacher talent from the universities by setting higher standards for certification and entry. Combine this with societal panic over education and the incentive of existing teachers to erect barriers to the profession, and you have an overly cumbersome process of becoming a teacher. Admittedly, the pre-service teaching degree in NSW does a reasonable job at equipping teachers for the demands of teaching, but it is lengthy and lacking in relevance at times. A much more efficient way of training teachers would be for schools to hire them without  teaching qualifications, have them initially engaged in an internship/apprenticeship  program with observation, practise and formal study, the latter provided by an external provider and potentially subsidised by government. The progressive Teacher Wars gave favourable treatment to an American internship-style teaching program. Not only does it get teachers into work quickly and before they commence study, it is also an appropriate way to teach teachers. Practical placements remain the best teaching tools for pre-service teachers.

Ultimately, though, of importance is not qualifications or certifications. It is whether you are a good teacher. The reason we have such a need for certification and qualification is because our students and parents struggle to hold teachers to account. Certification is the means of accountability you exercise when you can’t actually exercise it. A form of ex-ante, attempted  accountability. And it is actually compliance, a different thing altogether than accountability. Further, it is also about government controlling the system. (For example, even private schools must study the NSW curriculum and be certified and qualified as determined by the government, despite parents clearly being able to exit their chosen school if need be and demand higher standards. Thus, it is not solely about the government’s inability to keep the public school system accountable.)

If students were empowered with more options and the means to exercise them, greater accountability would emerge without the need for many regulations. Teachers could be hired without qualifications and held to account by the school and the parents. This would be effective if students had school choice. Teachers could be employed on negotiated terms, not terms dictated by a lengthy and opaque enterprise bargaining process. It would not be perfect. But it would be more incentive compatible than the current system, where accountability is hard to achieve and relevant knowledge difficult to transmit.

As Charles Murray wrote so eloquently in In Pursuit, schooling is just about the most natural thing that could form in a community. Stripping people of the dignity of choice and responsibility does nothing to achieve empowered, responsible citizens. If we want to solve the problem of disengagement in schooling and by parents, consider that their responses to disengagement may well be rational, and that a new type of schooling system would be needed to remedy that. Such a system empowers the student, putting them, not the department, union and teachers, first.

What we can learn from James Scott and Albert Hirschman about schooling

With the publication of the Engaging Students report, the Grattan Institute hit upon a widely-felt but under-reported phenomenon in classrooms – disengagement. According to authors Peter Goss and Julie Sonnemann, disengagement and minor disruptions are more widespread than anti-social and aggressive behaviours, and about 40 per cent of students are disengaged. These students are 1-2 years behind their peers, and affect the the whole class’s learning.

I’m going to look outside of classroom research to think about this issue. One of the transformational moments in my education was reading James C Scott’s Weapons of the Weak. [This paragraph outlines the book, but you can skip to the next paragraph as its non-essential.] Written in the 1980s, it examines the impact in rural Malaysia of the Green Revolution – the introduction of new production techniques into agriculture, which  increased productivity and changed relationships in the village. The gap grew between wealthy and poor, which shattered their  existing arrangements (the poor ascribed the wealthy villagers with status, who in return provided feasts and some assistance to the poor). Once the wealthy had new production techniques and huge production surpluses, and less need for labour with their substitution of more productive technologies, their attention shifted away from the poor towards the faraway markets they began to serve.  What was once a highly interdependent village with the social and economic intertwined was now more explicitly transactional, and traditional roles and bonds were weakened.

The book details the ‘everyday forms of resistance’ carried out by the losers of the Green Revolution, in the form of behaviours such as gossip, shirking, theft, etc. According to Wikipedia, Scott’s follow up, Domination and the Arts of Resistance describes the hidden and public transcripts that occur in a situation of domination. Public transcripts relate to what is outwardly displayed, which is often done to avoid the attention of the oppressors, while hidden transcripts relate to the behind-the-scenes actions of the oppressed. In order to understand the oppressed, one must look to these hidden transcripts.

There is something to be learned from James C Scott about the classroom. Students show the teacher one face and their friends another. They use minor forms of resistance everyday. Much like shirking workers, they disengage from school work. They disrupt to a low level, enough to disrupt the class and show their resistance. It is this low level disruption, and disengagement, that should be the main focus of school teachers with respect to discipline and engagement.

Consider disengagement and minor disruption as preventing shirking under a labour contract, with the teacher as the employer and the student as the employee. Disengagement effectively increases the ‘transaction costs’ involved in the classroom, through greater monitoring and enforcement costs.

Another way to look at it is Albert Hirschman’s Exit, Voice and Loyalty. If students are unhappy and disengaged, they can either voice their concerns or leave the school. Except they can’t – most students will not be able to leave the school as they compulsorily attend the local state school. And if they do move to an independent school, they are still subject to the NSW curriculum. In this instance, the best prospects for change would be to use voice to influence the school in your favour. But with little hope of exit, and the domination of the teachers, backed up by legislation, students are often left with no option but to quell voice and exercise everyday forms of resistance.

It shouldn’t have to be this way. By removing the curriculum monopoly currently in place, and offering students choice in schooling, students could vote with their feet. With voice currently not a great option, exit would be useful. The presence of exit would enhance voice and bring hidden transcripts into the light of day (rendering them ‘public transcripts’). Schools should be trying to understand these hidden transcripts anyway, but with the threat of exit, and the enhanced voice that will follow, it will be difficult to ignore student sentiment.

Complacency and educational attainment

Short and sharp today – much to do. Tyler Cowen’s upcoming book, The Complacent Class, is so timely for me because it’s a book that comments on something I’ve been observing and thinking about for a long time – our cultural complacency. Call it a curse of affluence, call it arrogance, call it diverted attention. Whatever it is, it’s a thing. It’s present. I see it in the classroom, whether it’s students coddled and kept away from the world, rendering them unprepared for life, or parents not sufficiently valuing education. Perhaps it’s a product of our material situation – necessity is a major driver of human energy and production, and abundance has, to some extent, sapped us of our drive. Millennial podcaster Megan Tan stumbled across this in her fascinating episode on affluence and privilege. While privilege has benefits, it also has costs, and lack of drive is one of them. Privilege is not black and white.

Research tells us that motivation and engagement is critical in learning, yet so much concern in education relates to what the government or teacher can do. Instead, sometimes we just have to help ourselves. The path forward is self-improvement as much as it is institutional improvement (or what Yuval Levin described as ‘taking the long way‘ to liberty).

Bottom line: complacency seems to be an unmeasured (ie residual) cause of stagnant or falling educational attainment.

Real Education by Charles Murray

“This book calls for a transformation of American education – a transformation not just of means but of ends. We need to change the way the schools do business. We also need to redefine educational success….The educational system is living a lie. The lie is that every child can be everything he or she wants to be. No one really believes it, but we approach education’s problems as if we did.” – Charles Murray, Real Education

Last year I raced through Charles Murray’s Real Education. The book’s message is unpopular, at least not in teaching departments at mainstream universities. Which is why it is important to consider.

Short summary

Students vary in ability. Children of lower ability will not be able to do the work required in schools, nor are they capable of sustained, substantial academic improvement. Meanwhile, gifted students are not fulfilled. Too many students who are not capable of going to uni are doing just that, but will not be prepared for life due to a weak primary and secondary education and poor ranking in their uni class. On the other hand, gifted students are not getting the liberal education needed to make wise and virtuous decisions that affect many in society. Murray recommends higher standards, greater matching of students’ abilities to their education, school choice, certification instead of degrees to signal aptitude and skills to employers, and a more exclusive, higher standard and more liberal BA.

Longer discussion

Ability varies

Ability varies, and many students with below average ability are not going to do well at school, no matter what money or attention are thrown at them. I found this contestable, but to his credit, he proposes conducting a major study to prove or disprove this perspective in the last chapter.

Multiple intelligences

Murray invokes Gardner’s multiple intelligences (linguistic, logical-mathematical, spatial, musical, bodily-kinesthetic, interpersonal, intrapersonal) and notes that they are not equal. Only linguistic, mathematical-logical and spatial intelligence correlate highly with academic ability, and academic ability tends to predict which students get into and do well at college, and which go onto top jobs. Other intelligences – eg bodily-kinesthetic and musical – are not highly correlated with academic ability and do not have great employment opportunities. With students gifted with different ability in each of the seven intelligences, there will be students simply not able to do well academically and go into top jobs.

Half the students are below average

Murray notes the fact that half of the students are below average. This is obvious, but he wants us to really consider what this means. Most of the readers of Real Education will be academically able and may not have witnessed the struggles of a below average student. He notes the number of students who cannot answer basic questions (eg, 77.5 per cent of eighth graders did not know the answer to a question involving adding 10 per cent to 90). He just isn’t optimistic that we can sustainably and substantially improve these students’ scores. When students with such differences in ability are in a class with academically-gifted students, he calls it effectively a difference in kind, not a difference in degree. Reading this, I considered my ability to do art. I was woeful, and quite a gap from the gifted students. The degree of difference was so vast it may have well been a difference in kind. I may have improved with a lot of help, but this would have been very costly, and not aligned with my natural gifts or interests, so why bother? This line of thought gets a tad depressing, but I wonder to what extent students of low ability in academics are similar to me in art. Surely more than a few. This does seem to dent what Murray calls the “Utopians” in education. But the obvious answer to “why bother” is the very notion that linguistic and mathematical-logical skills are relevant to work, and therefore the “why bother” becomes “how can you not bother?” It does makes you wonder though: if art were the majority of the curriculum instead of subjects testing linguistic and mathematical-logical intelligences, what kind of a student would I have been, and in this instance, what would be the best option for me to maximise my time?

Some issues

Reading Murray’s perspective made me consider a few other issues. How does one explain excellent relative performance in South Korea, China, etc if Murray is correct? It may be that their education system is less liberal, more focused, with more rote learning and teaching to the test, more time in the classroom, and a greater culture of learning. In other words, they pay a price for their achievement. But then of course there’s Finland. Putting this aside, these examples seem to undermine Murray’s point.

Another perspective is the changeability of IQ. Thomas Sowell writes about the shifting IQ of different groups in society over time, indicating that things like culture and educational attainment and access can affect IQ in no small way.

I’m also made to think about the claim that academic achievement varies more within schools than between them (I hear this not infrequently in my teaching degree). Academics take this to mean that the teachers within a school vary tremendously, particularly as it is teachers that have the biggest ‘effect size’ (influence on attainment) after the student itself. But to me, this seems like evidence of the variety of ability between students, which in comprehensive schools will be vast within the school, but may even out across schools.

The benefit of school choice

Interestingly, Murray does not blame the schools for these outcomes, but in the nature of the children themselves. Despite this, he does go onto advocate school choice. But here he makes a fascinating point: ignore the maths and reading scores when debating school choice. These scores relate mostly to students ability, and both private and public schools face the difficulty of lifting students’ scores. Private schools are desirable because they offer a better education for students that is not picked up by reading and maths scores.It is schools that are more free to act and respond to the needs of the attendees that will provide them with the particular education they need.

Too many go to university

After considering the abilities of the students, Murray then claims that too many students attend college. Only 20 per cent (or more realistically, 10 per cent) of students have the ability to do a four year degree and do it well. Murray examines random passages from introductory books in survey courses for first year students, and indeed, they are challenging passages! A four year college degree should provide a rigorous liberal education for the future bankers, lawyers, doctors, etc who tend to get the top jobs. Less academic students can achieve a liberal education in primary and high school, where a more traditional and rigorous curriculum should be used. These students should be taught the basics for living a good life and being a citizen, and basic skills for getting a job. It is the philosophically devoid elite that need a rigorous, liberal college education, because while they may be smart and nice, they are not wise and virtuous. These attributes are required, in Murray’s opinion, if they are assuming powerful positions in society that affect many lives. I agree with Murray that many ‘educated’ people are well-trained but not really educated, and this is to our detriment. We are crying out for wisdom, philosophy, and virtue.

A hypothetical

Murray is strong when he considers a hypothetical high school student, facing a decision faced by many. The student, gifted with his hands and some spatial ability, but only in the 70th percentile for academic ability (remember Murray consider only 10-20 per cent of students should go to college). Should he do a trade, or go to university and then attempt to enter a business management role after graduation? The encouragement from authorities and intellectuals is to attend college, but how well would this really pan out? Aside from the debt incurred, the student, in attending college, would not compare will with his peers at university and may not perform very well in the graduate market. On the other hand, if he were to learn a trade, he would not only be doing what he is gifted at and thereby get pleasure and satisfaction from his work, but he may also earn more than in management by being atop a profession that pays reasonably. This analysis seems right, and it’s a view that seems to be growing, despite the push for more higher education. Murray argues that encouraging university as the be-all-and-end-all makes it punishing for those that do not graduate or attend college. The more widespread is the degree, the more worrisome it is for employers if an applicant does not have one.

Murray’s proposals

Murray finishes with some proposals:

  • Perform a massive experiment to once and for all address the issue of student ability and the changeability of it.
  • Discover what is possible so we can focus on what is possible.
  • Assess each students’ ability in order to better tailor education to students’ needs.
  • Teach core knowledge to every student (a liberal education).
  • Let gifted children go as fast as they can. Improve discipline and standards of behaviour.
  • Expand choice – through voucher, private schools, home schooling, curricula, etc.
  • Use certification to undermine the power of the signal that is the BA – the labour market is plagued with the issue of discovering who is skilled and motivated, and who is not. The BA is a signal, but it is flawed  and certification can provide a “known, trusted measure of their qualifications that they can carry into job interviews”. This is a topic for another post.


This book was mostly beautifully argued and challenging to the orthodoxy. For that, it deserves great credit. But, from my relatively uninformed perspective, it seemed to have some questionable views that require more investigation. Other parts were music to my ears – it’s so refreshing to read a social scientist who also sees the bigger picture, steeped in philosophy. Murray himself is illustrative of his argument – that our top students need to be taught to be citizens, not just to enter professions.

Can education keep up with technology?

It’s become clear that the US has splintered by class; cultural, social and economic gaps are growing. Couples are increasingly formed between people of similar socioeconomic status (‘assortative mating’), economic and social inequality is increasing, and the political divide is stark, drawn along cultural, educational and class lines. I view the US as a clear and well-documented example of a phenomenon I think is happening across the Western world, including Australia . It seems that these trends are likely to worsen, and education will play a major part in ameliorating them.

The link between education, technological advance and income inequality is becoming clearer by the day. A major book in this literature, hailed by economist Tyler Cowen as “The most important book on modern U.S. inequality to date”, is The Race Between Education and Technology by Claudia Goldin and Lawrence Katz of Harvard University. Goldin and Katz argue that we are not increasing educational attainment fast enough to keep pace with the demand for skilled workers, leading to greater inequality. Those with elite skills can demand a premium in the labour market as they lack competition in getting top jobs, while a glut of unskilled workers has emerged, thereby reducing their returns relative to highly skilled workers. But, as they note, this wasn’t always the case.

In the first three quarters of the twentieth century, the supply of skilled workers was relatively strong, which reduced income inequality. Education was outpacing technology and the associated demand for skilled workers. The opposite has occurred in the last three decades, leading to greater returns for skilled workers and increasing inequality.

The implication is that we need to increase educational attainment to keep up with the increasingly sophisticated economy and the associated demand for highly skilled labour. However, I have a concern with this idea, derived from Charles Murray. Murray argues that many students are simply not equipped and motivated to do higher study to the level and rigour necessary for higher education (he thinks only 10-20% of high school students actually have the aptitude). Therefore, it follows that as the demand for high skilled workers grows, inequality will continue to increase; perhaps the economy is getting so sophisticated that the population simply isn’t capable enough in large enough numbers to participate at the top level. There is only so much we can squeeze from education.

One of the implications is that we should increase high-skilled immigration into countries with high demand for skilled workers (such as the US and Australia) as a means of supplying the economy with the workers it needs and thereby putting a lid on inequality. Australia seems to do this already, which is perhaps why inequality has only risen mildly in the last few decades (and wealth inequality has actually gone down since the 2008 financial crisis).

But perhaps more pertinently for education policy, we need to start considering a more appropriate education system, one where students are more engaged, learning useful stuff and gaining more experience to enable them to build relevant skills and useful networks. The current education system seems to have hit it’s limits with respect to supplying ample numbers of skilled workers. It’s time for an overhaul.