Cowen on Income Mobility

by Dave Schuler on January 18, 2012

Tyler Cowen posts on income mobility and raises a lot of the points that I did here. For example:

How much of immobility is due to “inherited talent plus diminishing role for random circumstance”? Is not this cause of immobility very different — both practically and morally — from such factors as discrimination, bad schools, occupational licensing, etc.? What are you supposed to get when you combine genetics with meritocracy? I do not know how much of current American (or other) immobility is due to this factor, but I find it discomforting that complaints about mobility are so infrequently accompanied by an analysis of this topic.

{ 2 comments… read them below or add one }

Zachriel January 18, 2012 at 11:09 am

Well, as intergenerational mobility is decreasing, then there are probably factors other than inherited talent involved. You can also compare the U.S. to other countries, such as in Europe. Presumably, parents instill their values and work ethics there too, but there is more intergenerational economic mobility in Europe. There seems to be a large measure of macroeconomics involved.

sam January 18, 2012 at 11:17 am

“there is more intergenerational economic mobility in Europe”

On that, Tyler wrote:

Why do many European nations have higher mobility? Putting ethnic and demographic issues aside, here is one mechanism. Lots of smart Europeans decide to be not so ambitious, to enjoy their public goods, to work for the government, to avoid high marginal tax rates, to travel a lot, and so on. That approach makes more sense in a lot of Europe than here. Some of the children of those families have comparable smarts but higher ambition and so they rise quite a bit in income relative to their peers. (The opposite may occur as well, with the children choosing more leisure.) That is a less likely scenario for the United States, where smart people realize this is a country geared toward higher earners and so fewer smart parents play the “tend the garden” strategy. Maybe the U.S. doesn’t have a “first best” set-up in this regard, but the comparison between U.S. and Europe is less sinister than it seems at first. “High intergenerational mobility” is sometimes a synonym for “lots of parental underachievers.”

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