In “The Complacent Class,” Cowen, who runs the popular blog Marginal Revolution, argues that a new kind of cultural segregation has become the norm in American life, benefiting a select class — and leaving many more people simply stuck. The U.S. population has sorted out not only along political lines, but also by education, race, income, social status and even technological ability. Along the way, the country has become more polarized, less dynamic and less fair.
Cowen argues that the educated urban elite, who are well equipped to compete in today’s economy, have become increasingly isolated from other parts of the country — and so don’t see the urgency with which the country needs reform to help those left behind. While people on the top have little motivation to change, he believes they may be forced to, as others grow increasingly disgruntled.
I spoke with Cowen in December about the book, which was released Tuesday. This interview has been edited for length and clarity.
In the book, you discuss how new “matching” technologies are helping to make the world a more enjoyable place — for example, websites and apps that help people find better jobs and more suitable mates. We think of these technologies as a good thing, but you point out they have a dark side, including contributing to growing segregation and inequality. How does that work?
I think of matching and segregation as two sides of the same coin. On the positive side, so many of the gains in our well-being over the last 20 years have come from better matching, rather than traditional forms of economic growth. These days, if I buy music, I know in advance I like it. In the old days, you would buy an album, and you might not like most of the songs. Or if you look at couples, their ability to find a compatible partner is much greater because of the Internet. People who are good at using matching technologies are really much better off.
But there are two downsides. One is many people don’t have these technologies or use them well, because of the digital divide. Secondly, matching is also a kind of segregation. People who are of the same political views, the same education, same cultural tastes, similar income levels, they’re much more likely to be living together than before. It has very real benefits for some people, but in my opinion it is not overall a good thing. This came up as an issue in the election.
You say the upper class has become much more concentrated geographically. How did that occur?
People of high socio-economic status and particular political views are much more likely these days to be matched into parts of New York, California, Washington D.C., and a group of smaller but high status towns, like Ann Arbor, Santa Barbara, and so on. This means those people are actually somewhat insulated from the “real America.” When you run that experiment in politics, all of a sudden it’s possible to get this big divergence between the popular vote, which went for Hillary Clinton, and the electoral college vote, which went solidly for Donald Trump.
What does the decline in people’s willingness or ability to move around the country have to do with how dynamic the American economy is?
Moving around less makes our word views more static, it makes our economy more static, and it makes our labor markets slower to recover after a recession. If you compare today to the period between 1948-1971, there’s about 50 percent less movement across states. People find somewhere they really like and they stay, which is a good thing. But it does mean a loss of dynamism.
Some of the lack of mobility is due to high rents in cities, which keeps many people out, right? You cite some research that shows if it was cheaper to move into American cities, GDP growth would be much higher, and the economy would be more dynamic.
Enrico Moretti’s estimate is that GDP would be 9.5 percent higher. That figure is hard to estimate, but it’s not a tiny effect. Right after WWII, adjusting for inflation, an apartment in Manhattan cost $530 a month. That’s unimaginable today. It’s a big reason why mobility has become problematic.
These restrictions to new people moving in, the ossification of the most developed cities in America, you say all that’s leading to an increasing isolation of this “complacent class” you talk about —
That’s us, by the way.
Right, as we sit here pontificating. Who is the complacent class and what is their experience now?
The most literal meaning is well educated, upper middle class to upper class professionals. They’ve dug themselves in and have more or less impregnable positions with high income. They’re highly qualified for their jobs, and they could get another great job at will.
But the trend of complacency goes beyond that. Even among people of lower educational backgrounds or lower incomes, there’s a much greater willingness to accept the status quo. If you look at the 1960s, with the riots, the discontent, the crime rates, there was a sense of urgency — which was actually mostly disruptive, I’m not advocating we go back to that — but it was the other side of the coin of greater dynamism. And now, even people who are significant losers from the current arrangement are less likely to do something disruptive. This may just now be changing, though.
The 1960s and 1970s weren’t a particularly happy time for many people in the U.S. Are you discounting the benefits we have today in favor of a preference for growth and change?
The benefits of today are very real — lower risk, higher safety, a greater sense of calm. Even if you don’t belong to a minority group that was badly oppressed back then, life is generally much better today. The problem is, we can’t just keep the status quo forever. When everyone tries to dig in and tries to become super safe, ultimately dynamism dwindles, you run out of the ability to pay the bills, and you can’t maintain all those protective barriers. The more you try to control risk in the micro sense, the more you lose your ability to hold the really big risks at bay.
What changes will that lead to, in your view?
Well, we just had a big one this November. Trump’s election was something many people thought couldn’t happen, and it did. It’s very hard to predict exactly what the Trump administration will do, but it’s already proven highly disruptive.
You write that “Some of the places that are the most segregated are the parts of America where people feel very good about themselves” -- places like New York and California, liberal cities and college towns. You say that segregation in these places is not mostly the result of overt racism anymore, but when you have segregation by education, by income, by social status, does the effect end up being largely the same?
A lot of the effects are similar. There are plenty of people who would never dream of thinking of themselves as racist, yet they will choose where they buy their home based on getting into “the best school district possible,” and that will have a segregating effect. In absolute terms, many of the most segregated school systems are in the north, in places like New York state. It’s nice that there is no racist intent, it’s still a positive thing. But at the end of the day the mixing that boosts mobility is in danger. And the fact that it’s not so explicitly racist in some ways makes it harder to combat. Because who could object to someone wanting a better school district for their kids? Of course, that’s natural.
You didn’t propose many solutions to this in the book. I felt like you see much of this as inevitable. Are there things we could do to diminish school segregation?
There are plenty of solutions, like having more school choice, deregulating high-density building in urban areas, shifting away from entitlements in the federal budget and having more discretionary spending. I could go on. But part of the point of the book is the complacent class doesn’t want many of those things to happen, so probably they won’t. We probably need to hit a wall for change to occur, and we may be in the midst of that right now. So there is an air of inevitability. It’s not that there are no solutions, it’s that we’re unwilling to do them.
You mention that we see a similar sorting out among companies, with some super companies that are high performers, and then a large class of mediocre firms —
That’s become much more the case. There are some super firms like Google, Microsoft, Apple — not just tech companies, but many other places — and then there are ordinary companies that don’t grow much or have the same productivity.
How did that happen?
I think talent became more important. Again, that’s a good thing. But the best and wealthiest firms hire up the best talent, let them learn from each other, let them become fantastically productive. They don’t want to let in workers who will break that morale, disrupt the culture, say rude things over the water cooler. They become more segregating. They don’t segregate based on race. In fact they try to be inclusive. But they do segregate based on IQ, and of being cool and cooperative and fitting the corporate image. And that is actually quite oppressive for much of society.
Some of the Trump supporters are rebelling against that. They consider that a kind of “ism” directed against them, and they want that system to end.
If you were to describe that in a slightly different way, it’s a situation many people would support — the best companies recruiting talented people who don’t make rude comments.
Of course! And you can’t avoid it. You can’t force the best companies to hire rude, unqualified people. That said, decades ago, within most companies there was more mixing, if only because it was harder to evaluate talent. Today, when you apply for a job, the employer will Google you, look at your record, looking at your presence online. It’s much easier to evaluate people.
I thought it was really fascinating how you compare the changes in the United States between 1900 and 1950 with the changes between 1965 and 2015. You talk about how people in 1950 expected us to accomplish many more grand projects in the future, like space colonies, because they were drawing on their own experience of 50 years of change. But what we’ve actually seen is quite different, right?
Science fiction from the 19th century almost always underestimates how much the world would change. Science fiction from the middle of the 20th century almost always overestimates what will happen, especially with travel. They imagine a nearly limitless ability to get places, like the flying car, the jet pack, warp drive. In reality, in most places we get around more slowly today than we did in the 1970s. Trains are not really better, bus service arguably is worse. Cars are safer, but traffic is worse. Other than smartphones and communication, in a lot of areas we’ve badly unperformed expectations.
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