What Is the Secret of Success?

I found Thomas Edsall’s New York Times op-ed on the role of education in (economic) success very thought-provoking. It has a number of quite interesting observations and I wanted to comment on it and them. For example, consider this passage on the education as a “lifter of all boats”:

Education lifts all boats, but not by equal amounts.

David Autor, an economist at M.I.T., together with the Harvard economists Claudia Goldin and Lawrence Katz, tackled this issue in a paper last year, “Extending the Race Between Education and Technology,” asking: “How much of the overall rise in wage inequality since 1980 can be attributed to the large increase in educational wage differentials?”

Their answer:

Returns to a year of K-12 schooling show little change since 1980. But returns to a year of college rose by 6.5 log points, from 0.076 in 1980 to 0.126 in 2000 to 0.141 in 2017. The returns to a year of post-college (graduate and professional) rose by a whopping 10.9 log points, from 0.067 in 1980 to 0.131 in 2000 and to 0.176 in 2017.

I asked Autor to translate that data into language understandable to the layperson, and he wrote back:

There has been almost no increase in the increment to individual earnings for each year of schooling between K and 12 since 1980. It was roughly 6 percentage points per year in 1980, and it still is. The earnings increment for a B.A. has risen from 30.4 percent in 1980 to 50.4 percent in 2000 to 56.4 percent in 2017. The gain to a four-year graduate degree (a Ph.D., for example, but an M.D., J.D., or perhaps even an M.B.A.) relative to high school was approximately 57 percent in 1980, rising to 127 percent in 2017.

He then proceeds with a lot of hand-waving on how increasing technology requires increasing education. He then considers the role of parental strategies:

In their paper “The Economics of Parenting,” three economists, Matthias Doepke at Northwestern, Giuseppe Sorrenti at University of Zurich and Fabrizio Zilibotti at Yale, describe three basic forms of child rearing:

The permissive parenting style is the scenario where the parent lets the child have her way and refrains from interfering in the choices. The authoritarian style is one where the parent imposes her will through coercion. In the model above, coercion is captured through the notion of restricting the choice set. An authoritarian parent chooses a small set that leaves little or no leeway to the child. The third parenting style, authoritative parenting, is also one where the parent aims to affect the child’s choice. However, rather than using coercion, an authoritative parent uses persuasion: she shapes the child’s preferences through investments in the first period of life. For example, such a parent may preach the virtues of patience or the dangers of risk during when the child is little, so that the child ends up with more adultlike preferences when the child’s own decisions matter during adolescence.

Guess what? In societies (or, presumably, sub-societies) in which advancement is nonexistent or unlikely, the authoritarian style prevails. The claim is that in both the United States and China the authoritative style prevails. I seem to recall that in some societies it depends on the child’s age—preschool children are generally treated very permissively but when they start attending school parents become very controlling.

No mention is made in the piece of single parent families which are the norm in some segments of our society.

He goes on to tout spending heavily on early childhood education. Frankly, I’m skeptical. IIRC the gains from Head Start tend to erode very quickly. I will agree with one thing: the heavy federal spending we have been doing on higher education is not worthwhile.

Now I’ll make a few observations. I wish he didn’t include MDs in the calculus. Physicians are outliers. Consider this very interesting chart of real per capita health care spending:

thoughtfully provided by the University of Minnesota. I’m not claiming that physicians account for all of that change but they certainly participate in it. You can come up with lots of explanations for that astonishing change. It is my believe, following Uwe Reinhardt, that “it’s the prices, stupid”. Others point to improved outcomes or other explanations. I also think that Medicare spending is both a cause and an effect in that chart but that’s another subject.

It is a fact that lawyers, engineers, architects, and accountants have not experienced a 25-fold increase in real incomes over the last 90 years. Physicians stand alone among professionals in that regard.

And including JDs isn’t particularly helpful, either, for reasons I have explained before: incomes in the practice of law occur in a bimodal distribution (sort of like a camel’s humps) with the higher incomes being realized by associates and partners with big law firms who graduated from the top law schools. The top law schools are extremely selected in their admissions. You can’t generalize anything from them. Similarly with MBAs. There’s a difference between the income of a Harvard, Stanford, Northwestern, or U of Chicago MBA and an MBA from the U of Pittsburgh. I also suspect that when those outliers are excluded from the statistics on the income expectations of those with post-graduate degrees the picture looks a lot different.

Next observation. IQ is weakly correlative with financial success. What might be called “temperament” or socio-emotional development is much more closely correlated. Does heredity play a role in socio-emotional development? No one really knows.

I’ll close with a question. What are the factors behind economic success? Offhand I would say

• Wanting to succeed and putting in the effort to succeed
• Socio-emotional development
• Social support, i.e. peer pressure
• Heredity
• Parenting strategy
• IQ
• Luck

and I think the federal government is more likely to be a hindrance than a help.

Offhand I would say I was extremely fortunate. I was expected to get a college and probably post-graduate education. When my dad died young I put myself through school. I didn’t get much benefit in that regard from being white. I was fortunate in having parents who both were bright, who both had post-graduate degrees, and who adopted the “authoritative” strategy. I’ve always been sort of a non-conformist (or even anti-conformist) so the opinion of my peers has not played much of a role for me.

I would appreciate the thoughts of my readers on this subject.