Lindert on Goldin and Katz, _The Race between Education and Technology_

[Book Reviews in Economic and Business History]

Published by EH.NET (November 2008)

Claudia Goldin and Lawrence F. Katz, _The Race between Education and 
Technology_. Cambridge, MA: Harvard University Press, 2008. vii + 488 
pp. $40 (hardcover), ISBN: 978-0-674-02867-8.

Reviewed for EH.NET by Peter H. Lindert, Department of Economics, 
University of California -- Davis.


Claudia Goldin and Lawrence Katz have produced a definitive economic 
history of American education.  This reviewer’s high hopes for their 
book project have not been disappointed.  The final product is tightly 
reasoned and easy to grasp by anyone who cares about the country’s 
educational history.  Even those who are shy of mathematics can simply 
slip past the occasional show of regressions and equations, guided by 
the authors’ trouble-free prose.  Those of you who have seen several 
Goldin-Katz papers from this project are assured that the whole is 
greater than the sum of those parts.

Two featured insights tie the whole book together, with the first of 
these leading logically to the second.  The first insight: It’s home 
grown education that has mattered, not technology or immigration.  That 
is, contrasting historical movements in American wage inequality are 
explained mainly by revolutions in education, not by shifts in 
technology or by waves of immigration.  Goldin and Katz make this 
argument persuasive by wisely choosing to focus on the task of 
explaining contrasts in wage movements between long periods.  Wage 
inequality, by occupation or by educational level, rose in the late 
nineteenth century, fell dramatically in the first half of the 
twentieth, and then rose in most decades of the second half (though not 
in the 1970s).  In any one period, all three of those forces -- home 
grown education, technology, and immigration -- shared in determining 
the width of the pay gaps.  Similarly, trends in all three shared in the 
task of explaining trends in the pay gaps.  Yet the key insight emerges 
from contrasting those long trends, a temporal contrast analogous to 
economists’ “differences in differences” analysis.  What made periods of 
rising inequality different from periods of falling inequality is that 
the rate of advance in education was stronger in the latter periods. In 
the title roles, technology has been the steady tortoise, while 
education has raced like the erratic hare. At times it ran ahead, at 
times it fell asleep, and now it races to catch up.

The first featured insight introduces their search for the second.  How 
did America achieve those revolutions in education, and what explains 
their timing? The second insight is that American education had a unique 
set of egalitarian virtues, which weakened or were subverted later.  The 
six original virtues were public funding, public provision, the 
separation of church and state, fiscal decentralization, forgiveness of 
youthful errors, and gender neutrality.  Some of these virtues waxed and 
waned, though not because of any unifying dynamic.  Three of them -- 
public funding, public provision, and secularization -- rose across the 
middle and late nineteenth century and never retreated, for better and 
for worse. Two others - forgiveness and gender equality -- have been 
permanent American strengths, with a couple of wrinkles in the 
mid-twentieth century.  Fiscal decentralization has the most complicated 
dynamic of all.

The opening part of the book (Introduction and Chapters 1-3) previews 
everything, especially the first key insight about the 
technology-education race. Its factual summaries deserve to be worked 
into our reading lists and lectures.  For an overview of the distinctive 
history of American educational progress across the data-rich twentieth 
century, see Chapter 1.  Chapter 2 fixes our attention on earnings 
inequality, the dependent variable that dominates the book. Reading 
lists could well combine this chapter’s summary of wage inequality in 
the twentieth century with the Piketty-Saez overview of what happened up 
at the very top of the distribution.  Chapter 3 on skill-biased 
technological change debunks the notion that the computer era is a 
radical departure, and drives home the point that skills bias has 
advanced more evenly over the decades than most people think. It ends 
with the key pivot point that “It’s not technology,” which turns us 
toward the second key insight, namely that fluctuations in educational 
progress play the leading role in explaining inequality movements.

The second part of the book dwells on the unevenness of that progress. 
This country went through three great waves.  In the nineteenth century 
America’s (and Canada’s) public primary schooling became the envy of the 
world.  Chapter 4 on the “origins of the virtues” sketches this wave, 
with definitive coverage of the six egalitarian virtues.  Chapters 5 and 
6 explain the second great wave, in which America became the world 
pioneer in public high schools with its own egalitarian emphasis on a 
wide menu of courses for all.  Goldin and Katz show that several 
economic forces explain why the timing of this grass-roots movement 
differed across regions.  Their quantitative accounting downplays 
compulsory school laws and child labor laws, which they find had only 
small, though statistically significant, effects.  Rather, the analysis 
hints at a political economy in which some regions developed high 
schools faster than others because their political structures were more 
egalitarian.  In the high school wave, as in the earlier primary school 
wave, the willingness to raise taxes for school unquestionably raised 
total schooling, and did not just crowd out private schooling.

Chapter 7 on the evolution and current state of America’s private and 
public colleges and universities is jam-packed with useful information. 
  It belongs on everybody’s reading list in education economics.  The 
main theme here is triumph: The Americans did a better job than any 
other country at financing higher education, and at making its 
institutions compete against each other.  Only at the end of the 
twentieth century have other countries caught up in high-education 
enrollments, though the United States continues to dominate in research.

Two subplots in the twentieth-century advance of higher education relate 
to gender and to regions.  The gender story exposes one of the main 
wrinkles in the triumph of gender equality in American education.  With 
higher education, as with careers in teaching, women lost ground at one 
point in the twentieth century, though they overtook males later.  Their 
college education fell behind a bit in the Great Depression of the 
1930s, and especially in the postwar quarter-century when the GI Bill 
did so much for males’ higher education.  This wrinkle was ironed out in 
the 1970s, when male graduation rates stagnated and females soon became 
the majority of college graduates, as they continue to be in this and 
several other countries.

The regional story includes some reverse crowding out: The Northeast has 
remained behind in its tax support for higher education because it has 
always been so well endowed with private universities.  That might not 
have been so remarkable if the overall attendance rate had been higher 
in the Northeast.  Yet Goldin and Katz show us the opposite: Overall 
attendance remains higher in the vast North and West from Minnesota to 
the Pacific.  In other words, something about the presence of excellent 
private universities actually lowered college attendance in the 
Northeast, other things equal.  Might this quantity difference have 
outweighed the quality advantage of private institutions in the 
Northeast?  Did influential ivy alums in northeastern states suppress 
public higher education enough to hold back regional growth?

In the final part of the book Goldin and Katz return to the race between 
technology and education in explaining twentieth-century movements in 
earnings inequality, this time with Chapter 8’s tidy quantitative 
analysis. The early wage compression and the later wage widening were 
driven by the supply and demand for the skills tied to educational 
attainment, with a little help from institutional movements in the power 
of unions and wartime wage controls.  As we were warned in Part 1’s 
preview, the wage movements were dominated more by swings in the supply 
of education-related skills than in the demand for them.  And on that 
supply side, the swings in home grown educational attainment were more 
important than the swings in immigration.

In Chapter 9’s finale on “How American Can Win the Race for Tomorrow,” 
the authors tread warily in the minefields of current policy debates. 
They do not take clear sides in the war over whether extra money will 
improve education, despite citing Krueger’s evidence that paying for 
smaller class sizes does seem to help.  They also refrain from judging 
No Child Left Behind, though they note that testing and accountability 
is an important issue.  On local school choice mechanisms, such as 
vouchers and charter schools, they take a cautious position shared by 
this reviewer: the evidence is mixed, but school choice “could improve 
the situation” for low-income families.  The idea of school choice is 
also supported, of course, by its success in raising the productivity of 
higher education, covered back in Chapter 7.  They also seem to accept 
the evidence that the country has underinvested in infant education.

Where next for research in the economic history of American education? 
This is the perfect time to ask, now that Goldin and Katz have achieved 
closure on so many questions.  The view from their shoulders reveals two 
key areas to explore.

First, who was it that under-invested in education?  Did private 
individuals pass up money lying on the sidewalk, or was it the political 
process failing to realize high social rates of return that took into 
account both fiscal effects and knowledge externalities?  For the 
purposes of their book, Goldin and Katz are able to finesse these tough 
questions.  By focusing on contrasts between American epochs, they 
successfully explain the contrasts in “returns” in terms of movements in 
wage ratios that were dramatic enough to drive movements in all 
definitions of the rate of return on education. Yet we still need to 
explore the separate levels of the private versus “social” (private and 
fiscal only) versus overall rates of return, the last being the one that 
draws on the recent literature on externalities.  Only then can we 
distinguish private irrationality, or private capital constraints, from 
a failure of policymakers to capture high societal returns to extra 
years of education.  The new research will have to proceed on different 
levels for different time periods.  For the present day debate, scholars 
will have to jump the higher econometric hurdles imposed by Heckman, 
Lochner, and Todd in their rejection of the convenient Mincer return 
analysis.  For earlier periods, it should suffice to make rougher 
contrasts between the likely private and fiscal returns for different 
eras and different places.

A related frontier is the political economy of education finance.  Who 
voted for or against taxes for schools, in which states, and why? 
Goldin and Katz have advanced the political economy agenda with 
econometric evidence on the determinants of high school and college 
attendance, and the funding for public state universities.  Yet there is 
much more to be done.

On both these research frontiers, our progress will be accelerated 
because Goldin and Katz have paved the way.
	

Peter H. Lindert is Research Professor of Economics at the University of 
California - Davis.  His latest book is _Growing Public: Social Spending 
and Economic Growth since the Eighteenth Century_, two volumes, 
Cambridge University Press, 2004.

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