The Reimagining the Economy Project brought together Raj Chetty (William A. Ackman Professor of Economics) and Michael Sandel (Anne T. and Robert M. Bass Professor of Government) for a talk titled “Education, Elitism, and Economic Opportunity” moderated by Dani Rodrik. This panel discussion is a part of our series of conversations titled “Economics and Beyond” that puts economics in conversation with other disciplines. 

 

For this panel discussion, we invited Professors Raj Chetty and Michael Sandel to engage in a conversation on the American Dream and the value American society places on higher education. These scholars have done extraordinary work on issues that are at the core of the Reimagining the Economy program. Chetty’s work uses big data to highlight the importance of place and social networks in determining patterns of social mobility. Sandel has put forward a challenging view of the importance of civic virtue and community, putting limits on the role of markets in determining social value. 

 

Is living the American Dream still possible?

Chetty presented evidence on the fading of the American Dream as reflected in the ability of any child, from any family, to move up the income distribution through their hard work. One of Chetty’s studies finds that over 90% of children born in 1940 went on to earn more than their parents, while only 50% of children born 1980 did so. Economists are now looking into why this changed while thinking about which factors hinder social mobility in the modern economy. The answers to these questions contribute to a broader discussion around distributive justice – a fair distribution of the benefits and burdens of social participation among a diverse group of people. 

Sandel agreed that distributive justice is important, but argues that the decline in the American Dream also reflects a problem with contributive justice.  Contributive justice goes beyond thinking of people as consumers and maximizing consumer welfare; it considers people as producers and includes their working conditions and the social recognition they receive from providing valuable services for others. Sandel attributes the deep political divide that America faces today partly to the stagnant wages of low and middle income workers and the sentiment of overlooking the work that they do to keep the system running. The political crisis is characterized by a failure of not only material distribution but also honor and recognition by the wider society. 

 

Promises and Pitfalls of Higher Education

Chetty's most recent empirical work explores the role of  higher education in contributing to social mobility. He finds that the most prestigious colleges deliver the best outcomes in terms of mobility but they admit the smallest portion of low income students. Children from families in the top 1% of the income distribution are more than 70 times as likely to attend an Ivy-Plus college compared to children from the bottom 20%. Conversely, colleges that admit many low income students are unable to produce the same mobility outcomes for their students. Chetty asked how we can shape higher education to both serve many low income children and deliver great upward mobility.

Sandel, on the other hand, suggested that the importance we place on higher education for doing well in one’s career could be greatly contributing to the problem of inequality. The doubling of the college wage premium in recent decades has been fueling the competition of getting into the top higher education programs in the US. One perspective is that this trend follows naturally from the economy’s greater need for skilled workers. Sandel’s perspective is that the same way we would contest if the wage gap between men and women doubled, we should not take the college wage premium as a given.

“We have cast higher education as the arbiter of opportunity. Should colleges and universities be the arbiter of opportunity?” Sandel asked. “Today, colleges define merit in a market driven economy, but there are other countries that are democratic, have strong economies, and don't cast higher education in such a role.”

 

Elitism Everywhere

Chetty and his team provide a compelling argument for paying attention to elite colleges and universities – their students are the ones to take on jobs that shape the world such as positions in public leadership and company management. However, their research also shows that these institutions perpetuate elitism. By denying access to low income students (for example, by favoring legacy admissions), they make prominent positions in society available only to a small minority of already wealthy people. 

For Sandel, though, elitism extends beyond higher education. He is concerned with the modern tendency to outsource the judgment of value to markets. We perceive markets as a neutral instrument for determining answers to questions that we as democratic citizens would not be able to agree on, like who is contributing to society and how much. In a pluralist society, these questions are rife with conflict. Nevertheless, Sandel argued that markets have proven to not be trustworthy in determining value. They inherently favor the wealthy and well-connected. Instead, we need to reinvigorate public deliberation about what economic activities contribute value to the economy and the common good. We don’t need to arrive at a universal agreement for this debate to be valuable. Merely having the debate broadens society's perspective beyond the established elite.

 

This report was authored by Rada Pavlova, Predoctoral Research Fellow at the Reimagining the Economy Project