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The Kobe Bryant theory of inequality

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Both Matthew Yglesias and Alex Tabbarok seem to think we disagree about the role of technology and inequality. We don't.

As Tom Noah's series on inequality suggests, there are lots of questions when it comes to inequality. But what's confusing people here is one particular question: skills-biased technological change. That's where technology changes (we now have computers) and those who know how to use the new technology pull away from those who don't. In this case, the scenario would be that the computer-literate start making a lot of money, while those who aren't comfortable with laptops and Firefox lose out.

That explanation is intuitively appealing, but it doesn't fit the facts. For one thing, Europe had the same technological revolution, but without the attendant increase in inequality. For another, the startling changes in inequality was between those at the 99th percentile and those in the 90th percentile. It was the tippy-top pulling away from the top, or what I like to call "the conehead economy." If you imagine the economy as the person, it's grown eight inches, and most of that growth has been in its forehead.

Matt and Alex both double back on this and note that technology does play a major role here, and they're right: The Internet, television and other forms of mass media and communication make it much easier for one person or firm to serve a national or international audience. To use an easy example, Kobe Bryant can make more money because the Chinese watch his basketball games and pay him to endorse their products (that's not a random example, incidentally).

But saying that the rise in inequality is partly the result of technological change is not the same as saying it's the result of skills-biased technological change. It's not that satellite television has created a need for more basketball players and that need isn't being filled. If that were the case, the answer would be easy: Train more basketball players. It's that satellite television has made it much, much more lucrative to be one of the world's top basketball players. It's not about skills, but about the opportunity to make money. Training more basketball players won't really help reduce inequality or spread opportunity in that world. Higher tax brackets for the super-rich, however, might.

Graph credit: Slate.

By Ezra Klein  |  September 13, 2010; 10:34 AM ET
Categories:  Inequality  
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Comments

Except Kobe Bryant's basketball salary is severely limited by the people who own basketball teams. Lot of his wealth creation is being siphoned off by others. So why is he even used as an example? Because even though the actual facts don't fit he fits the story.

Posted by: endaround | September 13, 2010 10:57 AM | Report abuse

How about just buying a ticket to watch Kobe play against Kobe? Watching him warm up? Nah. It's more fun to watch the upgrade candidates attempt to play catch up. This also employs more people in the league and other support industries of the game.
The U. S. has a transportation advantage that older, more crowded nations can't enjoy... Wider roads. Most people prefer larger vehicles as opposed to subcompact one's. I'm referring to lithium battery technology and utilizing our taken for granted advantage of largeness, where we have room to fully implement somewhat older battery technology by building the vehicles out of lighter, stronger materials, enabling the carrying of the heavier, older batteries ala upgrade style of the computer world, where they pay for R. & D. via their own customers payments. A mile covered is a mile earned. As opposed to the overheated attempt to rush through the use of a rarer element. [Lithium. (Kobe vs. Kobe)]

Posted by: deepthroat21 | September 13, 2010 11:24 AM | Report abuse

Kobe is a good example of someone at the top who has benefited from globalization. This factor was almost completely ignored in Tim Noah's series. He was too busy worrying about bank tellers to what technology did for hedge fund managers.

In general the series has too much focus on what has held up the bottom - immigration, unions. These factors may be part of the story, but (so far) all he has to say about the top is they did well off Reagan's tax cuts. It's as if the possibility that high earners actually became more productive is uncomfortable for him.

Posted by: MrDo64 | September 13, 2010 11:26 AM | Report abuse

"It's not about skills, but about the opportunity to make money." I'd go one step further and say that one factor is more than the mere opportunity to make money: it's the desire to engage in the opportunity to make money. I'm often amazed at the number of people who, after being given a job with great pay and low demands, fail to show up on a daily basis: those who do not show up lack the desire to engage in the opportunity to utilize the skills they have.

A while back, a philanthropist sponsored a program in which teen mothers were provided with child and medical care, paid to attend class for 1 hour each day, and paid to work (in a receptionist-like role, having the opportunity to meet a variety of key businesspeople in a variety of fields) for 1 hour each day. The hourly wage was set to one-half of the median daily wage in the area, meaning that each participant would for the 2 hour obligation receive pay equivalent to the median worker in the area (a darn good deal) plus benefits far beyond those offered in any industry. More than 78% of participants simply failed to attend regularly... which exemplifies the type and degree of non-desire I'm attempting to highlight.

Kobe isn't lazy: one factor in his success is his willingness to practice and desire to achieve. Without his willingness and desire, the other factors -- his height, his skills, and the technology he successfully exploits -- are relatively meaningless.

Posted by: rmgregory | September 13, 2010 11:32 AM | Report abuse

If you're advocating the use of income taxes to redistribute income and decrease post-tax income inequality, then the discussion would be better served by measures of post-tax inequality, instead of the (poorly labeled) pre-tax income graph you posted the other day.

I suppose it is possible that your concern is pre-tax in come, rather than post-tax. In that case, higher taxes would be used to decrease incentives for high earners to earn. But I seriously doubt that your solution to inequality is just less productivity, so I'll stick with my suggestion that you use post-tax numbers or at least explain that numbers are pre-tax when that is the case.

Posted by: djc63 | September 13, 2010 12:03 PM | Report abuse

Winner-take-all markets (society) coined by Robert Frank and Philip Cook.

It has the effect of not only concentrating wealth but also limiting intellectual and creative diversity. In many, many fields, if you don't make it big, you can't make it at all. Technology may ameliorate that winner-take-all aspect in some endeavors (you can make and sell your own line of clothing without any bigger investment than a sewing machine, cloth and your time) but in others you are SOL. Not only has the satellite, the Internet, etc. not increased the demand for basketball players by enlarging the market, it may have actually decreased demand because the demand is not really for basketball players in general but for certain basketball players -- Kobe and the likes -- which technology very cheaply increased the supply of.

Posted by: kcar1 | September 13, 2010 1:52 PM | Report abuse

10 years ago, blogging for a living was unheard of, but here is Ezra doing just that. Technology makes it possible, but not everybody can do it, even if they have access to the technology. Not even all journalists can do it. Face it, success in any given field requires and aptitude for it, a certain level of talent, a lot of effort and some luck.

Posted by: bgmma50 | September 13, 2010 2:16 PM | Report abuse

And all these people are ignoring that Kobe isn't the one making the money. His salary is capped. Yes he has endorsement deals, but he likely would be making more in real terms in the early 90s when the Larry Bird rule existed and when the NBA was on top than now where his pay is being surrendered to Laker ownership.

Posted by: endaround | September 13, 2010 2:20 PM | Report abuse

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