George Will

CHICAGO -- In his curriculum vitae, Austan Goolsbee lists as his "other interests" -- other than teaching at the University of Chicago -- two activities: triathlons and improv comedy. Evidently he is a masochist with a sense of humor, so he is suited to participate in presidential politics, which he is doing as an adviser to Barack Obama.

Before they met in person, Obama, running for the Senate in 2004, asked Goolsbee a perplexing question. Obama's opponent, Alan Keyes, an African- American imported from Maryland by Illinois' shambolic Republican Party, had been asked whether he believed in reparations for slavery. Keyes said perhaps America could do what Rome did -- exempt descendents of former slaves from taxes for two generations. Obama asked Goolsbee how much that might cost. Goolsbee's two answers were: Hard to say. And: Trillions.

Goolsbee graduated from Yale and earned his doctorate from MIT before coming to the University of Chicago's business school, which gave to public life a giant of conservatism, George Shultz. The university's economics department has been adorned by the likes of Milton Friedman, George Stigler and Gary Becker, each a Nobel laureate, each a conservative by virtue of his inclination to expect more utility from markets than from government interventions therein.

Is Goolsbee dismayed about widening income inequality? Yes, but with a nuanced understanding. The stagnation of middle- and working-class incomes, and the anxiety this has generated, is, he says, a most pressing problem, but policymakers must be mindful about trying to address its root cause, which Goolsbee says is "radically increased returns to skill."

In 1980, people with college degrees made on average 30 percent more than those with only high school diplomas. That disparity has widened to 70 percent. In the same year, the average earnings of people with advanced degrees were 50 percent more than those with only high school diplomas; today it is more than 100 percent.

The market is shouting, "Stay in school!" and Goolsbee's conservative colleagues at Chicago say a high tax rate on high earners is "a tax on going to college." Conservatives say: Don't tax something unless you are willing to have less of it. But Goolsbee says: Conservatives often exaggerate the behavioral response to increased tax rates. The solution is to invest more in education, which will raise wages, reduce inequality and move toward equilibrium. The GI bill was, he says, so prolific in stimulating investment in "human capital" -- particularly, college education -- that for a while the return on it went down relative to high school.

George Will

George F. Will is a 1976 Pulitzer Prize winner whose columns are syndicated in more than 400 magazines and newspapers worldwide.
TOWNHALL DAILY: Be the first to read George Will's column. Sign up today and receive daily lineup delivered each morning to your inbox.