Inherited privileges are the enemy, not earned privileges.

The remarkable persistence of power and privilege a book review by Andrew Leigh of Gregory Clark's The Son Also Rises. Brings out some points I have not seen mentioned elsewhere.

Analysing mobility in medieval England, Clark finds that people with names derived from jobs (Cook, Butler, Thatcher and so on) were more likely to move upwards, while those with names that derive from towns (including Baskerville, Pakenham and Walton) tended to move downwards. And not much changed after the industrial revolution. Surnames of Oxbridge graduates in the early 1800s, for instance, are three times as common among British MPs in the late 1900s.

Interesting. Makes some sort of sense.

While fascinated and somewhat receptive, I remain leery of Clark's work. I have the nagging feeling that rare names may have some independent dynamic that might make them less than representative. I don't know what that dynamic might be and the more his work is endorsed and incorporated by others in the field, the less likely it is that my simple instinctive response will have merit.

There is a nice summary of the earlier inequality research.

In his 1988 presidential address to the American Economic Association, Gary Becker argued that “earnings are not strongly transmitted from fathers to sons.” Four years later, Gary Solon showed that prior researchers had been overestimating the degree of social mobility because they were using just a single year of data.

To see how this happens, imagine a high-earning barrister who happens to take six months off work in the year of the survey. Now suppose his son becomes a high-earning barrister too. A study that used just one year of data might wrongly assume that this was a case of someone moving from rags to riches. But a study that used several years of data would see that both father and son were well-off.

At this point, I need to introduce a few numbers. The standard measure of mobility across generations is the “elasticity” of children’s earnings with respect to their parents’ earnings – in other words, how closely the former reflects the latter. Because women have tended to have much lower rates of paid work, researchers have focused on the father–son earnings elasticity. An elasticity of zero means there was no relationship between the earnings of fathers and sons, while an elasticity of one would mean that a 10 per cent rise in fathers’ earnings was associated with a 10 per cent rise in sons’ earnings. The closer the elasticity gets to one, the less mobile the society.

Elasticity measures aren’t confined to income. The elasticity of height, for example, is about 0.5, which means that if a father is ten centimetres taller than average then we expect his sons to be five centimetres taller than average. Sure, there are tall fathers with short sons (and vice versa), but basketball dads are generally taller than gymnast dads.

In the case of earnings, economists’ best estimate of intergenerational elasticity went from 0.2 when they used a single year of earnings (as did the studies Gary Becker was relying on) to 0.4 when they used a few years of earnings (Gary Solon’s approach). Over the next decade, US researchers threw better and better data at the problem, and each time they found less and less mobility. Using more than a decade of earnings data, Bhashkar Mazumder estimated in 2005 that the intergenerational earnings elasticity for the United States was 0.6. That would put it higher than the father–son height elasticity. Among American sons, fathers had a larger impact on their earnings than on their stature.

Using similar techniques, researchers began estimating father–son earnings elasticities for other countries. As one survey showed, Scandinavian nations tended to be extremely mobile, with elasticities below 0.2. In Latin America, there was much less class-jumping, with elasticities over 0.5.

So the more detailed the research, the less mobile societies appear (0.6).

But if we accept Gregory Clark’s methodology, his results imply a very static society. For Britain, the United States, India, Japan, Korea, China, Taiwan, Chile and even Sweden, he concludes that the intergenerational elasticity is between 0.7 and 0.9. This would mean that social status is at least as hereditable as height. It suggests that while the ruling class and the underclass are not permanent, they are extremely long-lasting. Erasing privilege takes not two or three generations, but ten to fifteen generations. If you cherish the notion of a society where anyone can make it, these results are disturbing.

It is interesting to see people wrestling with the implications of Clark's work. Take that last line just quoted, "If you cherish the notion of a society where anyone can make it, these results are disturbing." Not necessarily. What you want to avoid is an oligarchic outcome in which classes of people both hold power and are shielded from consequences. An aristocracy, using the old terms.

But if some families transmit cognitive or physical attributes, whether by genes or culture/values, which are successful in multiple contexts and in multiple eras, then why should that inherently be concerning as long as it is merit based and not a consequence of inherited privilege, nepotism, rent seeking or regulatory capture. It seems to me that concentration of power, corruption, rent seeking, regulatory capture, and nepotism are the sources of concern, rather than the prevalence of achievement among different individuals within lineages over time.

Let me use an example to try and make this clearer. If all car companies are free to enter the Grand Prix and all are subject to the same regulatory rules, it is not unlikely that a handful of companies are likely to end up being more consistently likely to win the Prize over the decades than others. Not every year, and certainly there are ebbs and flows. But over time 3-4 may produce the most number of winners. Why would that, in itself, be concerning?

Let's grant that we want a society where anyone can make it. We set up processes and procedures and expectations and metrics of achievement so that everyone's performance is open, transparent and objectively measured. Is it likely that all individuals and all lineages will have exactly the same representation over time? No. Only those who have the clearest understanding of the rules and have the personal attributes, knowledge, experience, skills, values and behaviors that permit the achievement of the objective measurements will succeed. Some individuals, families, lineages, cultures are going to be over-represented compared to others, i.e. those that most encourage the most appropriate attributes and behaviors. There is always variation in any system over time. No one is fated. As long as the system permits everyone with the requisite skills, values and behaviors to rise, then why would we be concerned? Leigh doesn't address that question.

The implicit logic is that Leigh and others likely want everyone to have equal chance of reward regardless of capability. That is an exceptionally bald way of putting it but that seems to be the logic. I think the unstated discomfort with Clark's results are that they force a confrontation that there are different goals being pursued by different people. Do we want an impartial system that objectively awards everyone that is able to meet its criteria fairly, even if that means there are disproportionate beneficiaries (by lineage, or culture, or religion, or class, etc.) Or do we want a system that rewards people randomly regardless of effort so that everyone has a chance to share in the systemic boon? If you are some form of meritrician, then Clark's work is interesting but not particularly concerning.

If you are an equal outcomes person, then "these results are disturbing."

The challenge to break out of unstated assumptions is most manifest in Leigh's penultimate paragraph, where he makes recommendations.

How do we break the pattern? Part of the answer must lie in a fair tax system, a targeted social welfare system, effective early childhood programs, and getting great teachers in front of disadvantaged classrooms. We need banks willing to take a chance on funding an outsider, and it doesn’t hurt to maintain a healthy Aussie scepticism about inherited privilege.

None of which necessarily follows from anything he has written before. He seems to accept Clark's research and some of its implications but then instinctively falls back on recommendations that are necessarily ineffective given the results he has just accepted.

If Clarks research ends up being accurate, all it does is put the onus on ensuring that we fight concentrated power, self-serving cadres, rent seeking, regulatory capture, obfuscation, subjectivity, etc. While accomplishment may show up in some families less often than in others, it is imperative that it be allowed to flower wherever it occurs. Inherited privileges are the enemy, not earned privileges.

UPDATE: On consideration, I think the unstated assumption made by Leigh and many others is that disproportionate accomplishment (by lineage, culture, religion, class, race, etc.) necessarily leads to nepotism, rent seeking, regulatory capture, positional exploitation (protecting US and exploiting the OTHER by whatever means US and OTHER are defined). I think this is a conflation of concerns. There is a risk that disproportionate accomplishment will lead to the pursuit of positional exploitation - that is human nature. You can't easily change that. However, you can build a system which discourages nepotism, positional exploitation, rent seeking, regulatory capture, etc. That should be the focus, not the naturally arising disparate accomplishment.

The risk is that by trying to suppress natural patterns of achievement (if indeed they are naturally occurring rather than the consequence of positional exploitation) is essentially an attack on accomplishment, i.e. an attack on risk taking and productivity. As long as the attacks are miniscule or ineffective, it is just so much noise. If the attacks become successful then you have systemic productivity collapse as exemplified by every such effort in the past. Our history is that we can have a system where there is maximum productivity but with disparate distribution of the benefits of that productivity or you can have equal poverty. We haven't yet found a way to achieve both high productivity and minimal disparities.