Thursday, November 20, 2014

Professor John Cochrane's Opinion On Inequality

From The Wall Street Journal, "What the Inequality Warriors Really Want: Confiscating wealth is ultimately about political power. Koch brothers, no. Public-employee unions, yes." by John Cochrane, professor of finance at the University of Chicago Booth School of Business, a senior fellow at the Hoover Institution, and an adjunct scholar at the Cato Institute:
If some get rich and others get richer, who cares? If we all become poor equally, is that not a problem? Why not fix policies and problems that make it harder to earn more?

Yes, the reported taxable income and wealth earned by the top 1% may have grown faster than for the rest. This could be good inequality—entrepreneurs start companies, develop new products and services, and get rich from a tiny fraction of the social benefit. Or it could be bad inequality—crony capitalists who get rich by exploiting favors from government. Most U.S. billionaires are entrepreneurs from modest backgrounds, operating in competitive new industries, suggesting the former.

But there are many other kinds and sources of inequality. The returns to skill have increased. People who can use or program computers, do math or run organizations have enjoyed relative wage increases. But why don’t others observe these returns, get skills and compete away the skill premium? A big reason: awful public schools dominated by teachers unions, which leave kids unprepared even to enter college. Limits on high-skill immigration also raise the skill premium.

Americans stuck in a cycle of terrible early-child experiences, substance abuse, broken families, unemployment and criminality represent a different source of inequality. Their problems have proven immune to floods of government money. And government programs and drug laws are arguably part of the problem.

Local Rail Systems Fare to Expense Ratio: Chart

From The Wall Street Journal, "Funding Battle Looms for New York’s Subway, Buses, Bridges: Fare and Toll Increases by New York’s Metropolitan Transportation Authority Could be Overshadowed by a Battle Over Overall Transit Funding Next Year" by Andrew Tangel:
Riders of the New York City subway, the nation’s largest mass transit network, last year shouldered 63.6% of the system’s $4.8 billion in operating costs, the third-highest so-called farebox recovery ratio for such U.S. systems, according to Federal Transit Administration data.
Local Rail System Fare to Expense Ratio
Source: The Wall Street Journal