Economics

Whose Fault Is It That You Are Rich?

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Research indicates there's a good chance it's your parents. But the extent of, and reasons for, that effect have shifted in the relevant professional literature on intergenerational income equality, as surveyed and cheekily summed up by economist Bryan Caplan:

Stage 1 (1970s-80s): The intergenerational income correlation is low, about .2.  This shows that capitalism is pretty fair….

Stage 2 (1980s-1990s): Previous researchers underestimated the intergenerational income correlation by failing to correct for year-to-year fluctuations.  The true correlation is much higher, about .4, showing that we live in an unfair class society.

Stage 3: (late 1990s—today): The intergenerational income correlation is indeed quite high.  But twin and adoption studies show that most or all of this correlation stems from heredity.  The reason why kids from rich families do well isn't that mom and dad buy their way through life.  The reason, rather, is that rich families have genes that cause financial success, and pass these genes on to their kids.  (Casual consumers of this literature often get confused by the fact that the effect of IQ is far too small to explain the intergenerational income correlation.  The key thing to remember is that there is a lot more to genetics and success than IQ)…..

Stage 1 was defensive: "Sure, life's not fair.  The children of the rich do better.  But the unfairness is pretty small, and almost vanishes after two generations."  Stage 3, in contrast, is offensive: "Life is fair.  The children of the rich do better because talent breeds talent, and under capitalism, the cream rises to the top."  

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  1. Now lets see a study of the text of the Constitution to try and find any relevant power delegated to the federal government therein that indicates it is any business of the federal government to be trying to re-arrange the distribution of wealth regardless of what caused the distrubtion that exists.

  2. Still no Pelosi circus story? Not that this one should be the Pelosi Circus instead of the fine story that it is, no not at all.

    Reason must have a team working on the PC story. Maybe a good Matt/Nick tag-team rant is in order for us this evening.

  3. I mean, you can read all about the PC story everywhere and everyplace. And, *surprise*, nothing new or insightful.

    I don’t have a problem with reason being a Sometimes Haven from the Political Shitstorm.

  4. Well if were coming up with suggestions for posting topics, how about on the absolute socialist bullshit that Obama was spouting at his University of Arizona commencement speech?

  5. Well if were coming up with suggestions for posting topics, how about on the absolute socialist bullshit that Obama was spouting at his University of Arizona commencement speech?

    Very good.

  6. No Naga, no SugarFree and no MNG today. Interesting . . .

  7. The reason, rather, is that rich families have genes that cause financial success, and pass these genes on to their kids.

    We offered the world order!

  8. The reason, rather, is that rich families have genes that cause financial success, and pass these genes on to their kids.

    The rich are hoarding genes. If they don’t want to share they should be taxed until they do.

  9. The rich are rich because they’re criminals. The only effective solution is aggressive redistribution of wealth by the federal government.

  10. Khaaaaaan! Khaaaaaan!

  11. “Chad.” Once we all know you’re one of us engaging in the 1,000th act of performance art on this blog, it’s time to try something new. Like an over-the-top libertarian. Strange that no one has faked that.

  12. “We offered the world order!”

    Little known fact: Khan actually said, “We took the world’s orders!” He and his so-called “supermen” were actually members of an Indian waiters’ union that escaped from Earth due to one offensively low tip too many. Kirk, as a Canadian (notoriously bad tippers), pissed Khan off, which is why he took over the ship and tried to blow it up later on.

  13. Obama’s socialist worker’s speech was at Arizona State University. The University of Arizona is the nasty shithole in the hellhole known as Tucson-a couple of hours south of the paradise where ASU is located.

  14. Yeah right the wealth gene. Even if that weren’t complete bullshit, how does that translate to fairness?

    If you admit that capitalism is inherently darwinian, how then can you advocate no economic safety nets on the premise that all you have to do to be wealthy is work harder?

  15. If you admit that capitalism is inherently darwinian

    What about a non-coercive exchange of goods is darwinian?

  16. “…under capitalism, the cream rises to the top”

    That explains Reason’s low readership and reliance on donations.

  17. What about a non-coercive exchange of goods is darwinian?

    What about libertarianism requires its followers to be so obtuse?

  18. So heredity didn’t work before 1980?

  19. The rich are hoarding genes. If they don’t want to share they should be taxed until they do.

    Absolutely! That stuck-up rich blonde bitch needs to start mixing her genes with mine! For the good of the children!

  20. If you admit that capitalism is inherently darwinian, how then can you advocate no economic safety nets on the premise that all you have to do to be wealthy is work harder?

    It’s hard to stop, drop, and roll when your legs and arms don’t have joints.

  21. I’m getting a bit tired of the whole “distribution of wealth” meme. Wealth isn’t distributed, it’s created. You can’t solve poverty by plundering those who are creating the wealth.

    -jcr

  22. What about libertarianism requires its followers to be so obtuse?

    We’re only obtuse with those who earn it, as you do time and time again.

    -jcr

  23. You must be a rich kid, Brian. Sorry, I’m not buying it.

    I’m a regular reader of Reason, and I certainly don’t want government redistributing wealth, but social mobility has plummeted in this country in recent generations, and this kind of pseudo-science has no place in this publication. This smacks of the racism that discredited social darwinist who use to claim caucasians were smarter than africans by filling brain cavities of skulls with sand to measure their volume. This is a very slippery slope that Reason should not be skiing on.

    Recommended reading: Malcolm Gladwell’s Outliers: The Story of Success
    http://www.amazon.com/exec/obidos/ASIN/0316036692/reasonmagazinea-20/

  24. If you admit that capitalism is inherently darwinian, how then can you advocate no economic safety nets on the premise that all you have to do to be wealthy is work harder?

    I wouldn’t say wealthy, but unless a person is mentally or physically disabled, all they have to do to survive is work harder. And “safety nets” create all sorts of perverse incentives, such as those that motivate poor women to turn themselves into baby mills and those durned evil, giant corporations to reduce their workers’ pay and encourage them to apply for welfare to make up the difference.

  25. social mobility has plummeted in this country in recent generations

    Yep, that “war on poverty” did exactly what LBJ intended: it keeps the underclasses in their place. The tragic thing is that he turned them into a reliable democratic voting bloc in the process.

    -jcr

  26. Boy, Charles Murray sure got reamed when he talked about similar stuff way back in the bad ol’ 90’s in The Bell Curve.

    The socialists in charge now–and all those doing the New Deal/Great Society redistributionist work for the last 80 years–don’t want to talk about this kind of stuff.

    It’s satisfying to know that this sort of discussion will piss them off mightily, to the extent they take notice.

  27. “social mobility has plummeted in this country in recent generations, and this kind of pseudo-science has no place in this publication. This smacks of the racism that discredited social darwinist who use to claim caucasians were smarter than africans by filling brain cavities of skulls with sand to measure their volume”

    ChrisG,
    I think you might be a bit mixed up. First, although income inequality has risen recently, the standard of living for the poor continues to improve from generation to generation in absolute terms. Incidentally, the main cause of income inequality in recent years has been our immigration system which restricts companies from hiring from abroad and increases the wages of Americans with the same skills (this is especially true in engineering and science professions).

    Second, to say that this article smacks of Racism requires some assumptions. The evil of Racism (or any of these other bad ism’s) is in giving people a lower moral standing based on race (or class, sex,creed, etc.) This article merely stated that there is a connection between success and genes. In order to say this article smacks of social darwinism requires the belief that a persons moral worth is tied to their success in life (or some other measure of contribution to society), not their inherent humanity. Although there are plenty of people out there that might think that, our whole country is really based on the opposite ideal.

  28. Obama promised in his State of the Union address to “put science in its rightful place”. Great! I look forward to his lobbying for increased funding for research into genetic causes of human differences.

  29. ChrisG,

    If he’s a rich kid, I take it we’re to assume you’re bitter over a failed career?

    What’s good for the goose is good for the gander, my nilla.

  30. the main cause of income inequality in recent years has been our immigration system which restricts companies from hiring from abroad and increases the wages of Americans with the same skills

    It also drives companies to farm out work to offshore vendors.

    -jcr

  31. I have another reason why “the rich” breed more rich. The perpetually poor are, for a lack of a better term, fuck-ups. They have too many kids too young, don’t get enough education, make stupid financial decisions, are dysfunctional in their relationships and are altogether childish. They are often the victims of abuse or the children of addicts and they perpetuate the same on their own offspring. No amount of community activism, unionism or socialists in the white house and congress will fix their problems.

    Being a success in life for most people requires living a clean boring life: staying married, going to work, doing your job, not spending your way into massive debt, etc. You know, boring, leave-it-to-beaver stuff. No going to the club, banging your wife’s sister, doing mounds of blow or gambling $10,000 on the pre-game coin flip at the Superbowl. You will have a dull life, but a relatively successful one.

  32. I don’t think there is a wealth gene…but parents do surely transmit a mindset to their kids. If parents are poor, they instill a mindset of limitation and scarcity that stays with the person right on into adulthood. Many children, when grown, feel guilty if they make more than their parents (believe it or not, there’s research to back that up.)

    I would have much more appreciated this item if it hadn’t brought up that BS about the genetic component. This is behavioral all the way. The rich get richer and the poor get poorer and it’s got nothing to do with their gene pool. It’s got to do with their upbringing and their thoughts.

  33. Stage 1 (1970s-80s): drawing conclusions about capitalism from data compiled in a corporatist, aristocratic country running on a mixed-trending-socialized ecnomy…. is absurd.
    something about checking your premises… also something about actually using a control/reference group…. something else about reason sucking hard

  34. ..I guess Kim Jong Il must have the super-wealth gene… coz somehow he managed to come out rich like his daddy.. something that normally just doesn’t happen in workers’ paradises… right?

  35. Ah, someone dusted off the old nature v. nurture argument. Wasn’t this point settled by Randolph and Mortimer Duke in Trading places?

    Big news: the offspring of rich people are (wait for it): rich.

    Foolish mutant Calvinism. By the same logic, lottery winners’ offspring would be granted the wealth gene magically.

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