Human Capitalism Provides The Explanation For Rising Income Inequality

Brink Lindsey, who is a Senior Fellow at the conservative Kaufman Foundation, has written a book called Human Capitalism which offers an explanation for rising income inequality.  Tyler Cowen who heads up the conservative Mercatus Center funded by the Koch Brothers, announced the release of this book on his blog.  The comments that follow the announcement are as interesting as the abstract of the book which one of the commentators provided. Cowen's blog is one of the more popular economic blogs.  The comments provide some insight into what his followers think about important social issues.

The basic thesis of Human Capital is that our economy has become more complex.  Those who are successful in our new economy possess human capital that enables them to succeed in a more complex world.  They inherited cognitive ability and they have invested in education which makes them valuable in a complex economy.  It follows that they should be rewarded financially for the contribution that they make.  Unfortunately, technology and globalization has eliminated many of the jobs that made it possible for less skilled individuals to earn high incomes.  That has increased the gap between those with human capital and those without it.

Human Capital provides an explanation for rising income inequality that will be well received by the plutocracy.  Those at the top of the pyramid are smarter and more talented than those that have been left behind.  They are being rewarded for their ability and the investments that they have made to prepare themselves for success in a more complex economy.  It is unfortunate that the less talented have been left further behind but there is little that can be done to make the economy less complex so that the less gifted and energetic can be as successful as they have become.  Moreover, there is little that can be done to modify the distribution of income.  It is based upon merit that is unequally distributed and any efforts to change the system would be bad for economic growth and prosperity.  The very smart and highly educated financial engineers who almost destroyed the global economy deserve to be paid princely incomes and to escape prosecution for fraud. The executives of our major corporations earn ten times what their peers earned 40 years ago.  That must be because their jobs have become more complex and they are smarter and better educated than the CEO's from previous generations.  They are also smarter and better educated than CEO's from other parts of the world because they earn several times what they earn.  If guess we are all lucky that we have such talented leaders in our economy.