Monday, February 27, 2006

A Fallacy

In today's column, Graduates Versus Oligarchs Krugman contradicts the new Fed chief Ben Bernanke. Krugman accuses Bernanke of making a mistake in saying that incomes of the well-educated have risen.

Krugman supports his position by presenting data that in fact average incomes of college graduates have not risen substantially.

Krugman furthermore presents data showing that incomes of the top 1% have risen to $400,000; the top .1% to $1.6 million and the top .01% to $6 million. He attributes this to the establishment of an oligarchy, a ruling class.

To some extent that is true. Apalling examples can readily be named.

Surprisingly, Krugman overlooks another possibility: that a college degree adds little to the market value of the person who has it. College students do not learn all that much that translates to value to an employer.

What is very likely is that when Bernanke used the term "well-educated," he did not mean average college graduates. What Bernanke probably meant was graduates of the Ivy Leagues and other top-rated undergraduate schools and holders of advanced professional degrees (MD, JD and MBA), and Ph.D.'s in Economics, Business, Psychology, Biology, and other sciences.

So the fallacy may not have been Bernanke's, but Krugman's.

Finally, neither Krugman nor Bernanke are members of any oligarchy. Yet they both have incomes that place them in the top .1%, possibly even in top .01% . How do they do it? With intelligence, hard work and Ph.D.'s in Economics. Both have written successful Economics textbooks.

America is still the land of opportunity. It just takes more talent and work to make it big.


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