[fullwedgewhale]

The point of the article is that the meritocratic system in this country is broken. In part this is because we have systematically transferred wealth out of the bottom to the top. For example, focusing on tax cuts that benefit high income individuals while cutting support for public colleges. These two things are usually done at different times with tax cuts usually to stimulate the economy and spending cuts coming to reign in budget imbalances. The result is that you could work your way through college in the 1960's by working about 20 hours a week. Now you'd have to work 40+ hours a week to pay tuition at a public university. The difference income throughout someone's working life between a college degree and no college degree is about 1,000,000 dollars. So the middle and lower middle income people don't see the benefits of tax cuts but they bear the burden of college tuition increases. And their long term earning potential suffers. And the country as a whole suffers because we have a less well educated work force.

You can repeat this pattern with a whole host of other programs and issues. For example, the minimum wage is still behind where it needs to be if it were adjusted for inflation. We're becoming a casino culture where people keep playing the game because they believe they're going to be the ones that turn out okay. For the most part, your ability to leave your social class is pretty close to zero, with the rich staying rich because their wealth can insulate them against bad decisions. The only real mobility for most people has been down.

[ryandrake]

I'd build on that to point out that the systematic transfer of wealth from the bottom to the top is not something that "we're doing", but simply the natural product of capitalism. It doesn't require an evil mustache twirler sitting in a dimly list room scheming about how he's going to systematically conduct a massive wealth transfer. Wealth transfer is the natural result of any system that rewards the deployment of capital with more capital.

There exist lawmakers that focus on cutting taxes on the rich and reducing access to education, health care, and economic opportunity. While they are helping to widen the gap between the haves and the have-nots, they're unnecessary--the gap would widen with or without them.

[icebraining]

Wealth transfer is the natural result of any system that rewards the deployment of capital with more capital.

That's not what capitalism does, otherwise the Webvan investors would be massively wealthy.

It rewards effective deployment of capital with more capital. And it often rewards ineffective deployment of capital with less of it. So you can have massive transfers of wealth from "side to side", not necessarily from bottom to top.

[candu]

Sure - but "effective" here is essentially a random variable, and the central limit theorem does the rest.

"Wealth transfer" isn't transfer to/from particular individuals. As a group, the wealthiest will tend to accumulate wealth faster than everyone else. Furthermore, it may be possible for individuals to enter/leave this class, but it gets less likely the further you are from the dividing line.

[chimprich]

On the whole, though, it is fairly easy to make more capital with capital (e.g. tracking the stock market, at least in the medium term). And the more capital you have, the easier it is to make more capital. In general, having more capital offsets deploying it effectively.

[sanderjd]

Certainly there are clear mechanisms for wealth transfer from both bottom to top and side to side. What is more interesting to consider is: What are the mechanisms for wealth transfer from top to bottom? From what I can tell, that sector is shrinking – as mass deployment of labor diminishes in importance – and has little prospect of recovery outside of government intervention. Would love to hear some different perspectives on that.

[yourapostasy]

This class of emergent behavior hypothesis of capitalism is a good point, but too much emphasis upon this behavior risks absolving and abdicating the agency all participants possess in democratic settings. It has always been pointed out that republican-type democracy only functions when both represented and representing participants continuously, actively engage the system and each other, making changes cautiously and introspectively. More than the economic system alone is broken; the political context it takes place within is arguably also severely missing vital transmission functions.

[xyzzyz]

I'd build on that to point out that the systematic transfer of wealth from the bottom to the top is not something that "we're doing", but simply the natural product of capitalism. (...) Wealth transfer is the natural result of any system that rewards the deployment of capital with more capital.

That's true, as long as the rate of return on capital is bigger than the growth of economy. Otherwise, as the economy grows faster than capital brings the returns, capital owners own smaller and smaller part of overall wealth.

Unfortunately, throughout almost all known history, the rate of return on capital was greater than growth. The only exception was the brief period of the post-WW2 years.

[zanny]

I'd certainly argue that the tremendous disparity is impossible to have under purist capitalism and entirely free markets. Assuming your starting point is not where all societies actually start from (destitute masses and lavish rulers) but instead have everyone start out equally educated and wealthy. You also have to discount corruption of the state, which is another critical aspect to the extravagance of elite wealth.

In a natural economy from a flat start you have people funding the interests of those with entrepreneurial spirit to form businesses. Assuming you have some form of social organization where those with the means and wit cannot just inflict violence upon others to get what they want, what generally happens is that capitalists build industry to create goods everyone else wants, while paying others to work for them where they get more money from the labor than the worker gets in pay.

Naturally, the total wealth of the workers must decline while the capitalists profits rise. But the capitalists want more money, and the only way to really put their money to work is either internal investment in their own company, or funding the ventures of others. Rather than the base state group funding of an individuals venture, you have one or few wealthy sponsors funding new ventures.

That does mean that over time you get fewer and fewer capitalist entrepreneurs that are successful, because less money goes into making someone elses business dreams come true and more goes into making the established businesses stronger.

But in that natural capitalist market you cannot do many of the things modern American companies do to exploit markets and produce unnatural profits. All of which require the violence of the state to perform, which is why government is always a double edged sword - you need something to protect the people from violence in the first place, but that just gives the violence to an influencable, corruptable group, and money - especially concentrated - talks.

But it is much harder to get a monopoly in laissez faire system where you cannot use regulations and ordinance to block competition the way almost every major business in the US does. Be it (ab)use of the patent system, abuse of zoning, abuse of permits, abuse of straight up law, companies constantly goad politicians into giving them an unfair advantage.

In that free market if someone starts abusing their growing monopoly for profit it opens up infinite room for competition because the only barrier to entry to a goods or service market is the ability to produce it. That requires a whole economy of productive goods markets - but you can always fill the gap from the start wherever monopolies arise, and while you can have monopolies form, they cannot act against the market for long without opening up room for competition - they have to skirt the border where their goods and services cost just enough to disincentivize competition which means just below new-entry market rates, and that is after all extrinsic influencers outside price - business practices and ethics, employee retention and satisfaction, and general reputation. Look no further than Wal-Mart for an actual example of a business that competes at below market prices but loses significant business to its own awful reputation.

So my point is that while capitalists in a laissez faire system can perpetually concentrate wealth, it really cannot happen nearly as fast as it has in the last fifty years because you need regulation to capture markets as completely as so much of American enterprise has.

[Shivetya]

Wealth transfer because of the tax code occurs all the time, every day. Yet some here I can guarantee would scream bloody murder if they lost their piece of that wealth transfer. Two of which are easy, the ACA and EV tax credits, both transfer wealth but in different ways. The first from the young and healthy who usually are at the beginning of their income generating years and hopefully their lowest pay in their career to those at career and life end where they might have the homes paid for, retirement incomes, and more. Then the EV tax credit gives to people making purchases of cars beyond the reach of average workers.

What is the point? The tax code created this imbalance and continues to do so as it is the number one means by which politicians separate us. They play us off each other and the tax code allows the to reward or punish.

Simplify the tax code so that anyone with a high school education can see the money and that will lead to people clamoring for a change.

[zanny]

Which is why it will never happen. It is against every elected representative with voting power to fix the American tax code to do so because they gain significant power with a system nobody can interpret without significant mental and time commitments.

You basically have to elect a majority of honest politicians to congress all running on the platform of fixing the tax code, and if you managed to perform that miracle greater than walking on water while turning it to wine, you would still be conceding literally every other political position to them because you had to do the most insane systemic uprising of policy in American history since prohibition, and anyone elected to vote for that would have their own anterior motives and agenda to replace the power vacuum from losing the tax morass.

[sokoloff]

There are more EVs sold with an after-credits price under $25K than over $50K.

And there's an awful lot of people driving $25K new ICE cars, so I can't agree that the EV credit is mostly going to cars that are beyond the reach of average workers. (I also don't think that the average worker is financially well-advised to buy a new $25K car, but they're doing it in droves, so...)

[woobar]

But this is the point. Without the credit they will not be able to afford $32.5K car.

And btw, average worker makes $35K, and pays federal tax up to $3200. So their "after credit" price would be close to $30K.

[sokoloff]

Fair point, though those average workers who can do math and plan ahead would lease the car, where NMAC (or the competitors' equivalent) would purchase the car and take the $7500 federal credit as a cap cost reduction and the lease payments would reflect the full value of that credit.

I would be in favor of a simplified tax code, even if it takes away the mortgage interest deduction (mine is partially phased out already), the EV credits, etc (and especially if it gets rid of ACA as my health care plan changed dramatically for the worse and by an amount far greater than historically normal rate increases).

[NoMoreNicksLeft]

It's unclear that the mechanism you describe behaves as you claim.

Supposing that it's true that a college degree confers (typically, on average, whatever) an extra million over a lifetime career, what would happen if everyone did attend college?

Would that effect remain? If college educations become more common, they also become less scarce and valuable.

You talk about how affordable it was in the 1960s, but this is also a period when a relatively small portion did attend college. If we're willing to return to that rate of college education, the budget likely will make it possible to afford this...

Of course, the screams of institutional racism, sexism, and elitism will be deafening.

[cgearhart]

The Supply/Demand analysis of college degrees assumes that education is a fungible commodity. In some ways that's true -- because many technical skills developed in pursuit of a degree are intended to be generally applicable. But there is also broad economic value in an educated population beyond the instantaneous value of the credential. A college education is about creating value by obtaining an education.

The central challenge of college today is not that everyone is going, but that everyone is going into so much debt to do it. Most people will be able to service their debt (in part thanks to the higher average earnings they'll realize), but it is coming at the cost of delaying other purchases. New grads can't afford new cars, houses, weddings, children, or savings. And the fraction of borrowers who can't afford their debt become a drag on the economy because it is so difficult to discharge.

[NoMoreNicksLeft]

> But there is also broad economic value in an educated population beyond the instantaneous value of the credential. A college education is about creating value by obtaining an education.

Even if we assume this is true, none of your claims follow.

If it costs X to educate 10% of the population, it takes more than 2X to educate 20%. And that's only if the population is static. The population has increased since 1960, especially in the demographic we're discussing.

It's not so bad down in the 10% and 20% range, but once we start talking about universal college, it quickly becomes expensive.

> The central challenge of college today is not that everyone is going, but that everyone is going into so much debt to do it.

Costs have ballooned. No longer is it some spartan experience for the nation's managerial and elite classes, before they run off to their lives of gold-plated yachts and spas where they bathe in the tears of orphans.

Now college is something everyone's entitled too, and the dorm rooms no longer pack 4 students into something that looks like a closet. All those new buildings... someone must pay for them.

The price would be roughly the same even if those weren't paid with by loans, but rather with grants.

And since there is no relief from lowered enrollment, prices will stay high.

> Most people will be able to service their debt (in part thanks to the higher average earnings they'll realize),

Only the graduates. You should look at how many drop out after $20,000 or $50,000 worth of student loan debt. This number is significant, I do not know if it's half, but it's close enough.

This isn't a problem that can be fixed with "but those goshdarned republicans broke things, we need to return to the 1960s-era quasi-socialism and it will all go back to normal!". Those policies worked because so few attended college, attended colleges that were much different (and fewer) than today, and were already well within the upper middle class anyway.

[cgearhart]

> ...none of your claims follow.

That was my claim. To wit, that a college education is more valuable than the credential.

> If it costs X to educate 10% of the population, it takes more than 2X to educate 20%.

Why would the cost of providing education to more people increase as a multiple of the baseline costs?

> And since there is no relief from lowered enrollment, prices will stay high.

Restricting enrollment would increase costs as there is more competition among prospective students for the service. Students would have to outbid each other, not merely outperform each other to secure a spot.

> Now college is something everyone's entitled too... [sic]

An education is what we should entitle them to. As you note, colleges have been locked for decades in a competition for students by investing in new buildings, amenities, and sports with no regard for the effect on costs because of the price inelasticity of demand. And it has been a safe investment because student loans & grants have been so readily available.

The best price controls available to us are exercised by holding the institutions accountable for certain outcomes (like excessive dropout & loan default rates), by providing an equivalent service at a lower cost (something like Obama's "free community college" option), and by making student loan debt dischargeable like most other debts. The ready availability of capital is part of what has driven up costs.

> You should look at how many drop out after $20,000 or $50,000 worth of student loan debt.

The national graduation rate was approximately 60% in 2012 [1], while the national student load default rate was 13.7% in 2014 [2]. Students who do not graduate are several times more likely to end up in default, but it is still a manageable risk overall for investors because student loans are so difficult to discharge and because most people will eventually pay them back, and still worth it for students because they still have a positive net ROI.

[1] https://nces.ed.gov/fastfacts/display.asp?id=40 [2] http://www.washingtonpost.com/local/education/national-stude...

[fullwedgewhale]

Let's step back for a second and realize there's nothing magical about college. We can make the same arguments about the validity of a high school education. In fact, I can take your argument and say that providing everyone a high school education lowers every high school graduate's wages. We can then apply the same argument to middle school or any even providing any education at all. If we teach everyone to read and write, under your model, it devalues reading and writing. Because fundamentally, your model is one where there is a fixed pool of demand for educated people and beyond that any additional education add little additional value. And that is a completely wrong assumption.

The reason why education works is that it makes all parts of society function better. Having an educated population produces a higher functioning society. That's a society that, more often than not, is able to produce more wealth faster. In fact, it's in the enlightened self interest of society to have a broadly educated population. Basic research winds up driving GDP growth as science goes from the lab to products. Having more engineers and scientists is important, but so is having musicians, writers, nurses, and so on. All these types of education are important in a modern society. What's going on in the United States is that we are slowly short changing ourselves by making it harder and harder for people to get that additional education.

But in the process we're also creating a more stratified society. A lot of social mobility comes from the "first generation to go to college." By making college education less affordable, we keep people in the lower and lower middle classes that could have a transition up the income ladder from lower skilled, lower paying jobs to white collar professions. That's just one way we're becoming a society with little social mobility. American has moved away from the meritocratic American ideal. Now, even if you're an idiot, if you start out rich you'll probably stay rich. If you're poor, even if you're smart and capable, you'll probably stay poor.

[wdr1]

> The point of the article is that the meritocratic system in this country is broken.

I think you're overreaching.

The article is pretty clear in its explanation on the difference between people's perception of inequality & reality.

That this is evidence the meritocratic system is broken is your conclusion, not the article's.