Why is wealth inequality such a prominent feature of the American economy? What are the economic, social and political implications of the wealth gap? What can be done about it?
Philanthropist James Stone would like to find answers to questions like these, and to do so, he is supporting research centers at eight universities, from Harvard to Berkeley and beyond. The University of Chicago is the newest addition to the list. Stone’s foundation recently gave $5 million to establish the James M. and Cathleen D. Stone Center for Research on Wealth Inequality and Mobility at the university’s Harris School of Public Policy.
The James M. and Cathleen D. Stone Foundation isn’t a marquee name in the philanthropic world, but it’s intent on making an impact. James Stone, who taught economics at Harvard and was the insurance commissioner for Massachusetts, founded and led the Plymouth Rock group of insurance companies. His wife, Cathleen, an environmental and administrative law attorney, served as Boston’s first chief of environmental services and is involved in a range of environmental organizations in the Boston area.
The foundation the couple created in 2019 addresses their respective interests, James Stone said via email. “Cathy and I each chose one area of concentration for our philanthropy, but we very much admire the other’s selection,” Stone wrote. “Cathy’s choice is the study of environmental sustainability and mine is the causes and consequences of wealth inequality. Believing the pen to be mightier than the sword, at least most of the time (and less costly to finance just about all the time), our aim is to impact the development of prevailing thought in both of our areas of interest.”
Stone isn’t the first philanthropist to question the system and the forces that helped him build and grow his own fortune, of course. Hedge fund billionaire Ray Dalio, for one, has raised alarms about the societal risks of wealth inequality and the threat to democracy. And a number of funders have taken steps in recent years to address the racial wealth gap, including Bloomberg Philanthropies, which is focusing on economic opportunity for Black communities through its Black Wealth Data Center, as IP reported recently.
What distinguishes the Stone Foundation is its determination to understand the roots and dynamic of wealth disparities by supporting research at institutions of higher learning.
“The Stone Foundation has been at the forefront of supporting research into the growing inequalities in societies throughout the world,” said Steven Durlauf, Steans Professor in Educational Policy at Harris, who will lead the new center at the University of Chicago, when the initiative was announced. “Thanks to this vital support, our scholars will be able to develop a fresh set of tools to understand wealth, income, occupational and educational inequality in the United States and around the world.”
Intellectual roadmap
Economist and social scientist Steven Durlauf began to focus on wealth inequality after his first child was born. At the hospital with his new baby daughter, he noticed all the other children born on the same day. Many of the families he saw clearly didn’t have the resources his family did.
“It made me profoundly sad to know these other parents probably couldn’t do the things that I wanted to do for my child,” Durlauf said in an interview for the Harris School of Public Policy website. “I should have known that before, but there was something about that, the shock effect of having my own child in the ward with the other newborns. I became increasingly morally troubled by inequality.”
At the time, Durlauf was developing mathematical models that he realized he could use to better understand inequality. In his work, Durlauf has focused on the “memberships theory” of inequality, which examines the interactions of individuals, their families, and their social and community environment. “Individuals are members of many types of groups in society, and those memberships matter,” Durlauf told me recently. “It’s very important who you interact with, who you know, and who is part of that social structure with you. To me, the overarching idea has been to understand how different types of memberships interact and produce inequalities, and in particular, determine levels of social mobility.”
As an example of the influence of membership, Durlauf points to his own children. They didn’t feel they had any choice about going to college because their father is a college professor and everyone they knew was going to college. “They grew up with such strong social norms as to whether you go to college or not. They were programmed to do it,” he said. “On the other hand, think of people in disadvantaged communities where you don’t interact with people who went to college. To think about college in that context requires an active imagination about a different life. That’s a textbook example of the neighborhood effect.”
This is one of the areas the new Stone Center at the University of Chicago will be exploring. Asked how the Stone Foundation selects the programs it supports, James Stone made it clear that it has a lot to do with the work of experts like Durlauf. “We choose campuses with scholars who are leaders in the field of distributional equity,” Stone said over email. “We also choose campuses that have demonstrated a long-term commitment to training the next generation of leaders in this area. The University of Chicago Harris School of Public Policy was an easy choice.”
For now, at least, Stone believes that supporting university research is the best way to tackle wealth inequality. This work, he wrote, “yields the best return on philanthropic investment for what we are hoping to achieve. My hope is that a clear intellectual roadmap can be developed, allowing reversal of the current misguided trend, while taking care that the remedies applied to excessive wealth concentration are never worse than the malady. By giving to universities, we can ensure the best minds are focused on this important issue while at the same time training and expanding the next generation of scholars and practitioners who can commit their hard work and talents to the topic.“
Minding the wealth gap
Wealth inequality and its implications is a subject that James Stone has been exploring for most of his life, as he outlines in the report, “Upping the Distributional Economics Game,” which is published on the foundation’s website. Stone has seen the gap between the wealthy and those without resources widen over the last several decades, and his assessment of the risk it poses to democracy is frightening — and more evident every day.
“Every sign and signal tells me that our society is tilting too far toward economic inequality,” Stone told me via email. “If you believe a country can be judged by how decently it treats its least fortunate, or that its middle classes will be civically responsible and generous only when their hard work is fairly rewarded, then shifting too great a proportion of the gains of economic growth to the wealthy is unpropitious and even downright dangerous.… If cynicism that the economy is a rigged game grows unchecked, large fractions of society may become alienated from constructive civic participation. The already disappointing rates of civic participation can easily fall still lower, enhancing the power of single-issue voters, haters, and the simply delusional.”
As noted, we’re seeing more wealthy donors seeking remedies for our increasingly top-heavy economy. The Hewlett Foundation’s is one example of a similarly intellectual approach, through its Economy and Society Initiative, which seeks to foster an “intellectual paradigm” to succeed neoliberalism by backing scholars, students and thought leaders. Big tech donors, in particular, appear to be drawn to trending topics like universal basic income. Still, there is a lot of room for more donors to take on economic inequality. As we’ve pointed out often, there are some obvious solutions out there — like supporting worker power and reforming our tax system so that the mega-wealthy pay their fair share — that don’t receive nearly enough attention from the sector.
Given Stone’s academic background, supporting research on the topic does make a lot of sense, and the family’s engagement with the topic is admirable. There’s always the risk that such a center will simply churn out more briefs and white papers, but hopefully, the scholars Stone supports will provide fresh answers and a roadmap (or roadmaps) for the creation of a more equitable society. Certainly, we need a better understanding of the topic — including its impact on philanthropy itself — and where to go from here. Then we’d love to see more philanthropy, whether that’s Stone or other concerned donors — putting those ideas into action.