Economics faculty assess causes, effects of inequality
The message from William M. Rodgers III, vice president and director of the Institute for Economic Equity at the Federal Reserve Bank of St. Louis, was stark.
“For a growing number of United States households, financial stability is nothing more than a pipe dream, no matter how hard their members work,” Rodgers told the audience at last month’s Boston College Economics Symposium, “Pathways to Innovation, Sustainable Productivity & Equitable Growth.”
Rodgers’ talk centered on the approximately 42 percent of the U.S. population categorized by the United Way as “ALICE”—an acronym for Asset Limited, Income Constrained, Employed—who “exist on a survival budget, including firefighters, teachers, police officers, and college graduates unable to land a job in their major.”
While these families may not meet the federal benchmark of poverty, he said, they struggle “to afford basic expenses, are forced to make impossible choices each day.” Even with a “continuous period of strength, labor market opportunity and amazing prosperity and growth, persistent and widespread wealth inequities remain, particularly within this group. Increases in child care—even prior to the pandemic—and health care are driving up the costs.
“In every state, at least one-third of U.S. households are below the ALICE threshold.”
Syposium organizer Brian Bethune (Caitlin Cunningham)
The symposium at which Rodgers spoke, organized by part-time faculty member Brian Bethune, is one example of the Economics Department’s focus on both domestic and global inequality. BC is by no means the only academic institution to examine inequality, but Economics faculty believe the University’s approach—notably from a Jesuit, Catholic standpoint—offers students a multifaceted understanding of the issue, and how to address it.
“Our focus in both the graduate and undergraduate curricula is to develop in students an understanding not only of how appropriate economic policies can support and sustain a country’s economic growth but also of how the gains from economic progress are not shared equally across societies,” said Professor Robert Murphy, the department's chair, who noted that Macroeconomic Theory—which primarily covers models of external and internal growth and development—is a required course not only at the undergraduate level for economics majors and minors, but also for all econ doctoral students.
“Both Jesuit teaching and economic inquiry urge us to take a broad, world-wide perspective, not limited to a single country,” said Professor Susanto Basu, pointing out that economics is perennially among the most popular majors at BC—last year it was second with 1,278, and for more than a decade was the top-enrolled major.
Economics Professor Susanto Basu (Peter Julian)
“I strongly believe that we have so many majors not just because economics is viewed as a stepping stone to good jobs, but because students understand that we teach them how to think rigorously about important, socially relevant issues.”
On the undergraduate level, Basu—co-author of a 2022 article in the Journal of the European Economic Association, “Productivity and the Welfare of Nations”—pointed to the popular course, Economics of Inequality. Taught during the fall semester by Associate Professor of the Practice Geoffrey Sanzenbacher, the class is designed to outline the structural economic factors that result in or lead to inequality in financial outcomes and opportunity. Of particular importance is understanding the distinction between opportunity inequality and outcome inequality, as well as the current domestic policies and those suggested to alleviate these disparities.
Additionally, Sanzenbacher co-teaches two Core Curriculum courses: The American Divide: The Economics of Inequality, with Philosophy Professor of the Practice Cherie McGill, which examines the meaning, causes, and consequences of inequality from the economic perspective; and Real Estate and Urban Action, a look at the economics of housing policy that includes an exercise in which students present a plan for redeveloping a neighborhood to a simulated city council. The latter is co-taught by Neil McCullagh of BC’s Urban Action Lab, who concentrates on the history of housing policy.
Sanzenbacher’s work includes the articles “Rising Inequality in Life Expectancy by Socioeconomic Status,” in the North American Actuarial Journal, and “Measuring Racial/Ethnic Retirement Wealth Inequality,” for BC’s Center for Retirement Research (CRR).
Relevant and related courses are the Economics of Aging, taught by Associate Professor of the Practice Matthew S. Rutledge—who, along with Sanzenbacher, is a Research Fellow at CRR—and Public Policy in an Aging Society, taught by Rutledge and Professor Joseph Quinn, which both examine the inequality of wealth across generations, Basu added.
A course set to debut next spring, The Economics of Discrimination, will cover such topics as the now banned practice of “redlining”—the refusal by banks to authorize mortgages or loans to an individual because they live in a neighborhood deemed to be a poor financial risk—that significantly reduced the ability of minorities, particularly African Americans, to accumulate wealth in the form of real estate, said Basu.
Looking internationally, Basu said, “we offer courses on the economics of developing countries and the deep sources of growth and technological changes over hundreds of years, and why outcomes have differed across nations.”
These include Impact Evaluation in Developing Countries—led by Professor of the Practice Paul L. Cichello—and From Stone Tools to Robots: Economic Growth and Development, a course taught by Professor Pablo A. Guerron-Quintana which explores economic growth over the past millennia, and why economic results have varied by continent.
As William Rodgers underscored at the October symposium, the concept of ALICE—a term he coined and helped develop on behalf of United Way, and has since been adopted by more than 25 branches—the concept is most useful to help people begin to see how we are connected with one another, a theme clearly echoed by the BC Economics Department’s mission to train students to apply their knowledge of economic theory and use the tools of calculus to analyze economic problems and interpret public policy alternatives.
“If folks in this category don’t have good housing, or substandard or no child care, there’s a social and economic impact for everyone in the surrounding community,” Rodgers said. “When ALICE is having difficulty, there’s a spillover effect on overall productivity and economic growth.”