1âA primer on inequality
Drive far enough on a snowy, tree-lined road in the middle of nowhere Montana and you will encounter a stand-alone stone building occupied by security guards. If youâre lucky enough to be on the guest list or, even luckier, a member, a quick ID check is all you need to gain access to perhaps the most exclusive private ski resort in the world, the famed Yellowstone Club in Big Sky, Montana.
For ski enthusiasts, treatment at the Yellowstone Club feels different than at non-membership ski resorts. There are no long walks hauling gear from distant parking lots. Instead, a valet meets you at the entrance to an opulent clubhouse to park your car and shepherd your skis slope-side. Crowded and overpriced food courts packed with bags and people struggling to put on their ski gear are replaced by a clubhouse with a complimentary barista and hot breakfast, including fare like âpigs in a parkaâ and acai bowls. Long lift lines on powder days are replaced by nearly entirely empty chairlifts, ensuring that untouched lines exist well past the next snowfall.
Such is life for the 800-plus1 very rich and variably famous members. And to be clear, members are indeed very rich. With an initiation fee of $300,000, annual dues of $41,500 per year, and a requirement to own property at the resort ranging from just under $3 million for undeveloped land to tens of millions of dollars for lavish mansions, all but the most well-off are kept off the membership roster.2
For the uninitiated, it seems unfathomable as to why, or perhaps even how, such a place could exist. At a time when 39% of American households cannot pay a surprise $400 expense without selling assets or taking on new debt and 25% of adults skipped necessary medical treatment due to their inability to pay, the divide between the average American and the superrich American is all the more telling.3 However, Americansâ attitudes about the level of inequality are mixed. The trend in the number of Americans who think that the government should intervene and reduce the level of income differences has been virtually unchanged since 1978 even as income differences have skyrocketed.4
The dramatic increase in income inequality is well documented by economists. Indeed, the seminal work by Thomas Piketty and Emmanuel Saez, âIncome Inequality in the United States, 1913â1998â, sparked debates among politicians and economists alike, led to the publication of countless papers and books on the subject, and prompted the collection and sharing of global income data through the World Incomes Database.
Within this debate, there has been a tendency to treat income inequality as a moral issue with normative statements abound. More liberal outlets such as the Washington Post and the New York Times describe income inequality as âHow Income Inequality Hurts Americaâ5 and âIncome Inequality: Itâs Also Bad for Your Healthâ6 while more conservative outlets describe income inequality as âThe Inequality Delusion: Why Weâve Got the Wealth Gap All Wrongâ7 and âIncome Inequality Is Good for the Poorâ.8
So why such a dramatic divide? Ideology certainly plays a role. For conservatives, income is unequivocally viewed as a reward to good decisions made by the recipients. The rewarded are people who worked hard, earned their way into good schools, worked hard, earned job offers at good companies, worked hard, and advanced up the ranks based on their merit. Liberals, however, have a different view of how the rich end up at the top of the income ladder, through a combination of luck, fraud, structural advantages, and preferential treatment by those in power, oftentimes, the already-established rich.
However, the reality is likely somewhere between the two. The âpull yourself up by your bootstrapsâ stories of success are oversimplified, and the âcheat your way to the topâ descriptions are mostly incomplete. Even worse, in the current climate of blind bipartisanship in the United States, it seems that very few have actually taken the time to look beyond the headlines to try to unpack exactly what makes inequality good or bad and what, if anything, we can or even should do about it.
Fortunately, a more nuanced approach to thinking about inequality can help untangle the good from the bad and inform a policy approach to coping with it. In effect, that is the purpose of this book: to focus on one possible cause and result of income inequality, outline its negative consequences, and use the analysis to inform policymakers.
What is this boogeyman of income inequality? Rent seeking, the use of a resource that results in the transfer, rather than the creation, of wealth, begetting income inequality and shaping the incentives behind our education, career choices, and policies.
The remainder of this book is designed to shine a light on the concept of rent seeking. Chapter 2 gives the reader an introduction to the economic concept of rent and offers a working definition of rent seeking. Chapter 3 offers examples of where rent seeking takes place in the modern economy. Chapter 4 discusses an unexpected consequence of rent seeking, the shifting of talent, and the relationship between postsecondary degree completions by major and state-level growth in the United States. Chapter 5 discusses some of the ways politicians have tried, or perhaps failed, to address rent seeking in the US economy.
Notes
