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Human Capital

12/20/2014

In survey after survey, we see that the concentration of wealth in fewer people continues to increase.  The latest Pew Research study shows the net worth of the top 20% of Americans doubled from $318,000 in 1983 to $639,400 last year, while it actually dropped for the bottom 20% of Americans from $11,400 in 1983 to only $9,300 last year.  In a rare moment of agreement, nobody thinks this trend of increasing concentration is good for our nation.  At some point, social instability becomes inevitable.  Unfortunately, that is the end of agreement.

Some say that the rich are just working harder, while the poor are getting lazier, but that is not very helpful.  The Christian religious community does not help very much.  Some point out that the Bible reminds us that the poor will be with us always, so why worry about it.  Other Christians maintain we are our brother’s keeper.

In economics, the supply-side disciples argue another tax cut for the rich would free-up capital which would be invested to produce more jobs . . . maybe.  Keynesian disciples pose the double-negative rhetorical question of “how can we NOT help the poor?”  Austrian disciples argue the problem is not about economics but about politics — just don’t create any new regulations.

In politics, the always-persecuted Republicans ask how can we be sure we don’t help one single undeserving poor person?  The always crybaby-Democrats insist the poor are merely victims of Republican indifference.  (Then, there was the stunningly simple assertion of 1972 presidential contender George McGovern that people are poor because they don’t have money, so let’s give every poor person one thousand dollars.)

It may be more useful to look thorough the lenses of social science, where they study social or human capital, which are non-quantifiable, non-monetary assets of some people.  Nobody disagrees that intelligence is better to have, than to NOT have.  It is a type of human capital and has value, but cannot be expressed in dollars.  Other types of human capital include being raised by educated parents, so that children can absorb education, perspective, and even speech patterns.  Being taught traditional manners has a value to certain humans that is likewise not measurable.  Does anybody doubt the value of connections or the power of a fat Rolodex?  Likewise, you cannot measure that value nor put it on your financial statement.

French/Swiss philosopher Jean-Jacques Rousseau wrote The Social Contract in 1762, saying that a person is merely the product of his environment.  (The immortal opening sentence is “Man is born free, and  everywhere he is in chains.”)  We can look at environmental capital as human capital.  It is non-monetary and non-measurable.  Environment can be a type of predestination.  While it doesn’t necessarily have to be a predestination into chains, it usually is.  

Now, what should be the policy response to the social problem of increasing concentration of wealth?

No, “let them eat cake” is not a policy option!  Ask Marie Antoinette . . .

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