|Peter Boettke|

The news is full of stories about the consequences of inequality on economic opportunity. It is a hot button topic that is hard to get consensus on, and Congress may be stuck in gridlock, so President Obama has assured everyone that executive orders might be called for: "I've got a pen, and I've got a phone." If Congress will not give him the policy fixes he deems necessary, then he can go it alone.

Well, this isn't a post about constitutional protections against the abuse of power. But instead, I want to ask have we correctly identified the social injustices that we perceive in modern American society, and if so have we identified the fundamental causes of the injustice.

It seems easy to claim that the distribution of wealth is to blame. The rich have advantages, and the poor do not. Absent those opportunities, and the poor remain poor; and given those opportunties it is very difficult for the rich to not remain rich. This is one of the reasons why income mobility has always been more important to look at than income inequality at any slice in time. To use an analogy that my colleague Richard Wagner often uses for a different point, though it captures the point here as well --- if I took a still photo of horse at the track, I might conclude that horses can fly as I can catch them at a moment when all four hooves are off the ground; but if I had a movie of the horse running I would see that horses don't fly they gallop. But precisely because the counter-claim about mobility dampens the force of the inequality at any moment in time claim, it has become important to provide a counter-claim to that and to argue that climbing the economic ladder has become more difficult over time rather than less.

Well that claim, it turns out, cannot be sustained. Economic mobility, as discussed in a new NBER working paper, has not gotten any more difficult over the past 50 years. But the results need to be understood carefully as well because it turns out that social mobility has never been all that easy either.

I know this will not happen, but I would like to see the discussion around these studies result in a public discourse that addresses the fundamental causes of poverty in America, and the problems associated with the truncating of life choices from individuals.

Liberalism seeks to establish constitutional rules of governance and design institutional structures precisely to realize a social order that permits neither discrimination nor dominion. In all of these discussions, I believe, it is important to stress as Hayek did, that democracy must be subordinate to LIBERALISM, whereas the modern state is defined by a quest for liberalism within DEMOCRACY. As long as the modern political situation remains, the quest to achieve a social order that is neither discriminatory nor permits the dominion of some over others will be in vain.

Living better together requires a set of general rules that treat individuals as equals in terms of the law. A fair sporting contest is one where the players all play be the same rules, not one where everyone achieves the same outcome. But the political/legal system in the US does not meet this structural bar in my opinion. And over the past several decades, we have seen the professionalization and consolidation of our public services of law and order, which ironically might be a significant reason for structural impediments to economic opportunity for some born into poorer economic conditions, and even those born into more fortunate circumstances but who get dragged down by the system in their youth. What could I mean?

Consider the following quote from Elinor Ostrom:

I have kidded people sometimes that I have ridden in more police cars than most scholars. I have also visited many jails. Most important, I have seen the ways that police officers serving an independent community, where local citizens have constituted it, deal with citizens. Citizens are treated differently when you live in a central city served by a metropolitan police department. Many of the officers in very big departments do not see themselves as responsible to citizens. They are on duty for specific hours and with an entirely different mentality. When you are in a police car for eight hours with officers from a big department, you learn that they really do not know the area they are currently serving since they rotate so frequently. When I was in a policy car with an officer from a moderately sized department, the would start telling me about the local community, where there are trouble spots, and where few problems occur. They watch trouble spots that they see potentially emerging. They would sometimes take a juvenile to their home in order to discuss problems they are observing. They do not put kids in jail the first time they observe behavior that is problematic. In the big cities, officers tend to charge the juveniles who have been seen to commit small offenses right away. Many jails are overcrowded with juveniles in large cities. Problems of law enforcement in central urban districts have grown over time and are linked to the way urban governance has been shifted to ever-larger units. [JEBO 80 (2) 2011: 372]

The shift Ostrom is referring was a consequence of the metropolitan reform discussions in the 1960s and 1970s. But I think it is important to realize that with the escalating of the War on Drugs, even local units of law enforcement turned their attention away from their responsibility to local citizens to the administration of, and the financial resources provided, more remote and more centralized units of government. It is, as Lin points to here, about putting kids in the system, about meeting certain objectives in law enforcement that are easily measurable such as arrests. It is not about providing a safe and peaceful environment for their fellow citizens in the communities in which they also live. The militarization of police that has followed as a consequence of the escalation of the War on Drugs is another example.

But back to the topic and the connection I'd like to draw. In a recent paper published in Crime & Deliquency, it is estimated that 49% of all black males have been arrested for non-traffic related violations by the time they reach the age of 23. 49%! For white males the figure is 40%. Again 40%! What does the law and order system think this does to young males who attempt to go to school and find employment, but now must explain their arrest record? And this just for the fortune ones that do not have their life chances seriously dampened by having to spend time incarcerated. If we look at incarcertation, then what has happened to young black males is simply tragic. And, much of this for the non-violent crime of illegal drug use --- drug use I should point out that the last 3 presidents have readily admitted to engaging in during their youth. Truncating economic opportunity through bad public policy isn't an issue of The Other, it is, instead, Our America that should cause outrage among this generation and their parents and grandparents.



A functioning market economy operates on the incentives provided by property rights, the signals provided by prices, the lure of profit, and the discipline of loss. It is for all practical purposes a color blind institution -- except that is for the color of money. But ordinary politics operates on a different set of incentives, signals, rewards and penalties. The systemic bias in politics is to concentrate benefits on well organized and well informed special interests and disperse the costs on unorganized and ill informed masses. It is by its operational mechanisms discriminatory, unless structural rules are in place to counter the natural tendencies. This again is my reason for invoking the Hayekian point --- democracy within LIBERALISM, not liberalism with DEMOCRACY. LIBERALISM is defined here as a system that permits neither discrimination nor dominion. By pursuing liberalism within DEMOCRACY, one just shifts who the benefactors of government privileges are. The life chances of some are thus enhanced, while for others they are truncated by policy design.

America is not a completely fluid society as we might hope, it is also not true that market acquired wealth is the sole determining factor in economic opportunity and social bettterment. We face serious constraints from the body politic that are cutting off the bottom of the economic ladder for too many young people, and if you cut off the bottom of the ladder, you cut off their ability to climb. Inequality, I would argue, is a consequence, not a cause. The fundamental causes I would argue are to be found more in the institutional impediments that are destroying those bottom rungs on the economic ladder. I would first start wtih the War on Drugs, I would then address policies that make it costly to hire young people, and third I would tackle the state control of primary and secondary schooling.

What institutions and public policies do you believe are doing the most damage to the ability of youth to climb the economic ladder?