READING: From Rumbold to Carnegie to TechBro: The Ideology of Justified Inequality Countered by Sam Bowles & Herb Gintis
One of the greatest economics papers ever. At least, it is one of the ones that has most affected my thinking. How family, race, class, and culture as purveyors of inherited advantages as transmitters
One of the greatest economics papers ever. At least, it is one of the ones that has most affected my thinking. How family, race, class, and culture as purveyors of inherited advantages as transmitters of wealth, non-cognitive skills, and educational advantages—not via genetically-determined genius—are doing most of the heavy lifting in the ecology of American inequality. An attempt to replace the fables we tell ourselves about fairness, effort, and the American Dream with truths…
People’s views on redistribution hinge on whether they see success as earned or inherited—whatever those words “earned” and “inherited” might turn out in the end to mean. And it turns out that in the web of transmission of intergenerational advantages, gene-determined cognition is not important. Rather, it is wealth, social capital, educational opportunities, and the cultivation of non-cognitive skills like perseverance and sociability. IQ is very modestly predictive of income. Genetic inheritance is substantially predictive of IQ. When multiplied together, the product is small—maybe 0.05? But the actual IGE—Intergenerational Transmission of Inequality—was 0.5 in America in the second half of the 1900s, and is likely to be higher now. Moreover, fully half of that 0.5 evades explanation.
There are a great many people—the people whom Richard Rumbold back in 1685 denounced from the scaffold after being captured during Argyll’s Rising against James II Stuart—who fervently and with every fiber of their being search diligently for some reason to believe that most people “come… into the world with a saddle on his back… [with others] booted and spurred to ride…”
It used to be that our natural rulers were such because of their family traditions of blood and courage, or blood and honor. Or perhaps it was that non-Hellenes were slaves by nature because of their less-developed cognitive facilities. Later on, it was an enterprising spirit, as set forth by Andrew Carnegie:
The law of competition… is here; we cannot evade it; no substitutes for it have been found; and while the law may be someimes hard for the individual, it is best for the race, because it insures the survival of the fittest in very department. We accept and welcome therefore… the concentration of business, industrial and commercial, in the hands of a few… [as] essential to the future progress of the race.. There must be great scope for the exercise of special ability in the merchant and in the manufacturer who has to conduct affairs upon a great scale. That this talent for organization and management is rare among men is proved by the fact that it invariably secures enormous rewards for its possessor, no matter where or under what laws or conditions….
It is a law, as certain as any of the others named, that men possessed of this peculiar talent for affairs, under the free play of economic forces must, of necessity, soon be in receipt of more revenue than can be judiciously expended upon themselves; and this law is as beneficial for the race as the others. Objections to the foundations upon which society is based are not in order, because the condition of the race is better with these than it has been with any other which has been tried…
And now—especially among TechBros—the magic fairy dust that gives you a legitimate right to extraordinary wealth and power is IQ. Inherited IQ. Genetically-driven inherited IQ.
This is, as Sam and Herb patiently pointed out, nonsense, as best as we can tell.
Sam and Herb’s opening:
People differ markedly in their views concerning the appropriate role of government in reducing economic inequality. Self-interest and differences in values explain part of the conflict over redistribution. But by far the most important fault line is that people hold different beliefs about why the rich are rich and the poor are poor. Survey data show that people—rich and poor alike—who think that “getting ahead and succeeding in life” depends on “hard work” or “willingness to take risks” tend to oppose redistributive programs. Conversely, those who think that the key to success is “money inherited from family,” “parents and the family environment,” “connections and knowing the right people,” or being white, support redistribution (Fong 2001, Bowles, Fong and Gintis 2002a). Handing down success strikes many people as unfair even if the stakes are small, while differences in achieved success may be unobjectionable even with high stakes, as long as the playing field is considered level. How level is the intergenerational playing field? What are the causal mechanisms that underlie the intergenerational transmission of economic status? Are these mechanisms amenable to public policies in a way that would make the attainment of economic success more fair? These are the questions we will try to answer…
And their conclusion:
While the estimates in Table 3 are quite imprecise, the qualitative results are not likely to be affected by reasonable alternative methods. The results are somewhat surprising: wealth, race and schooling are important to the inheritance of economic status, but IQ is not a major contributor and, as we have seen above, the genetic transmission of IQ is even less important:
A policy maker who is concerned about intergenerational transmission of economic status will face two difficult sets of issues. First, many of the policies that might affect the intergenerational transmission of economic status are controversial. For example, the current political climate seems inhospitable to increasing the estate tax to limit intergenerational financial transfers. Eliminating racial discrimination would reduce one component of the heritability of income, but achieving this goal is difficult. Improving educational achievement, especially for those whose parents have relatively low levels of schooling, would reduce intergenerational transmission both directly, because of the impact of schooling, and perhaps also indirectly by providing a more open network of group memberships and mating choices that are less homogeneous by income class. But improving educational achievement is another goal that is easier stated than accomplished.
A second broad set of problems is normative. Does a level playing field entail no correlation between parental and child incomes? (Swift forthcoming) There are important values of family life and privacy that would be compromised by any serious attempt to completely disconnect the fortunes of parents and children. Rather than pursuing an abstract (and to our minds unattractive) objective of zero intergenerational correlation, a better approach might be to ask: which mechanisms of intergenerational transmission are unfair, and direct policies accordingly. The role of race in transmitting status from generation to generation is clearly unfair. Many people regard the strong correlation between parental income and child health as morally suspect, and many feel the same way about high levels of wealth inheritance. Large majorities favor policies to compensate for inherited disabilities. Other mechanisms of persistence—the genetic inheritance of good looks, for example—strike most people as unobjectionable and not an appropriate target for compensatory policy interventions. Even if some consensus could be formed on which of these mechanisms are morally suspect, the policy implications would be far from clear. For example, the possible incentive effects on parental behaviors of reduced parental influence on child success would have to be estimated and considered.
Addressing the policy challenge will require not only moral clarity about these and related issues, but a better accounting of which causal mechanisms are at work in producing the substantial levels of intergenerational persistence of economic differences…
What is the main thread of their argument?
They begin by highlighting that public opinion on redistribution is significantly influenced by beliefs about the sources of economic success. Those who attribute success to hard work tend to oppose redistributive policies, while those who believe that family background and connections play a significant role are more supportive of such measures. This dichotomy underscores the importance of understanding the actual mechanisms behind economic mobility. They start out from a stance of questioning the belief that economic success is primarily determined by individual effort and merit—whatever “effort” and “merit” might be.
They stress—and this is really important—that earlier studies suggesting low intergenerational income correlations suffered very badly from measurement errors and data limitations. The best good numbers tell us that the lifetime IGE in the United States was around 0.5 in the second half of the 1900s. That means that a significant portion of economic status is inherited rather than earned—or that if it is “earned” is earned by characteristics that are intergenerationally transmitted—anew in each generation.
They then turn to identifying pathways through which economic status is transmitted:
Genetic Factors: While acknowledging that genetics play a role in determining cognitive abilities, they argue that the heritability of IQ accounts for a relatively small portion of income variance.
Cultural and Environmental Influences: Family environment, including parenting styles, values, and expectations, significantly shapes children's attitudes and behaviors, which in turn affect their economic outcomes.
Wealth Transfers: The direct transmission of wealth, through inheritances and gifts, provides tangible advantages to offspring, enabling them to access better education, housing, and investment opportunities.
Social Capital: Connections and networks inherited from parents can open doors to job opportunities and other economic advantages.
Educational Attainment: Parents' socioeconomic status influences children's educational opportunities, which are strongly correlated with future earnings.
They emphasize the importance of non-cognitive skills—such as motivation, perseverance, and social skills—in determining economic success. These traits are often nurtured within the family environment and are less amenable to change through public policy interventions. Given the complex interplay, Bowles and Gintis suggest that policies aimed solely at equalizing educational opportunities will be far from sufficient to make the playing field not steeply pitched. They thus advocate for a broader approach that includes:
Early Childhood Interventions: Programs that support families and children from a young age can help mitigate the disadvantages associated with low socioeconomic status.
Wealth Redistribution: Tax policies and inheritance laws that reduce wealth concentration can help level the playing field.
Support for Non-Cognitive Skill Development: Initiatives that foster traits like resilience and social competence can enhance individuals' economic prospects.
We need to figure out what sorts of inequalities are fair, yes. But first we need to listen to Bowles and Gintis, and learn what our inequalities are.
Admirable. Among the variables unmentioned in the exerpt, one that largely gets counted as family influences, is peer groups, which have a significant impact during adolescence and so would seem to be an appropriate target for policy. Peer groups differ in ways that affect life financial outcomes, ways that covary with family income, wealth, race, education opportunities, location, gender, etc.
The study covers limited variation, if income and wealth were measured on the scale of historic worldwide distributions, then the intergenerational transfers among recent Americans of all sorts would be much higher: just being an average current native born American means you are doing pretty well thanks to your ancestors.
When I first read Ayn Rand I thought her ideas were childish. I think the tech bros were flattered. Libertarianism is as naive as communism. We Americans have the good fortune of living in a predominately middle class society. This is an enormous benefit--the source of stability, economic growth and personal freedom. But it can only be maintained through some level of redistribution of wealth. I went to college (in the 60's) almost for free because the state school received most of its funding from taxes distributed from the state. Now the source of funding is tuition. The policies of this administration (and really since Reaganomics) are moving us slowly toward a 3rd world country. My favorite quote: "A lot of people were born on third base and they go through life thinking they hit a triple." I saw this attributed to Barry Switzer, the former football coach of Oklahoma. In that position he would have dealt with football players and rich alumni.
Admirable. Among the variables unmentioned in the exerpt, one that largely gets counted as family influences, is peer groups, which have a significant impact during adolescence and so would seem to be an appropriate target for policy. Peer groups differ in ways that affect life financial outcomes, ways that covary with family income, wealth, race, education opportunities, location, gender, etc.
The study covers limited variation, if income and wealth were measured on the scale of historic worldwide distributions, then the intergenerational transfers among recent Americans of all sorts would be much higher: just being an average current native born American means you are doing pretty well thanks to your ancestors.
When I first read Ayn Rand I thought her ideas were childish. I think the tech bros were flattered. Libertarianism is as naive as communism. We Americans have the good fortune of living in a predominately middle class society. This is an enormous benefit--the source of stability, economic growth and personal freedom. But it can only be maintained through some level of redistribution of wealth. I went to college (in the 60's) almost for free because the state school received most of its funding from taxes distributed from the state. Now the source of funding is tuition. The policies of this administration (and really since Reaganomics) are moving us slowly toward a 3rd world country. My favorite quote: "A lot of people were born on third base and they go through life thinking they hit a triple." I saw this attributed to Barry Switzer, the former football coach of Oklahoma. In that position he would have dealt with football players and rich alumni.