Rescuing the American dream

Wednesday, February 24, 2021

Professor Ed Kleinbard’s What’s Luck Got to Do with It? proposes insurance as hedge against inequality

By Leslie Ridgeway

Professor Ed Kleinbard argues in his new book that well-designed public investment can lessen the effects of bad luck and alleviate inequality.

Shortly before he passed away in June 2020, Professor Ed Kleinbard, Robert C. Packard Trustee Chair in Law at the USC Gould School of Law, sent off final corrections on his third book, What’s Luck Got to Do with It? (Oxford University Press). The book is a culmination of knowledge and experience gained working as a tax attorney for wealthy clients, in the public sector as chief of staff of the U.S. Congress’ Joint Committee on Taxation, and finally as one of the most respected tax policy scholars in America.

The book scrutinizes pervasive American beliefs in individual control of destiny and the country as a land of equal opportunity that minimize the impact of brute luck on life outcomes and of education on earnings and success. Kleinbard’s solution is based in concepts of insurance, which the author understood well as a student of medieval history.

“Insurance is an effective tool whose entire purpose is to mitigate the financial consequences of bad luck,” Kleinbard writes in the book’s introduction. “It is a subtle financial instrument, honed over the last 700 years, from the time of medieval Italian merchants forward to today. If equality of opportunity is the great organizing principle of American economic life, and bad brute luck the unresolved universal force that knocks too many people off course in their pursuit of their economic dreams, then the application of insurance principles is the response that can be used to make equality of opportunity more than a hollow phrase.”

Kleinbard argues that well-designed public investment can lessen the effects of bad luck and alleviate inequality by sharing costs across the “risk pool” of the American population. USC Gould Professor Gregory Keating, who teaches torts, legal ethics and legal philosophy, noted that—in an example of skilled lawyering at the highest level— the book builds its case by drawing on diverse scholarly disciplines and sources.

“By summoning the resources of moral philosophy and economics, and weaving them together with reams of evidence Kleinbard shows just how much fate dominates talent and effort, and how we might do something to mitigate the injustice this breeds by invigorating insurance—as institution and morality,” Keating says. “What’s Luck Got to Do with It? envisions insurance not just as an answer to the cruel workings of fate but also as an institution uniquely capable of sustaining a distinctively American ideal of equality. The book is animated by, and articulates, a vision of a social world where people are able to lead the lives they imagine for themselves, unfettered by accidents of birth and opportunity.”

Leaders from policy, academic circles applaud book

What’s Luck Got to Do with It? has earned accolades from influential policy and academic figures including Darren Walker, president of the Ford Foundation, U.S. Senator Ron Wyden, chair of the U.S. Senate Committee on Finance, New York University tax professor Lily Batchelder, and UC Berkeley tax professors Emmanuel Saez and Gabriel Zucman, who called the book “a must read for anyone interested in greater economic justice." Fellow USC Gould tax law Professor Ed McCaffery praised the book for its accessibility and provocative ideas.

“Using the concept of insurance against all kinds of ‘bad luck,’ Kleinbard mounts a vigorous case for more progressive – and protective – government tax and transfer programs,” McCaffery says. “Sadly, this is not the dominant politics of our times, but Kleinbard has written a fresh and easily readable call for all times.  If we are fortunate enough to meet up on the other side, let us hope that we have better things to tell Kleinbard than that bad luck explains the growing inequalities on earth. “

The book continues themes introduced in Kleinbard's acclaimed 2014 publication, We Are Better Than This: How Government Should Spend Our Money (Oxford University Press), heralded as a “masterpiece of tax, fiscal and economic policy” by David Cay Johnston in Tax Notes and named one of “Our Favorite Books of 2014” by the staff of Newsweek magazine.

An event to celebrate Kleinbard and the book’s publication is planned for March.

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