The Anti-Economist — From the June 2013 issue

Education Is Not the Answer

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Last spring I sat on a panel convened to discuss the publication of The Occupy Handbook, a collection of essays in which a number of prominent economists addressed issues raised by the Occupy movement, in particular the stagnating wages and rising inequality that have defined our economy for the past generation. On these points the panelists shared the occupiers’ concerns, and our conversation soon turned to how such problems might be remedied. One of the panelists, Raghuram Rajan, of the University of Chicago, suggested that the way to return America to prosperity is to educate more of its citizens. His message to those in the audience was: Go to college.

The crowd could have been excused for responding with some skepticism. Anyone who spent much time around Occupy heard about the poor job prospects of debt-ridden recent graduates. Yet when mainstream economists seek to explain the plight of American workers, they blame lack of education to the exclusion of nearly everything else. As technologies advance, the orthodoxy tells us, our economy requires workers with more sophisticated training (this development is termed “skill-biased technological change”), a need that must be met with better education. “The rise and decline of unions plays a supporting role in the story,” write the Harvard economists Claudia Goldin and Lawrence Katz in a typical example of such thinking, “as do immigration and outsourcing. But not much of a role. Stripped to essentials, the ebb and flow of wage inequality is all about education and technology.”

Rajan is no ordinary economist. As far back as 2005, he argued that Wall Street was so large, so interconnected, and so heavily indebted that its failure could bring down the entire economy — an idea at which the likes of Alan Greenspan and Larry Summers scoffed. But when asked now about solutions to the crisis he predicted, Rajan sounds like any other economist. Growing inequality, he wrote in his lauded 2010 book Fault Lines, “stems primarily from the gap between the demand for the highly educated and their supply.”

Economists love these single-cause theories too well, especially when they reaffirm the core beliefs that free markets work and that government policies are not the answer. But practical realities have seriously challenged the pro-education argument time and again. This spring, the economics-data firm Sentier Research showed that the typical American household has seen its income fall every year since the Great Recession ended in 2009. That just isn’t supposed to happen during an economic recovery. Moreover, in the post-tech-bubble expansion that preceded the recession, household incomes never regained the high mark they set in 2000. The percentage of American adults with college degrees, meanwhile, is greater than ever, having grown in the past decade from 26 to 30 percent. Every year our country is better educated, while wages remain stagnant or fall.

I don’t mean to suggest that young Americans should steer clear of college. The odds they will eventually get a job are much higher if they first get a degree. But skill-biased technological change is not the main driver of inequality or wage stagnation in the United States, and education will not be the main solution.

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  • http://www.essayholic.com/ essay services

    The handbook collection was good and it consist of some useful terms for education. But in my own opinion, education will really be useful to individual because without having a good degree, people won’t be able to have good working opportunity.

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