Education and Equality in the 21st Century

Early in *Capital*, Thomas Piketty writes:

> [H]istorical experience suggests that the principal mechanism for convergence [of incomes and wealth] at the international as well as the domestic level is the diffusion of knowledge. In other words, the poor catch up with the rich to the extent that they achieve the same level of technological know-how, skill, and education. (p. 71).

Yet when he turns to policy prescription in part IV of the book, his
treatment of education is relatively brief and mainly forms a part of
his discussion of the “modernization of the social state.” By this he
means that ‘the tax and transfer systems that are the heart of the
modern social state are in constant need of reform and modernization,
because they have achieved a level of complexity that makes them
difficult to understand and threatens to undermine their social and
economic efficacy.’ Given the emphasis Piketty places on education as a
force for equality in the opening section of the book, the brevity of
the final discussion disappoints. He might have said much more. In what
follows, I will summarize Piketty’s educational policy prescriptions,
comment on the theoretical framework underlying them, and then point to
what I take to be an even more important source of education’s
egalitarian effects.

Piketty’s recommendations for educational policy are quite spare; they
are also familiar: egalitarian minded reformers ought to work toward the
broadest possible accessibility of educational institutions to the
population; elite institutions, which currently serve mainly privileged
youth from the highest income brackets, need to broaden the backgrounds
from which they draw their students; states should increase investment
in ‘high-quality professional training and advanced educational
opportunities and allow broader segments of the population to have
access to them’ (p. 307); and schools should be run efficiently.

In conditions of growth, the increasing accessibility of education
serves to reduce income inequality, and eventually wealth, only if it
shifts the distribution across the population of types of degrees. That
is, the spread of education has little impact on inequality if everyone
who once had a high school degree now earns a college degree, and all
those who previously secured only an eighth grade level of education now
attain the high school credential. Instead, one needs to shift those in
lower educational bands into higher bands, without concomitant upward
positional moves of those in the higher bands.

These policy proposals closely track those of Claudia Goldin and Larry
Katz in *The Race between Education and Technology.* In their argument,
rising income inequality in the U.S. can be explained to a significant
degree by the wage premium on skill. As technological innovations emerge
and generate a demand for new skills that are under-supplied, those in
possession of the skills-in-demand will reap rewards in the form of
higher income. In order for a society to see egalitarian income
distributions, on their argument, education must race to maintain
democratized skill provision that keeps up with the changing demands of
an economy fueled by technological development.

As Piketty points out, the wage premium on skill can explain only a part
of the growth in income inequality in the U.S. The growth at the highest
end, in the incomes accruing to ‘supermanagers,’ in his vocabulary,
reflects social norms that have coalesced around the acceptability of
sky-high executive pay. In his argument, these social norms have
coalesced as part of the growth of political ideology that endorses
untrammeled meritocracy. Supercharged salaries are held up,
rhetorically, as evidence of a supposedly fair and equally supercharged
operation of talent.

The question, then, of how to temper income inequality on Piketty’s
argument has fundamentally to do with social norms, and the question of
how those can be changed. Here is where he misses one of education’s
most egalitarian impacts. In an important 2006 paper, ‘[Why Does
Democracy Need Education?](http://www.nber.org/papers/w12128)’
economists Edward L. Glaeser, Giacomo Ponzetto, and Andrei Shleifer
identify a correlation between education and democracy that they argue
has causal force, with education causing democracy. They point to a more
fundamental relationship or, in their words, ‘primitive connection,’
between education and participation and test three hypotheses for why
education might cause participation. Perhaps it does so through the
provision of indoctrination; perhaps through the provision of
interpersonal skills (through reading and writing and the provision of
‘soft skills’ as well); or perhaps through a general increase in the
personal material benefits of participation? They rule out the first and
third hypotheses and make the case that education causes participation
because it makes people ready to participate. (Another brilliant moment
where economists validate the obvious!)

And what flows from participation? Not always, but very often,
democratic contestation. (The purpose of the qualification is to
acknowledge, as Glaeser, Ponzetto, and Shleifer point out that the rise
of European fascism also drew on the energies of students.) As scholars
of the U.S. Civil Rights movement, like Charles Payne, and studies of
activism by Cathy Cohen and Deva Woodley, have shown, political
contestation can drive change in social norms. (For a superbly
insightful essay on social norms, their bases, and the potential for
changing them, see Deborah A. Prentice, ‘[The Psychology of Social Norms
and the Promotion of Human
Rights](https://psych.princeton.edu/~psych/psychology/research/prentice/pubs/2012humanrights.pdf).’).
This is where education’s true egalitarian potential comes into play. It
supplies the basis for forms of participatory democracy that might
contest the labor market rules that deliver insupportable forms of
income inequality.

Piketty’s failure to make this point is surprising. In a 2014 paper,
“[The Rise and Fall of General Laws of
Capitalism](http://economics.mit.edu/files/10302),” the economist
Daron Acemoglu and political scientist Jim Robinson have pointed out
that arguments like those of Katz and Goldin presume a stable framework
of technology and political institutions. They put this point as a
critique of Piketty, arguing that his account of a future where rates of
return on capital will consistently outstrip growth fails because, in
their view, it ignores politics. Thus they write:

> The quest for general laws of capitalism, or any economic system, is misguided because it is a-institutional. It ignores that it is the institutions and the political equilibrium of a society that determine how technology evolves, how markets function, and how the gains from various different economic arrangements are distributed. (The Rise and Fall of General Laws of Capitalism, p. 1).

As examples of the impact on popular participation on the economy,
Acemoglu and Robinson highlight late 19th and early 20th century
Populist and then Progressive mobilizations in the U.S. that led to
reductions of corporate power, a turn of events that refuted one of
Marx’s general laws, they argue.

But their argument is not fair to Piketty who does repeatedly underscore
that policy frameworks, institutional choices, and social norms affect
how income and wealth will be distributed. Thus, he writes (p.308): ‘In
order to understand the dynamics of wage inequality, we must introduce
other factors, such as the institutions and rules that govern the
operation of the labor market in each society.’ In other words, Piketty
fully understands the importance of politics to his picture of the
economy. The only trick he misses is to underscore the relationship
between education and equality that rests on the link between education
and preparation for participation.

The preparation of citizens, through education, for civic and political
engagement supports the pursuit of political equality, but political
equality, in turn, may well engender more egalitarian approaches to the
economy. An education that prepares students for civic and political
engagement brings into play the prospect of political contestation
around issues of economic fairness. In other words, education can affect
income inequality not merely by spreading technical skills and
compressing the income distribution. It can even have an effect on
income inequality by increasing a society’s political competitiveness
and thereby impacting “how technology evolves, how markets function, and
how the gains from various different economic arrangements are
distributed.”