The Economic Basis of Academic Privilege and the Academic Basis of Economic Privilege

Note: Contributing to the Miami Institute’s economics forum, Ravi Kanbur argues that “economists have yet to take up the broader question of how the realm of ideas, of economic ideas in particular, underpins and supports economic privilege and inequality. Antonio Gramsci is not a name heard in economics courses. But the power of ideas in determining political economy is something economists should be interested in analyzing, not least because they would be following in the footsteps of John Maynard Keynes.”

There is enormous academic privilege in the world. By academic, I mean not only the world of education, universities and research, but I also have in mind the broader world of ideas. By privilege, I mean that relatively few have access to, control over and benefit from academic resources. This is not the place for a technical discussion of how to measure and quantify this privilege. Suffice it to say that there is a large (academic) literature that establishes the enormous inequalities that exist (Kanbur, 2020).

There is also enormous economic privilege in the world. Again, this is not the place for a technical discussion of the measurement of economic inequality. Indeed, although standard measures of economic inequality have risen in many parts of the world in the last three decades, there are other parts of the world where these same measures have fallen (Hasell, 2018). The differences can be put down to differing government policies. However, it can be argued that although policies in some countries have counteracted them, the fundamental forces of technology and openness are pulling in the direction of inequality. This is the sense in which we are living in an age of rising economic inequality (Kanbur, 2019).

So we have academic privilege and economic privilege. What are the connections between the two? The economic basis of academic privilege is very well established. There is a strong correlation between educational achievement and the economic resources of the household of the student. At the very basic level, in poorer countries there is a 32 percentage point gap in primary school completion between children from households in the top 20 percent and the bottom 20 percent of the income distribution. And access to higher education is a preserve of the rich in these countries (Ilie and Rose, 2016).

While universal primary school completion is, of course, the norm in richer countries, gaps in higher education are striking.  To take just one statistic, in the U.S. children from the top 1% of the parental income distribution are 77 times more likely to go to Ivy Leagues than children from the bottom 20 percent (Chetty et. al. 2017). Further aggravating academic inequality, these same U.S. universities do not pay tax on their endowments ($38 billion for Harvard and $7 billion for Cornell in 2018), the returns from which benefit these students. And wealthy individuals receive tax breaks when they donate to expand these endowments further.

Academic privilege in turn breeds economic privilege. The correlation captures causality in both directions. In narrowly economic terms, to the extent that greater levels of education create more skills in different dimensions, and to the extent that these skills are valuable in the labor force, there is causality from academic privilege to unequal economic outcomes. The last thirty years have been characterized by what is termed as skill-biased technical change. Technology is increasingly favoring educated labor, and capital, over basic labor. And the trend looks set to continue. The result is downward pressure on wages of basic labor. While not the only explanation, this has been argued to be a major causal factor in rising economic inequality (Autor, 2014). The spiral thus receives another twist. Economic privilege leads to academic privilege, which in turn reinforces economic privilege.

Furthermore, I have only scratched the surface of privilege and inequality. The intersection between economic inequality and gender, race, ethnicity, caste and other salient socio-economic groupings emanates from and feeds into the discourse. These dimensions of privilege and inequality are also well studied (Chetty et. al. 2020, Bharti, 2019). They also correlate very well with economic outcomes, and have causal explanatory power in conventional econometric terms. Technical change has also been analyzed from these perspectives—for example how new technology affects the economic position of women in the labor market, in rich and poor countries.

The above explorations are standard in modern economics research and relate to internal critiques of economics by economists. Some modern critics focus on how economics gets it wrong because it assumes competitive markets or perfect information. For example, Nobel Prize winning U.S. economist Joseph Stiglitz has emphasized the role of imperfect information in the market place, and of market power (Stiglitz, 2002). Other critics focus on the philosophical foundations of policy prescriptions. For example, Indian economist Amartya Sen, also a Nobel Prize winner, has emphasized that economists must not emphasize economic efficiency over and above inequality (Sen, 1999).

These internal critiques of economics are partly the impetus for the analysis of the two-way relationships between economic privilege and academic privilege discussed above. They are commonplace in much of economic analysis today. What is not so common, and indeed is quite foreign to the average economist, is the broader relationship between the world of ideas and economic power and privilege. It is not part of the standard training of economists. And this is despite the famous dictum of that most famous British economist, John Maynard Keynes, in his 1936 magnum opus The General Theory of Employment, Interest and Money, that

“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.”

In the 1930s, Keynes saw himself as waging a battle in the world of ideas to serve a practical purpose—to change government policy in the face of the Great Depression. But the claim in the last sentence “the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas,” would not comport well with the formulation in the writings of Italian thinker Antonio Gramsci, in particular his Prison Notebooks, authored in the late 1920s and 1930s. Gramsci saw vested interests and ideas as deeply intertwined. The dominant cultural, moral and ideological platform presents a hegemony that supports economic power relationships, or at least dents their questioning. This “superstructure,” in which intellectuals are complicit, is essential in the maintenance of economic privilege. Gramsci saw his argument as a critique of purely economy-based frameworks (“vulgar historical materialism”). While emphasizing superstructures, he also of course recognized and accepted the fundamental role played specifically by the economy and economic power.

Building upon the insights of Gramsci, we should be asking today: How could the fundamentals of economic reasoning provide a platform for a hegemony of ideas that supports economic privilege? In fact, debates among economists in the late nineteenth and early twentieth centuries spoke to this question, perhaps unwittingly, under the heading of “marginal productivity theory” (Clark, 1907). The central economic idea of marginal productivity theory is that a factor of production, be it capital or labor, would be paid its marginal product in a competitive market. The theory is straightforward. If this was not the case, that factor of production could be bid away by a competing producer. Difficulties arise in empirical validity of the theory if markets are not competitive or if myriad other conditions are not met. However, it is a particular extension to the theory that has Gramscian connotations. This is the claim that if a factor is paid its marginal product, that payment is legitimate—compensation is matched by contribution. Economic inequality is legitimized through marginal productivity theory.

One need not be an economist to recognize the parallel nature of the arguments that justify economic inequality and privilege through arguments of “meritocracy” (Young, 1958; Payne, 2017). Even the very word has justification built into it. The idea that highly paid individuals deserve their high pay because it is compensation for their contribution to society is baked into the superstructure of political economy the world over, and serves to sustain inequality of pay and incomes, not least because those on low incomes also buy into the narrative—that is what Gramsci meant by cultural hegemony. The discipline of economics, despite its recent and periodic attempts to break out, is one of the many contributors to the narrative. Keynes recognized this in his 1926 Essay, The End of Laissez Faire, which traces the origins of the doctrine:

“Therefore I trace the peculiar unity of the everyday political philosophy of the nineteenth century to the success with which it harmonized diversified and warring schools and united all good things to a single end. Hume and Paley, Burke and Rousseau, Godwin and Malthus, Cobbett and Huskisson, Bentham and Coleridge, Darwin and the Bishop of Oxford, were all, it was discovered, preaching practically the same thing—individualism and laissez-faire. This was the Church of England and those her apostles, whilst the company of economists were there to prove that the least deviation into impiety involved financial ruin.”

Colorful it may be, but Keynes’s prose complemented social analyses of his contemporary Gramsci, who described such dynamics as superstructure and cultural hegemony.

In sum, economists have analyzed the relationship between economic privilege and academic privilege in some detail. The broad consensus is that there is an intimate two-way causality. Policy conclusions naturally flow from this, including equalizing interventions in the education sector. Nevertheless, economists have yet to take up the broader question of how the realm of ideas, of economic ideas in particular, underpins and supports economic privilege and inequality. Antonio Gramsci is not a name heard in economics courses. But the power of ideas in determining political economy is something economists should be interested in analyzing, not least because they would be following in the footsteps of John Maynard Keynes.

-Ravi Kanbur

Ravi Kanbur was born in India and brought up in India and in Britain. He studied economics at the Universities of Cambridge and Oxford. He now teaches economics at Cornell University. Current positions include Co-Chair of the Food Systems Economics Commission. Past positions include Chief Economist for Africa at the World Bank, and President of the Society for the Study of Economic Inequality.

References

Autor, D .2014. “Skills, Education, and the Rise of Earnings Inequality Among the ‘Other 99 percent’”, Science 344 (6186), 843-851.

Bharti, Nitin Kumar. 2019. “Wealth inequality, class, and caste in India: 1961-2012.” https://www.ideasforindia.in/topics/poverty-inequality/wealth-inequality-class-and-caste-in-india-1961-2012.html

Chetty, Raj,  John N. Friedman, Emmanuel Saez, Nicholas Turner, and  Danny Yagan. 2017. “Mobility Report Cards: The Role of Colleges in Intergenerational Mobility.” NBER Working Paper No. 23618.

Chetty, Raj, Nathaniel Hedren, Maggie R. Jones, Sonya R. Porter. 2020. “Race and Economic Opportunity in the United States: an Intergenerational Perspective.” The Quarterly Journal of Economics, Volume 135, Issue 2, May 2020, Pages 711–783, https://doi.org/10.1093/qje/qjz042

Clark, J.B. 1907. Essentials of Economic Theory. New York: The Macmillan Company.

Gramsci, Antonio. 2011. Prison Notebooks. Translated by Joseph Buttegieg. Columbia University Press.

Hasell, Joe. 2018. “Is Income Inequality Rising Around the World?” https://ourworldindata.org/income-inequality-since-1990

Ilie, Sonia and Pauline Rose. 2016. “Is equal access to higher education in South Asia and sub-Saharan Africa achievable by 2030?” Higher Education. Vol. 72, pp. 435-455.

Kanbur, Ravi. 2019. “Inequality in a Global Perspective,” Oxford Review of Economic Policy, Vol. 35, No. 3, pp 431-444.

Kanbur, Ravi. 2020. “Economic Inequality and Academic Freedom.” T.B. Davie Memorial Lecture. Delivered to University if Cape Town, August 5.

Keynes, John Maynard. 1926. “The End of Laissez-Faire” in The Collected Writings of John Maynard Keynes, Volume IX, Essays in Persuasion, Royal Economic Society, Palgrave MacMillan, 1978.

Keynes, John Maynard. 1936. The General Theory of Employment, Interest and Money. The Collected Writings of John Maynard Keynes, Volume VII. Royal Economic Society, Palgrave MacMillan, 1978.

Payne, G. 2017. The New Social Mobility. Bristol: Policy Press.

Sen, Amartya. 1999. Development as Freedom, New York:  Knopf.

Stiglitz, Joseph E. 2002. Globalization and its Discontents. W.W. Norton.Young, Michael. 1994. The Rise of the Meritocracy. Second Edition. Transaction Publishers.

Young, Michael. 1958. The Rise of the Meritocracy. Random House.