Monday, October 17, 2016

"How Clones Can Experience Unequal Economic Outcomes"

From The Conversable Economist:
A certain amount of economic inequality is just luck. At the extreme, some people win the lottery, and others don't. But there is also the potential for more subtle kinds of luck, like two equally talented entrepreneurs, where one business happens to take off while the other doesn't. Or two equally talented workers who go to work for similar-looking companies, but one company takes off while the other craters. Richard Freeman discusses the research literature on why this final example might be significant enough to play a role in overall economic inequality in the US in his essay, "A Tale of Two Clones: A New Perspective on Inequality," just published by the Third Way think tank. Freeman sets the stage like this (footnotes omitted):
"[C]onsider two indistinguishable workers, you and your clone. By definition, you/clone have the same gender, ethnicity, years of schooling, family background, skills, etc. In 2006 you/clone graduated with identical academic records from the same university and obtained identical job offers from Facebook and MySpace. Not knowing any more about the future than the analysts who valued Facebook and MySpace roughly equally in the mid-2000s, you/clone flipped coins to decide which offer to accept: heads – Facebook; tails – MySpace. Clone’s coin came up heads. Yours came up tails....