What Creates Opportunity?

by Dave Schuler on January 4, 2012

Returning to a subject I touched on earlier today, Harold Meyerson’s column in today’s Washington Post challenges our own self-image as “the land of opportunity”:

The best way to measure a nation’s merit-based status is to look at its intergenerational economic mobility: Do children move up and down the economic ladder based on their own abilities, or does their economic standing simply replicate their parents’? Sadly, as the American middle class has thinned out over recent decades, the idea of America as the land of opportunity has become a farce. As a paper by Julia Isaacs of the Brookings Institution has shown, sons’ earnings approximate those of their fathers about three times more frequently in the United States than they do in Denmark, Norway and Finland, and about 11 / 2 times more frequently than they do in Germany. The European social democracies — where taxes, entitlements and the rate of unionization greatly exceed America’s — are demonstrably more merit-based than the United States.

I’m not so sure about his premise. Imagine a country that was completely homogeneous and in which the people were completely genetically, culturally, and environmentally uniform. In such a country you would expect “intergenerational economic mobility” to be based completely on chance and I strongly suspect there would be more of it than in a country that was very diverse genetically, culturally, and environmentally. Assortative mating, inheritance, and family culture would actually ensure differences in outcomes.

I think that people sadly underestimate the influence of things you learn at the kitchen table. Take my own case. I have started businesses nearly from infancy. I sold greeting cards door-to-door when I was seven or eight years old. I began operating “carnivals” for the other kids in the neighborhood at just about the same time. I started mowing lawns when I was twelve and within a few years was mowing five or six acres a week. In college after working a few “real” summer jobs I organized my own business doing odd jobs and earned half as much in a summer as the average attorney earned in a year. During the school year in college I ran a money-making theater group. I also taught martial arts (and sold uniforms), translated scientific articles for various departments, and sang at weddings, baptisms, funerals, and parties (as well as occasionally tending bar at them).

Since leaving school I’ve started half a dozen businesses. Where did this propensity come from? Well, as it turns out my great-grandfather and my dad both did much the same thing. My dad raised and sold hydroponic tomatoes. He also organized a sponge importing business. These in addition to a full-time practice as an attorney and being a landlord. At the time of his death my great-grandfather owned and operated a dairy and a saloon that had the catering franchise for the St. Louis City jail, courts, and municipal offices as well as being a justice of the peace who, according to his obiturary, officiated at the weddings of more than 10,000 people.

I don’t know whether it’s something in my genes or just hearing the stories at the kitchen table. Not everyone does all of this but something lead me to do it.

As it turns out I both agree and disagree with Mr. Meyerson. I don’t know what produces greater intergenerational economic mobility or even whether that translates into greater opportunity. I do think that here in the U. S. there are a large number of factors that reduce the level of opportunity including

  • Certifications
  • Accreditations
  • Inheritance
  • Intellectual property law
  • Unchecked monopolies using their power illegally to expand their monopolies
  • Government subsidies and bailouts of connected businesses
  • Hundreds of thousands or even millions of pages of regulations at the federal, state, and local level

just to name a few. Mr. Meyerson doesn’t mention any of these in his column so I don’t know whether he’s for them or against them. I think that some regulations produce more opportunity while others constrain opportunity. For example, prohibiting the use of lead in paint certainly produces greater opportunities for the kids that won’t eat the sweet-tasting lead paint in babyhood and unknowing limit their own future prospects. Better healthcare for children of parents in the lowest income quintiles would probably increase opportunity.

I am all but certain that requiring taxi medallions and limiting the number issued (just to give a single example out of a legion) reduces opportunity.

I’m not so sure about education, particularly higher education. I note that all of the justices of the Supreme Court graduated from just three law schools and those law schools have limited enrollment. That suggests to me that the opportunity to become a Supreme Court justice is, in fact, limited. Is that a good or a bad thing?

{ 8 comments… read them below or add one }

Brett January 4, 2012 at 12:01 pm

@Dave Schuler

I don’t know whether it’s something in my genes or just hearing the stories at the kitchen table. Not everyone does all of this but something lead me to do it.

There are some twin studies showing relatively high heritability for tendencies to engage in entrepeneurial behavior, so it might actually be genetic in the case of your family.

I note that all of the justices of the Supreme Court graduated from just three law schools and those law schools have limited enrollment. That suggests to me that the opportunity to become a Supreme Court justice is, in fact, limited. Is that a good or a bad thing?

I’m concerned that it might lead to a lack of diversity in viewpoints amongst the top judges, but so far that hasn’t been the case. It’s also worth pointing out that all three are schools with high national profiles, and quite frequently need-blind (Harvard actually waives tuition and fees for students with family incomes below $50,000 IIRC). Perhaps they’re simply catching the cream of the potential legal crop in the US, and the density of all those top-notch legal students in certain areas makes those colleges even more attractive to other potential top-notch students.

Brett January 4, 2012 at 3:53 pm

Addendum:

There are some qualifiers I should have attached to that study. Nearly 100% of the twin-pairs were from the British Isles, as well as being Caucasian. Over 90% of the participants were female.

Janis Gore January 4, 2012 at 5:56 pm

I listened to your sister Ann’s interview with your mother. Your mother said that one of the reasons she married your father was his can-do and will-do approach to life. Hard to say whether it’s genetic or kitchen-table for you.

Drew January 4, 2012 at 10:23 pm

“I’m not so sure about his premise.”

I am. It’s pure crap. I deal with entrepreneurs for a living. I’ve seen street kids done good. Semi-crooks. State school, high school, Ivy League. Trust fund babies. etc etc.

Janis is basically correct. Its kitchen-table. Its what’s in your innards. It comes from within.

I’ve seen the laziest, most dispicable Ivy League or inheritance types………and the most admirable from the same background. The worst characters from street backgrounds………..and the proverbial self made man stories. The most religious man you would ever meet……….but the worst at taking care of his employees. The hardest, meanist negotiator in the world……..but the softest heart for his loyal employees. And on it goes. I’ve seen it all.

No generalities make any sense if one wants to be intellectually honest. People have deep seated goals, drivers, needs, capabilities etc. They blossom in different environments and at different times of life. They all behave differently. Its one hell of a complicated mix. After all, how do we explain our very successful Dave S, Michael R, steve, or – if I may – me. We have quite diverse backgrounds, experiences, capabilities, views…………and yet here we are. Similar to Dave, I started “working” as a mid-teen. (He beat me by a few years.) But I never did the spring break thing. Worked Christmas break and spring break. Was there at work a day after school let out for summer. Its a mindset. Pure mindset.

As for Mr Myerson. Trying to turn this interesting conundrum into a predicate for a high tax and regulatory argument puts him in the dope/crook/asshole category. Sensible people will cast aside his piece, and think twice about wasting precious time with him in the future.

Andy January 6, 2012 at 8:34 am

Case in point. I have a friend who has a PhD in Aerospace engineering. He’s an Air Force officer. When he retires he’d like to teach High School science. But he’s finding out that his doctorate somehow doesn’t qualify him and he would have to get a Master’s in education.

Dave Schuler January 6, 2012 at 8:42 am

The irony of this is that education degrees, both bachelors and masters, are notoriously lightweight and are far more geared to indoctrinating future teachers in the latest educational fads and shibboleths than in conveying actual knowledge. Practically all of that is gained in practicum.

Andy January 6, 2012 at 1:36 pm

Exactly. My daughter’s teacher got her Master’s in education because of the pay boost, not because she really learned anything. It’s essentially a bureaucratic hoop to advancement.

Scott Kirwin January 12, 2012 at 8:32 pm

I admire people who have a “nose” (is that anti-Semitic? If so I’ll revert to Star Trek Deep Space Nine reference to Ferengi “lobes”) for business. I want to do it, but I lack the imagination. Now I can spin a tale or write my way out of a paper bag spilling cliches in the process, but for the life of me I can’t do the business thing.
I’m also the resident genealogist of my family. Interestingly there are excellent sales people, tinkerers and builders, but no business owners until you go waaaay back. Genetics must have something to do with this.

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