Monday, May 16, 2005

Economic Determinism

Yikes. It has always been an article of faith for me that the "American Dream" is real.

The right-wing side of American culture is built on two "truths", neither of which is entirely true, but which need to have some merit for our system to make any sense.

1. Anyone who works hard, is thrifty, and saves and invests, will be wealthy, at least by world standards. Everyone CAN BE above average, just like in Lake Wobegon.

2. Wealth position is something one can control. Failure to succeed is simply a sign of lack of effort, or will. Anyone who is poor, dissolute, wretched deserves to be so.

Sure, this is a gross oversimplification, but much of our collective rhetoric and social policy are based on the truth of these two statements.

But, some evidence that #1 may not be true, not even true enough to serve as a myth for policy decisions. That left-wing rag the Wall Street Journal has some questions.

Excerpt:

...the reality of mobility in America is more complicated than the myth. As the gap between rich and poor has widened since 1970, the odds that a child born in poverty will climb to wealth -- or a rich child will fall into the middle class -- remain stuck. Despite the spread of affirmative action, the expansion of community colleges and the other social change designed to give people of all classes a shot at success, Americans are no more or less likely to rise above, or fall below, their parents' economic class than they were 35 years ago.

Although Americans still think of their land as a place of exceptional opportunity -- in contrast to class-bound Europe -- the evidence suggests otherwise. And scholars have, over the past decade, come to see America as a less mobile society than they once believed.

As recently as the late 1980s, economists argued that not much advantage passed from parent to child, perhaps as little as 20%. By that measure, a rich man's grandchild would have barely any edge over a poor man's grandchild.

"Almost all the earnings advantages or disadvantages of ancestors are wiped out in three generations," wrote Gary Becker, the University of Chicago economist and Nobel laureate, in 1986. "Poverty would not seem to be a 'culture' that persists for several generations."

But over the last 10 years, better data and more number-crunching have led economists and sociologists to a new consensus: The escalators of mobility move much more slowly. A substantial body of research finds that at least 45% of parents' advantage in income is passed along to their children, and perhaps as much as 60%. With the higher estimate, it's not only how much money your parents have that matters -- even your great-great grandfather's wealth might give you a noticeable edge today.

Many Americans believe their country remains a land of unbounded opportunity. That perception explains why Americans, much more than Europeans, have tolerated the widening inequality in recent years. It is OK to have ever-greater differences between rich and poor, they seem to believe, as long as their children have a good chance of grasping the brass ring.


(Nod to JP)

3 comments:

coturnix said...

Welcome to the reality! Myths are just myths, no matter how many people wish they were true. Sunday NYTimes also has a long article on this (the first in the series on 'class').

jn said...

Whatever explains these findings, you should expect that over time mobility might decrease in a society that is good at expanding opportunity.

To simplify: Assuming that some people are poor through bad luck, and some are poor because of lack of aptitude, skill or proper work habits, improving opportunity will see to it that more of the former will not be poor or remain so for long. Hence a larger fraction of the poor will consist of the latter and should not expect to move up very much.

This may or may not be true (for the US economy), but it is observationally equivalent to the view that there was a "loss of opportunity" over the last quarter century.

Viagra Online said...

man sorry but I don't believe in the "golden American dream" in fact I believe more in "dark American nightmare", how many inmigrants had die in the try to pass the border chasing something that even exist?