Trade and Dealing with Income Distribution
There Is No Shortage of Shovel-Ready Human Capital Investment Projects

Marginal Products and Earnings in Historical Perspective...

File ReynaldofChatillon PatriarchofAntioch jpg  Wikipedia the free encyclopedia 1

In 1183 A.D., Reynaud de Chatillon--Prince of Antioch, Castellan of Kerak in Moab, Lord of Oultrejourdain, one of the leading nobles of the Latin Kingdom of Jerusalem, tall, strong, handsome, wielding his two-handed sword In Nomine Domine, and suffering from severe impulse-control problems--had much, much higher earnings than I would have had had I been back in the Latin Kingdom of Jerusalem in 1183.

Today, by contrast, I sit here outdoors in the warm Berkeley winter sun with a Treasury-Department Family Economic Income concept eight times the U.S. median, and were Reynaud de Chatillon to be here now he would be working the loading dock at Target at near-minimum wage and on Thorazine, for the skills that were his comparative advantage are to typically highly rewarded today--if he were not in Folsom Prison.

And perhaps in future centuries the wheel will turn again:

Ryan Avent:

Technology: Cognitive inequality: LAST week, I participated in a panel discussion on open questions in economics with professor and economics blogger extraordinaire Karl Smith. We got to talking about inequality, and I ran through a few of the bog standard interpretations of rising income gaps: mismatches between the supply of and demand for skills, superstar effects at the very top, and improved rent-seeking in the financial sector. Mr Smith offered something dramatically different, some of which he gets at in this post:

I want to make the point that this consistent with my long thesis that we are returning to an environment where productivity gains do not accrue to unskilled labor because they are imbedded in the brains of the innovators. A factory is really big and hard to keep secret. Computer code less so. When you simply write down the process you want or draw the object you want and the computer translates it for you the seep down [keeping the relative income distribution from blowing apart] will grind to [a] complete halt….

I want to stop there and use this thought to begin to tie a few threads together. Politicians, and many economists, are increasingly focused on the importance of global supply chains…. [W]hat most people seem to gloss over is the fact that the most important parts of modern supply chains are embedded in the heads of innovators and… in the space… in which discussions about innovation take place…. [T]he most important parts of the Apple supply chain are Steve Jobs' brain and the community of engineers tasked with turning Jobs' musings into actual, revolutionary products.

This has significant implications…. Someone with an outstanding analytical framework and a talent for manipulating information has probably (or at least potentially) enjoyed huge productivity and consumption gains from the internet and related technologies. Others have gotten some benefits from the internet, but it's far from clear that those benefits are outweighed by, say, the impact of increased outsourcing on the wage they can command….

[I]s this an iron rule of innovation in information technology—that the cheaper information becomes and the easier it becomes to manipulate it the greater will be the gap, productive and otherwise, between the informationally capable and the rest?

That's certainly possible….

I'm not sure we should be confident that continued innovation won't ultimately augment cognition generally, and perhaps in relatively surprising ways. Maybe as the internal aspect of cognition shrinks relative to the external, technological aspect, the differences in internal characteristics across the population will cease to matter very much. The more I rely on the same cloud brain that's available to anyone else, the less the strengths or weaknesses of my meat brain may matter…

But it probably will not turn again back in the direction of Raynaud de Chatillon.