Here, let us fix that

Schedule of work prevents me from reading this research in detail, but I am skeptical. Raj Chetty is a researcher whose research alway seems to support a particular outcome - chattering class authoritarianism. From Who Becomes an Inventor in America? The Importance of Exposure to Innovation by Alex Bell, Raj Chetty, Xavier Jaravel, Neviana Petkova, John Van Reenen. I am reasonable certain there is some quite interesting information and ideas in the research somewhere but that you would have to go to the raw data rather than the researcher's summary. Chetty teams always seem to find only that which they are looking for, reasons to shift decision making from citizens to the authoritarian credentialed. From the abstract:

We characterize the factors that determine who becomes an inventor in America by using deidentified data on 1.2 million inventors from patent records linked to tax records. We establish three sets of results. First, children from high-income (top 1%) families are ten times as likely to become inventors as those from below-median income families. There are similarly large gaps by race and gender. Differences in innate ability, as measured by test scores in early childhood, explain relatively little of these gaps. Second, exposure to innovation during childhood has significant causal effects on children’s propensities to become inventors. Growing up in a neighborhood or family with a high innovation rate in a specific technology class leads to a higher probability of patenting in exactly the same technology class. These exposure effects are gender-specific: girls are more likely to become inventors in a particular technology class if they grow up in an area with more female inventors in that technology class. Third, the financial returns to inventions are extremely skewed and highly correlated with their scientific impact, as measured by citations. Consistent with the importance of exposure effects and contrary to standard models of career selection, women and disadvantaged youth are as under-represented among high-impact inventors as they are among inventors as a whole. We develop a simple model of inventors’ careers that matches these empirical results. The model implies that increasing exposure to innovation in childhood may have larger impacts on innovation than increasing the financial incentives to innovate, for instance by reducing tax rates. In particular, there are many “lost Einsteins” – individuals who would have had highly impactful inventions had they been exposed to innovation.

Would that it were true. I am already seeing lots of chatter around the idea that if we only poured more money into fixing inequality it would pay for itself. The solutions are always totalitarian, skipping the messiness of citizens deciding for themselves.

Perhaps there is more nuance in the bowels of the report, but the summary has all the characteristics of a category error. The two categories are outcomes that derive from emergent order and outcomes that arise from purposeful design. Chetty's teams always seek to achieve Emergent Order outcomes through Purposeful Design means.

It is very similar to the policy thinking in the late 1990s and early 2000s. Home ownership is associated with all sorts of positive social characteristics; lower crime, higher education in education, more responsible household finances, higher family formation, lower out-of-wedlock births, higher labor force participation, etc.

Committing multiple errors (category errors, confusion on causal flow, post hoc ergo propter hoc, confounding variables, etc.) the chattering class authoritarians (also known as Intellectuals Yet Idiots) concluded that the good social outcomes arose because of home ownership and therefore, in order to build utopia, all we had to do was better enable people to build homes.

Legislation was passed and policies instituted. Fannie Mae and Freddie Mac were repurposed to increase home ownership. Regulations on banks and mortgage companies were adjusted to make it easier and easier to lend to people with little or no credit capacity. Just get people in to homes and unicorns would roam.

Instead of unicorns, we of course got the Great Recession of 2007. Not only were the targeted beneficiaries, those to whom mortgages had been extended which they could not afford, wiped out but everyone else suffered as well with a national and global economic contraction involving failed financial institutions, massive job losses, permanent reductions in labor force participation rates, and the wiping out of accumulated savings (both uninsured deposits as well as zero-interest rate policies).

All because the chattering class failed to recognize that home ownership was the result of middle class values which also drove all the other social goods. Simply giving people homes did not instill middle class values. Intellectual yet idiots indeed. Moral preening by the credentialed but unaccomplished is not a good foundation for real world policy setting.

Likewise, inequality is an emergent order arising from complex, chaotic, dynamic, non-linear, chaotic, loosely coupled systems which we understand poorly. Blundering in trying to reorder things with a minuscule understanding of categories, causal flows, feedback mechanisms, etc is a recipe for disaster. Yet all Chetty's research always seems to lead to the conclusion that the chattering classes ought to decide for their fellow citizens how to make things better.

Color me skeptical.