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So the fact that dropouts like Mark Zuckerberg and Bill Gates and Steve Jobs became billionaires is due to increasing returns to education? (why did Zuck drop o

So the fact that dropouts like Mark Zuckerberg and Bill Gates and Steve Jobs became billionaires is due to increasing returns to education? (why did Zuck drop out? why isn't everyone getting Ph.D.s?) How much of Mankiw's wealth is due to his education, and how much to the industry structure's ability to make people pay $233 for his textbook? http://crookedtimber.org/2011/11/04/occupy-greg-mankiw/ http://crookedtimber.org/2011/11/04/occupy-greg-mankiw/ http://www.amazon.com/Principles-Economics-N-Gregory-Mankiw/dp/0030259517 http://www.amazon.com/Principles-Economics-N-Gregory-Mankiw/... It should not be that hard to take income (or labor income) and regress against educational level and get a pretty good sense of how much inequality is related to educational achievement, and how returns to education have changed. My gut feeling is it explains some of it, but education has not that much to do with the vastly increasing income share of the top 1%. One man's 'stochastic' is another's 'uncorrelated'. http://krugman.blogs.nytimes.com/2011/11/03/inequality-trends-in-one-picture/ http://krugman.blogs.nytimes.com/2011/11/03/inequality-trend...

john_horton 15y ago
That regression (which is called a mincerian wage equation & economists have been running it for about 40 years) will give you the average percentage increase in earnings (if you do it in logs) from another year of education. That average measure can be consistent with lots of different dynamics---which is Mankiw's point. Perhaps another year of education increases earnings by 10% across the board (deterministic view) or perhaps is increase by 10% the chance that your income will increase 100% but 90% of the time does nothing. Note: All of this is just correlational---there are serious problems w/ treating these regressions as establishing causality, but that's another issue.
- RockyMcNuts 15y ago
  Mankiw's logic seems a little circular... education buys you the golden ticket, but then the process for determining the winners is stochastic. What determines the distribution of the stochastic process? If more people get educated, and the stochastic process stays the same, doesn't the distribution of outcomes stay the same? So in what sense is the distribution related to education? If in some areas network effects got more important, and Windows became ubiquitous, or Mankiw's textbook... and then industry got pretty powerful and able to defend the cash streams, without worrying about taxes or checks on market power... then the stochastic process became more winner-take-all.
meterplech 15y ago
>> "It should not be that hard to take income (or labor income) and regress against educational level and get a pretty good sense of how much inequality is related to educational achievement, and how returns to education have changed. My gut feeling is it explains some of it, but education has not that much to do with the vastly increasing income share of the top 1%. One man's 'stochastic' is another's 'uncorrelated'." I think Mankiw is actually right about the 'stochastic' returns to education- but he isn't admitting the real reason. I believe it's because the returns to going to a select few schools studying a select few things do create outsized returns. I.e, graduating from a Harvard/Stanford MBA or Law program makes it much more likely to place you top 1%. The number is institutions that this is true for is very small. In a sense, I don't think the actual 'education' is causing this stochastic return, but the people you meet and opportunities people get at the oligarchical institutions.
paganel 15y ago
> to make people pay $233 for his tex That much money for a textbook? Sorry, but I have to say it: WTF does it contain? And pardon me again for my French, but just today I stumbled upon Part One of a 1782 edition of Rousseau's Works in an antique book-store, priced at ~ 40 Euros (ironically enough, it contained this: "Discourse on the Origin and Basis of Inequality Among Men" http://en.wikipedia.org/wiki/Discourse_on_the_Origin_and_Basis_of_Inequality_Among_Men http://en.wikipedia.org/wiki/Discourse_on_the_Origin_and_Bas...).
- qohen 15y ago
  Actually, to be fair, the $233 price is for a prior edition--the latest edition "only" costs $192 (and $154 on Kindle): http://www.amazon.com/Principles-Economics-N-Gregory-Mankiw/dp/0538453052/ref=dp_ob_title_bk http://www.amazon.com/Principles-Economics-N-Gregory-Mankiw/...

john_horton 15y ago

That regression (which is called a mincerian wage equation & economists have been running it for about 40 years) will give you the average percentage increase in earnings (if you do it in logs) from another year of education. That average measure can be consistent with lots of different dynamics---which is Mankiw's point. Perhaps another year of education increases earnings by 10% across the board (deterministic view) or perhaps is increase by 10% the chance that your income will increase 100% but 90% of the time does nothing. Note: All of this is just correlational---there are serious problems w/ treating these regressions as establishing causality, but that's another issue.

RockyMcNuts 15y ago
Mankiw's logic seems a little circular... education buys you the golden ticket, but then the process for determining the winners is stochastic. What determines the distribution of the stochastic process? If more people get educated, and the stochastic process stays the same, doesn't the distribution of outcomes stay the same? So in what sense is the distribution related to education? If in some areas network effects got more important, and Windows became ubiquitous, or Mankiw's textbook... and then industry got pretty powerful and able to defend the cash streams, without worrying about taxes or checks on market power... then the stochastic process became more winner-take-all.

meterplech 15y ago

>> "It should not be that hard to take income (or labor income) and regress against educational level and get a pretty good sense of how much inequality is related to educational achievement, and how returns to education have changed. My gut feeling is it explains some of it, but education has not that much to do with the vastly increasing income share of the top 1%. One man's 'stochastic' is another's 'uncorrelated'." I think Mankiw is actually right about the 'stochastic' returns to education- but he isn't admitting the real reason. I believe it's because the returns to going to a select few schools studying a select few things do create outsized returns. I.e, graduating from a Harvard/Stanford MBA or Law program makes it much more likely to place you top 1%. The number is institutions that this is true for is very small. In a sense, I don't think the actual 'education' is causing this stochastic return, but the people you meet and opportunities people get at the oligarchical institutions.

paganel 15y ago

> to make people pay $233 for his tex That much money for a textbook? Sorry, but I have to say it: WTF does it contain? And pardon me again for my French, but just today I stumbled upon Part One of a 1782 edition of Rousseau's Works in an antique book-store, priced at ~ 40 Euros (ironically enough, it contained this: "Discourse on the Origin and Basis of Inequality Among Men" http://en.wikipedia.org/wiki/Discourse_on_the_Origin_and_Basis_of_Inequality_Among_Men http://en.wikipedia.org/wiki/Discourse_on_the_Origin_and_Bas...).

qohen 15y ago
Actually, to be fair, the $233 price is for a prior edition--the latest edition "only" costs $192 (and $154 on Kindle): http://www.amazon.com/Principles-Economics-N-Gregory-Mankiw/dp/0538453052/ref=dp_ob_title_bk http://www.amazon.com/Principles-Economics-N-Gregory-Mankiw/...