New Studies: Income Inequality Not Caused by Market or Cured by Socialism

Often, social science researchers will jump to conclusions that their data do not warrant. But more often, media and pundits misunderstand or twist (or simply don’t read and make up) findings to support a conclusion that the data do not warrant. 

So, I read a post by Dylan Matthews at WonkBlog, discussing some new findings on social mobility. The title gives away his conclusion – “How your last name will doom your descendants centuries from now.” Social structure inequalities rule, and the government can and should equalize. It turns out, however, that the papers provide some rather devastating evidence against the Progressive project.

Here’s Matthews:

It’s well known that there’s a huge correlation between the earnings and social status of a person and the earnings and social status of that person’s parents. That correlation varies a lot by country. It’s very high in the United States, where there’s widespread economic inequality, and in Britain, which has a formal class system. But it’s much lower in Scandinavia.

Now, two researchers argue that the link is bigger than we thought — even in Scandinavia. . .

. . .There are a few takeaways here. One is that family status could be more powerful than past measurements have suggested. Clark and Cummins note that their estimates suggest that family background has a much bigger impact on social status than previous studies have found. Another is that genetics likely has little to do with those results. Clark and Cummins studied surnames across eight generations. So, two people with the same surname in 1800 and 2011 would only share 0.58

= 0.4 percent of their DNA.And perhaps the most bracing revelation from the studies is that we haven’t gotten that much better at promoting upward mobility. . .  At that rate, we won’t wipe out inheritance-based inequality for another 600 years.

So, so much wrong here, its difficult to know where to begin. Dylan sets up the impression that economic and other structures are most to blame for inequality with his comparison of the unequal capitalist and social structures in the U.S. and Britain to the more egalitarian Scandanavian countries. And then he uses papers from Gregory Clark and Neil Cummins and Gregory Clark (all by his lonesome) to bolster this impression.

A few big problems:

  1. Dylan gets genetics and heritability cartoonishly wrong. People do not mate randomly, especially in class-system societies and for people with “unusual surnames,” who would be more likely to come from a different cultural background than those with common surnames. He should read up on assortative mating. In class-based societies, what types of people are most likely to break the class barrier? Extraordinarily talented  and intelligent individuals in the lower class. The persistence of differential life outcomes in human lineages certainly can be due in large part to persistent differences in genetics. 

  2. Family “status” does not equal family “background.” The Clark/Cummins paper uses the term family “environment,” a better term, and makes clear that this is separate from raw material or social advantages. Family environment can mean parenting and culture.
  3. The conclusions of both papers is that radical equalitarian social engeneering such as has been implemented for generations now in places like Sweden has not worked and is unlikely to work in the future. Dylan, however, somehow gets from all of this that we just need better Progressive social engineering.

From the Clark/Cummins paper (emphasis added):

A further surprise is that the rate of regression to the mean for both wealth and other status measures changes little over time, even though between 1800 and 2011 there have been substantial institutional changes in England. Wealth and income was lightly taxed, or not taxed at all, for most of the nineteenth century, but heavily taxed for much of the late twentieth century. Nineteenth century Oxford and Cambridge were exclusive clubs with strong ties to particular private high schools. By the 1940s they began a process of opening up admissions to students from a wider variety of educational backgrounds. And state financial support for students from poorer backgrounds became considerable. 

The modest effects of major institutional changes on social mobility implies that the important determination of persistence is transmission within families – either through genes or family environments – and that there may be modest prospect of increasing mobility through state action.

From the Clark paper (emphasis added):

Such enhanced mobility in a country like Sweden would suggest that institutional arrangements – the support for public education, for example, or the progressive taxation of wealth – play a vital role in determining rates of social mobility. The implication is that the lower rates of social mobility observed in countries such as England or the USA represent a social failure. The life chances of the descendants of high and low status ancestors can be equalized at low social cost. Sweden is, after all, one of the richest economies in the world.

Here I show, however, that in Sweden true intergenerational mobility rates for measures of status such as occupation or education are much lower, and in the modern era do not exceed the rates of the eighteenth century. Whatever the short run mobility of income, or years of education, there is considerable persistence of status – measured through wealth, education and occupation – over as many as 10 generations in Sweden.

  1. Tim H.

    I don’t have the chance to read the article or the paper this morning, but I wonder what Matthews means by “inheritance-based.”  I assume he means inherited wealth (since he seems to dismiss genetic inheritance).  But I have long suspected that the morals, attitudes, and (especially) expectations we pick up from our parents are the most important things to determining much of our success in life.  Far more so today than inherited wealth or genetics.  

    And since most of us try to pass those on to our children, much of that will in turn be passed on to our grandchildren, and so on.  Combine that with the tendency to marry people from a similar background, and these effects might not be diluted much over the generations.  

  2. Pat in Obamaland

    It has always struck me as axiomatic that heavy taxation and regulation inhibit upward mobility and entrench the social hierarchy. Liberals may complain about the rich getting richer but if the poor or middle class don’t even have the opportunity to become wealthy, well, it’s a moot point anyway.

  3. Valiuth

    I would be very skeptical of any claims about the influence of genetics on specific human cultures. Due to the incredible heterogeneous nature of the human genome the effect of genetics on society must be very broad and incredibly general (ie. males will take on military positions in most cultures). 

  4. Donald Todd

    I remember when Germany was reunited.  The people in East Germany, who lived under that socialist government, had bad work skills.  They were going to be paid for doing much of nothing no matter what happened, so they did much of nothing each workday.  That contrasted with the people of West Germany who worked for their supper.  No work, no supper.

    The people in Scandinavia, who are largely socialist, now depend on the welfare state to take care of them.  They have lost normal human drives.  They don’t reproduce themselves.  They expect someone else to take care of them.  They have been shorn of any desire to get ahead.  The driven ones know that the fruit of their work will be given to those who have no drive, so productivity is sacrificed.  Why work for little to no benefit of one’s own?

    Obama is doing his best to arrive at that conclusion for a significant number of Americans who cannot or will not extend themselves to be productive.  We are now expected to take care of people who won’t take care of themselves.

    If they are able but won’t work, don’t feed them.

  5. Red Feline

    Adam: “The implication is that the lower rates of social mobility observed in countries such as England or the USA represent a social failure.”

    Why is this a social failure? Surely equality of opportunity is what is important, as this allows individuals to develop to their fullest capacity, should they choose to do so? There are many examples of such people in the USA; witness Oprah who came from a deprived background, as she has made public. 

    In any case, are the social scientists talking about the distribution of material wealth, or is there something else implied. Riches do not bring happiness, in or of themselves. Do they think that the low income people ought to act with the social mores of the high income people? Do they want the USA to be a country of all chiefs, and no followers? 

    It seems to me that there is a lot of old-fashioned, unrealistic Utopian thinking here. The United States, and Canada, are the best countries in the world, where individual enterprise is rewarded. There is little that can be done for people who will not educate themselves, nor learn any job skills.

  6. david foster

    Educated-based credentialism is a major factor inhibiting class mobility, and also economically destructive as it prevents many people from fully exercising their talents.

    Not an analysis that you’re likely to see from very many academics.

  7. Tim H.
    david foster: Educated-based credentialism is a major factor inhibiting class mobility, and also economically destructive as it prevents many people from fully exercising their talents.

    David, could you explain your reasoning?  Given that education is available to just about everybody (and increasingly so), how does this emphasis on credentials hurt mobility?  I believe it has cheapened the meaning of a degree, but I’m not convinced that it has been a big inhibitor of mobility.  

    I’m a professor, by the way, but I don’t take offense.  Rather, I’ve been chairman of my college’s admissions standards committee, and we had discussed things related to this.

  8. Donald Todd

    Red:  Surely equality of opportunity is what is important

    What is important is that individuals who possess a drive toward success or excellence be free to pursue that success or excellence.  If someone has the wherewithal to start a company which grows to employ hundreds of people, the government should not be standing in the way of that person.  How about Boeing in South Carolina?

    I was at a large multinational when Sarbanes/Oxley was introduced.  Reams of paperwork followed, taking us away from real productive work into unpaid government support.  Unpaid government support?  Whose bad idea was that?  It was Sarbanes and Oxley supported by a supine congress with limited real world business experience driving up the cost of doing business for political expediency.

    We have government agencies prosecuting American citizens for attempting to build houses on their own property.  Whose bad idea was that?  Congress, which then threw it to the Executive, whose agencies then applied it to criminalize American citizens for doing nothing wrong.

    I am neither a Libertarian or an anarchist but I can see that much too often government is the problem and not the solution.

  9. Keith Rice

    I can’t see how anyone is seriously talking about income inequality in places like the US. The concept is meant to address kleptocracies where nepotism rules, not in a country where there is so much opportunity as in the US.

    Here’s it’s nothing more than a Marxist talking point.

  10. Adam Schaeffer
    C

    Red Feline: I just wanted to make sure it was clear that the sections you quote are other people’s statements or sentiments, not my own.

    I think the fascinating thing here is that these studies undermine the rationale that Progressives themselves put forward for social democracy/socialism; equalizing status/life outcomes.

    This is huge . . . if these structures reduce economic growth, reduce individual freedom, AND fail to substantively level life outcomes, then what rationale for them remains? Pure punitive impulse, ala the President’s remarks about increased taxes being about “fairness” rather than increased revenue?

    These papers were being used to bolster the case for more and better social engineering, and yet they actually provide compelling evidence against the Progressive project itself.

  11. Red Feline
    Keith Rice: I can’t see how anyone is seriously talking about income inequality in places like the US. The concept is meant to address kleptocracies where nepotism rules, not in a country where there is so much opportunity as in the US.

    Here’s it’s nothing more than a Marxist talking point. · 18 minutes ago

    Don’t you find you become frustrated with how Marxists apply their talking points to the US.? Even the concept of poverty can’t be applied to the US. I’ve seen real poverty, and the States can’t even come close. Not many other countries in the world have obesity as a health problem. :-)

  12. Red Feline
    Adam Schaeffer: Red Feline: I just wanted to make sure it was clear that the sections you quote are other people’s statements or sentiments, not my own.

    I think the fascinating thing here is that these studies undermine the rationale that Progressives themselves put forward for social democracy/socialism; equalizing status/life outcomes.

    This is huge . . . if these structures reduce economic growth, reduce individual freedom, AND fail to substantively level life outcomes, then what rationale for them remains? Pure punitive impulse, ala the President’s remarks about increased taxes being about “fairness” rather than increased revenue?

    These papers were being used to bolster the case for more and better social engineering, and yet they actually provide compelling evidence against the Progressive project itself. · 4 minutes ago

    I ought to have given the quotes a clearer designation. I really meant that they had come from the post, not you personally.

    What you are saying is encouraging. Perhaps the tide of thinking is turning, and the Progressive thinking is being shown for what it is, meddlesome interfering in other people’s lives.  

    Adam Smith and David Hume had it right. Try to understand reality and  human nature.

  13. Keith Rice
    Red Feline

    Don’t you find you become frustrated with how Marxists apply their talking points to the US.?

    Indeed I do, especially when our “intelligentsia” seeks to validate their contrivances by appealing to the baser emotions of the masses. They are trying to substantiate Marxist demagoguery.

    Some interesting facts about poverty in the US:

    Government benefits are not counted as wealth.

    The overwhelming number of people living in poverty at any given point do rise to higher economic status.

    Adam is right, these “scientists” are really social engineers abusing the tools of the trade.

    Regarding wealth acquisition, it seems obvious that acquiring and maintaining wealth is a skill one that can be passed from generation to generation. For researchers to not control for and address this obvious correlation suggests an a priori bias, or a lack of intelligence.

    But we see these kinds of mistakes all the time from our increasingly mediocre and prejudiced Ivory Tower: Trying to establish a biological basis (substantiating identity issues) without addressing environmental factors (how people negotiate choice).

  14. Red Feline

    Keith: “… Regarding wealth acquisition, it seems obvious that acquiring and maintaining wealth is a skill one that can be passed from generation to generation. For researchers to not control for and address this obvious correlation suggests an a priori bias, or a lack of intelligence. …”

    These “social engineers” seem to consider this careful husbanding of wealth a crime. Surely it is obvious that this benefits any country. Wouldn’t it be better if these “scientists”, rather, studied why some families are builders of wealth, which usually means businesses, analyse those skills and teach them to those families who don’t?

    What would they do when they discover that not everyone wants to do the work involved in acquiring wealth, then keeping it? 

    I think your comment about the intelligence level of the researchers, or their biases, is valid.

    I really would like to think that the tide is finally turning away from Euro-Communism/Socialism thinking, back to the original American values. As an immigrant to North America, escaping from that collectivist thinking, it distresses me that it seems to be threatening America.

  15. Keith Rice
    Red Feline: 

    These “social engineers” seem to consider this careful husbanding of wealth a crime.

    The default condition of humanity is poverty, although I don’t think they’re explaining it properly in Anth. 101.

    There are many roles to play in the Marxist revolution and it seems many of our well lettered academics are vying for top propaganda positions, won’t they be surprised when they discover there’s just no need for so many of them!

    But then maybe some are preparing for just that by making sure that they stand out as masters of specious scientific conclusions in appealing to the baser emotions of the masses.

  16. liberal jim

    Both market based economies and government controlled economies (cause) result in income inequality.   Which results in less?  To answer this one does not need a study, but simply must answer the question; who is better equipped to navigate the complex  regulations in a government control economy?  If you can answer that question you might understand why the middle class has been  shrinking while the government has been growing in size and complexity.

  17. Red Feline

    Donald: “What is important is that individuals who possess a drive toward success or excellence be free to pursue that success or excellence.  If someone has the wherewithal to start a company which grows to employ hundreds of people, the government should not be standing in the way of that person.”

    Couldn’t agree more, Donald! I believe in equality of opportunity, as much as that is possible, not equality of outcome. As a businessperson, myself, I know how hard it is to keep a business going, never mind build it, so this idea that “you didn’t build it”, and “you couldn’t have built it without government to build roads, infrastructure, etc.”, in not acceptable. This kind of thinking would destroy the motivation of those with drive. I sometimes wonder if people like Elizabeth Warren who put forward this suggestion, really knows what human nature and life is about. 

    And that applies to social scientists who want to engineer society to bring everyone to the same level: whether up or down, they don’t say. As Adam has put forward, these social scientists distort facts to fit into their own ideas. What is their goal?

  18. Red Feline

    Adam: “… Social structure inequalities rule, and the government can and should equalize. … ”

    I went back to the article, and found the goal. I object strongly to the idea that the government should equalize everyone. This has proven not to work in Euro-Communist/Socialist societies as it goes against human nature. It destroys incentive. It is amazing to me that we still haven’t advanced political science beyond this restrictive thinking.

    Hasn’t Utopian thinking been recognized for what it is: a desire to remake the world in the image envisioned by an individual. All immature people indulge in that, then grow up to the fact that it is better to let others create their own worlds as they want them.

    I guess I am asking if these social scientists don’t recognize that they are often going against reality? Doesn’t their training teach them that? Aren’t they trained to understand human nature? Are they taught anything about political science? What do they really know about anything outside their own narrow little world?

    It is one thing to pontificate in the safe environs of a university; it become dangerous when these ideas are used to control society.

  19. Crow

    Apropos of this, the center-left think-tank Brookings Institute scholar Scott Winship has a post summarizing some of the latest work done on inequality and economic growth internationally up at the NYT.

    Surprised?:

    Indeed, research by Christopher Jencks of Harvard University looking at the experience of 12 developed countries over the past century indicates no relationship across those countries between the share of income received by the top 1 percent and economic growth rates. Since 1960, however, countries with higher inequality have experienced more growth. Boushey and Hersh do not cite Jencks’s study but nevertheless conclude that, “Ultimately, data and methodological issues mean that analyses are too imprecise to deliver definitive answers to this old and central question in economics research.”

    Studies that look at some of the specific hypotheses mentioned above also are inconclusive or refute the idea that inequality is harmful to growth. Inequality does not appear to lead to financial crises. Its link to opportunity is highly questionable. The evidence that it distorts political outcomes is similarly thin and again based largely on developing countries.

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