The issue of our time is not income inequality but income mobility, of which there is in the U.S. less and less. Are conservatives paying attention?
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Did the Founders think, then, that America would be a country of perfect mobility? That was the subject of a famous debate between Jefferson and Adams, after both had left politics and patched up their quarrels. Both opposed what they called an “artificial aristocracy” of wealth and privilege and applauded the “natural aristocracy” in which the self-worth of eminent men and women is recognized by all. In each generation such people emerge, and a just state should recognize their worth and employ their services. Jefferson thought that some of their virtues might be passed on to their children, but thought that “the equal rights of men will rise up against” a permanent aristocracy of this kind.
Adams would have expected a higher score on the Pew scale, for he thought that a famous name would confer on its bearers an eminence which, if decayed, might nevertheless last through generations. That wasn’t good enough for his great-grandson, Henry Adams, who a hundred years later bemoaned the decline of his family. Even in our own day, however, a name such as Kennedy or Clinton confers a wholly undeserved advantage in life.
Beyond the celebrity attached to a name are the genetic advantages that come from the wise choice of parents. This was the great theme of Charles Murray’s The Bell Curve, which the debate about the book’s racism obscured. Murray prized the idea of America as the land of opportunity and worried that the transformation of America from a manufacturing to an information economy would confer lasting benefits for smart gene pools. The winners in the new economy are the more intelligent people amongst us, and if 40 to 80 percent of what makes us smart is inherited, as Murray suggested, then a class of the more intelligent might persist over generations, leaving the generations of Little Brains in the dust. That message is reinforced by the Pew Economic Mobility Study, in which measures of parental intelligence are strongly correlated with the economic outcomes of their children.
We haven’t yet reached the point where people are penalized for their intelligence, and we’ll never reach the point where we shun John Adams’ celebrity families. That is to say that we should not expect or desire perfect intergenerational mobility, with a Pew score of 0, in any society. Those with more intelligent parents are more likely to be more intelligent themselves, and wealthier too.
This doesn’t explain why the U.S. ranks so poorly on the Pew study, however. There are smart people everywhere, and we’d expect the same degree of mobility in each country, if intelligence were the only driver. Similarly, the move to an information economy can’t explain the differences, when this affects all first world countries in so similar a manner.
That leaves several explanations for the difference. For some people, the first thing to come to mind is racism. For some people the first thing to come to mind is always racism. In a racist society, the disfavored class finds it impossible to move up the ranks, and this would reduce mobility and increase the Pew ratio. I don’t know how to prove or disprove such claims, but nevertheless am skeptical that racism explains much of the difference. First, America is not the only diverse society around. Other countries, especially those which, compared with the U.S., have high immigration ratios, are also diverse, and often more racist than the U.S. Second, if racism explains the difference, what was affirmative action all about? What a waste all such efforts would have been, if it all comes down to irreversible racism.
Then there are cross-country differences in welfare systems. There is a strong positive correlation between economic mobility and a country’s top rate of marginal taxation. That might seem like a paradox, since the wealthy have less to leave to their children under progressive taxation. The paradox disappears, however, if the tax revenues are applied to level the playing field through welfare policies. Once again, however, I don’t buy it. As a percent of GDP, America spends less on welfare than most first world countries, but the value of the welfare payouts in America per recipient are among the highest in the world. One might think that government subsidies for higher education would account for much of the difference, since higher education is a powerful escalator for economic advancement, and since college tuition is much higher here than in comparable countries. However, university completion rates in the U.S. are the second-highest in the world. It may be expensive, but people still go to college here.
That leaves two things, which I think do help to account for the lack of income mobility in the U.S., and which conservatives in particular would find objectionable. The first is a culture of poverty in which the desire to get ahead is abandoned. To succeed, what children need are the habits of industry and learning, the willingness to defer immediate gratification, which professional and wealthier parents who are married to each other can more easily pass on to their children. That is the most important head start program society may offer, compared to which state-run Head Start programs are a joke.
Might this explain why America lags on cross-country measures of income mobility? Some evidence of this is provided by how America’s 15-year-olds fare on the OECD Program for International Student Assessment tests, where they rank 17th in science and 25th in math, with a statistically significant relationship between the science scores and the Pew mobility rankings. America’s kids do however lead the world in one category—self-esteem. The gap between performance and self-image is highest in this country, and the sense of self-contentment and happy mediocrity plausibly helps to explain America’s income mobility ranking. There is no need to pursue happiness if it comes without effort.
The second factor that might help account for the income mobility ranking is how America fares on measures of the rule of law. There is a broad understanding that the rule of law is crucially important in explaining economic development, without much agreement about what the term might mean. However, one thing it has always been taken to denote is a distinction between the rule of law and that of men. How the state treats one shouldn’t depend on whom one knows. In that sense, America seems not to rank particularly well, when compared with the other countries on the Pew mobility index. On measures of the rule of law, the World Justice Project ranks America about 9th or 10th out of the 12 countries surveyed in Western Europe and North America. Transparency International puts the U.S. in 24th place in its measure of perceptions of public corruption.
The Transparency International ranking is significantly correlated with the Pew mobility index. That’s what one would expect. The more corrupt a country, the more it matters whom one knows, and the less mobile the society. In highly mobile countries, it matters less whom one knows and more what abilities one brings to the table.
Jefferson thought that Americans wouldn’t tolerate the lack of income mobility I have described. Why was he wrong? Here I offer an explanation. Suppose that (1) people are concerned about how their children will fare; (2) people have relative preferences (they care about how they and their children rank compared to others); and (3) a class of people, small in size but large in influence, composed of opinion leaders and the very rich, has a disproportionate ability to shape our policies. Put all that in the hopper and don’t be surprised if what comes out is aristocracy.
Milton Friedman advanced a model in which people care only about themselves and not about their children. That was just a model, and it was inconsistent with the solid evidence that people do care about how their children fare. That’s why high estate taxes are wasteful. If people care about their kids, they produce more than they can spend on themselves during their lifetime in order to bequeath what is left to their children. Take away the right to pass on income on death, and people will react by producing a lot less. Caring about succeeding generations is not a vice. It’s a virtue, and conservatives in particular will recognize this.
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