Consider an egalitarian and an elitist view on differences in educational
attainment. First, suppose that all children have the same ability and differences
in educational attainment occur solely due to differences in opportunity.
Specifically, low-income parents have a higher rate of discount due to poorer
access to capital markets. Second, suppose that all children have the same
access to capital markets, but that persons from low-income families are less
able than those from high-income families.
Draw a graph of the market for human capital for children of low- versus
high-income parents in the two scenarios.
Draw the implied distribution of earnings in (A) for both scenarios.
Are these distributions consistent with the philosophies that generated
them? Why or why not?
Provide an economic rationale for why your parents might "reasonably"
complain if you date a person from "across the tracks" (i.e., from
a lower socio-economic status) or listen to "gangster rap" (i.e.,
music with anti-social lyrics).
Each year there is a European Song Contest in which each country from Europe
enters a group. The groups perform a song on the night of the competition,
which is judged by a panel of well-known persons from each country. The competition
is televised through-out Europe and the results are typically quite close.
Nonetheless, the winner, in addition to a monetary prize, often receives a
record contract, whereas the other groups do not. Provide a economic rationale
for this phenomenon.
