Economics

Dalibor Rohac
A Complex World and Its Discontents
Who’s lagging behind in the modern economy, and what can we do about it?
28 September 2012

Human Capitalism: How Economic Growth Has Made Us Smarter—and More Unequal, by Brink Lindsey (Princeton University Press, e-book, $3.82)

Every year in the United States, the amount of new information stored on paper, film, and electronic media reaches roughly 2 trillion megabytes—or 15,000 new book collections the size of the Library of Congress. Think about the mind-boggling number of e-mails, phone calls, and text messages that Americans send each other every day, and you’ll realize that our lives have become more complex and interconnected than ever before. However, some social groups have fallen behind in the increasingly complex modern economy. In his short and highly readable book, Brink Lindsey tries to explain why this happened and what can be done about it.
Formerly vice president for research at the Cato Institute, Lindsey is now a senior fellow at the Kauffman Foundation, a think tank focused on promoting entrepreneurship. He has devoted his career to talking economic sense to those on the political Left, with whom he shares some views on social issues.
Lindsey’s central argument focuses on the increasing complexity of modern societies. As we get richer, our world gets more complicated. In pre-industrial societies, the accident of birth broadly determined social roles, and technology remained stationary. People did things the way they or their ancestors had always done them. In today’s world, such a mindset obviously wouldn’t get you very far. In the United States, for example, as a larger part of the economy revolves around processing information, competition is fiercer than ever before.
The economy thus places increasing pressure on our cognitive abilities. Psychologists believe that if we gave American children in 1932 an IQ test normed in 1997, their average IQ would come out to about 80—borderline deficient by today’s standards. The secular trend in measured IQ, known as the Flynn effect, is, according to Lindsey, a result of the rising complexity of the environments in which humans operate.
Unfortunately, while the United States has become much wealthier, some social classes lag behind—and others have done disproportionately well. Lindsey’s focus here is not on the “top 1 percent,” but rather on the growing disconnect between the top 30 percent—mostly highly skilled college graduates—and the rest of the income-distribution curve. Why haven’t poor people been more successful? Lindsey suggests two main reasons. The first is skills-based technological change. In modern economies, routine, rules-based jobs are more easily replaceable with computers, whereas jobs that involve problem-solving in complex environments become ever more valuable and lucrative.
The second reason is the persistent divide between “elite” culture and that of the bottom 70 percent. Because of the persistence of cultural norms, social groups in danger of becoming obsolete in the modern economy are not adapting by investing more in their human capital. “Culture is trumping economics,” says Lindsey, hence a fostering a “strong tendency for children immersed in working-class culture to remain in that culture through their adult lives.”
This is not a novel argument. Charles Murray, for one, has advanced it for decades, including in his recent book. Lindsey criticizes Murray, though, for offering little more than “plaintive moralizing.” But if the problem is cultural, then a change in culture and rhetoric has to be part of the solution. And, arguably, Murray is right-on when he advises people to “recognize that the guy who works on your lawn every week is morally superior in this regard to your neighbor’s college-educated son who won’t take a ‘demeaning’ job.”
Unlike Murray, Lindsey doesn’t offer a coherent theory for the growing cultural divide between the lower classes and the successful denizens of the global economy. Why have poor people retained detrimental cultural habits? Lindsey offers no justification for why cultural norms may have gotten more persistent in recent decades. He doesn’t ponder at least one plausible explanation: that material incentives favoring certain behaviors shape values in a way that locks people into poverty and dependence. This is a thesis that Murray has explored in great detail, as have others, including economist Walter Williams.
Even if some of Lindsey’s arguments leave a reader unconvinced, it’s difficult to object to his policy ideas. He proposes a reform of K-12 and college education, including limiting college-tuition subsidies, and he’s optimistic about early-childhood intervention among underprivileged children. Similarly, it’s tough to argue against a reform of entitlements that would motivate individuals to seek employment instead of encouraging dependency on the welfare system; or against removing barriers to entrepreneurship. But the hard truth is that, unless accompanied by a sustained change in culture and rhetoric among the poor, even the wisest policies are unlikely to make much of a difference.

Dalibor Rohac is an economist at the Legatum Institute in London. Follow him on Twitter at @daliborrohac.