S-Curves Everywhere

From Salaries top out at age 40 by Penelope Trunk. Trunk reports on a conversation with Al Lee, the director of quantitative analysis at PayScale.

I am constantly intrigued by the pragmatic knowledge which we collectively know and selectively share. I have the idea that were some simple pragmatic truths more broadly disseminated, everyone would likely be better off and more productive. Our estimable desire that everyone should always have choices and can be whatever they wish to be tends to stand in the way of such pragmatic sharing. There are always exceptions to the norm but it is useful to know what the norm is.

As an example, it is well established, though not necessarily broadly known, that only 2% of people who graduate high school on time, are employed and stay employed (regardless of type of job), and who get married, stay married and do not have children before marriage will ever be in poverty. That is an astoundingly simple life strategy. Could there be a more straight forward policy to cut the poverty rate seven-fold?

The fact that it has about the same success rate as the strategy that in order to lose weight one needs to eat less and exercise more is a separate matter.

Trunk's conversation with Lee illustrates the prevalence of S-curves as I discussed in Predictability and Adaptability.

Al’s data, which is based on the careers of college graduates, is basically that the salary curve for most people in their 20s is very steep. Then it starts to flatten in the 30s, and then you get into the land of the 3% raise. In real dollars, those 3% raises are not actually raises, they are just keeping up with inflation.

[snip]

To be precise, pay tops out at age 38 for women ($61K) and age 45 for men ($95K). But the difference, according to PayScale data, is not due to unequal pay for equal work. Rather, the difference is that women choose lower paying careers, and women are more likely to take time out of the workforce for kids. So the first thing you can do to prevent your salary from flat-lining is choose a career that men dominate. But it's not just about industry—it is also about influence. Stick to line-management positions rather than support roles. For example, skip human resources and go to supply chain management.

This observation regarding salary S-Curves has some real world implications.

Buy a house assuming you won't get a raise. Ever. When it comes to houses in the U.S., the average age of a first-time buyer is 33. So people go through their 20s gaining super-high raises, and then people buy a house in their mid-30s with the assumption that the raises will continue. In fact, though, you should buy a house preparing for your real income to remain unchanged until age 55, when it is likely to go down.

I find all this interesting in and of itself. However, it highlights a paradox that most parents experience.

Increasingly, in our high-velocity, heterogeneous, uncertain world, the highest returns are to those who work hardest and practice longest in some specialized and competitive field. That means that it pays the most for children to get focused early.

At the same time, we want children to have a childhood. I think that is one of the most precious things we have to offer these days - shelter from a world environment that puts a premium on children growing up too soon, becoming worldly before their time.

Two competing goals: Get focused early to be successful but also experience childhood for a reasonable period. No wonder the field of parenting is so perilous. There is no right answer. But it is useful to know the S-curves that are out there and which influence everything.

He also had the nerve to claim that Western Culture was worth fighting for

From Shock Therapy by Sarah A. Hoyt.

Her framework argument is that western intellectuals and academia have been advocating the destruction of Western Civilization without comprehending the net value for good created by Western Civilization. She uses bon pensant criticism of popular authors such as Agatha Cristie and Robert Heinlein as a test. She argues that both had a fundamental common sense and therefore respect for Western Civilization that shocks and outrages the vapid, preening intellectual of today.

This allows Christie to look at the fashionable nightclub crawling women and divine beneath the fashionable dissipation a longing for domesticity. It allows her to treat the upper class communists as poseurs. And it reaches beneath to show that the bright young things were much like everyone else since the beginning of time: they wanted to partner, succeed and reproduce.

This is Christie’s unforgivable crime as far as todays cognoscenti are concerned. Had she spent her time bemoaning the horribleness of proletarian living, the oppression of women, the unique racism and evilness of western culture, she’d be required reading in schools today. (And not nearly as popular, but that’s something else.)

Heinlein’s crime is to an extent similar. No one could accuse Heinlein of being conventional—but a lot of what he did then has become conventional wisdom now, from self-consciously having varied ethnicities in his books, to tweaking conventional morality and religion. His goal was – I think – to make people uncomfortable and to make them think.

But like Agatha Christie he had a certain practical horse sense, come, I think, from growing up in a family that lived, financially, close to the bone.

He might enjoy goring sacred cows, but like Christie he had no doubt that sacred cows or not, Western culture (and in his case American culture in particular) was the most prosperous and advanced in existence, the one that had the best chance of propelling man forward to a destiny among the stars. He also dared have women who liked men and wanted to have children (in his defense, at the time that didn’t even rise to the level of a sacred cow, it was simply an observation of human nature and biological fact.) He also had the nerve to claim that Western Culture was worth fighting for.

[snip]

World War I was terrible, and for many reasons, including the prevalence of pictures and news, the fratricide/civil-war quality of it, the massive number of casualties. It shocked an entire generation into … writing an awful lot about it, and into trying to tear down the pillars of civilization, believing that Western Civilization (and not human nature, itself) was what had brought about the carnage and the waste.

Do I need to tell you they were wrong? That they were wrong in turning against Judeo Christianity and Western civ, and capitalism, and industrialization?

[snip]

Other than Western civilization and countries influenced by it, the evils of racism, sexism and rigid class (and tribe) structure are, if anything even more hardened than they were before.

That I’m saying is that Western civilization AND capitalism (particularly the greater affluence created by it) are what brought about the erosion of those ancient evils to which ALL OF HUMANITY is prey.

Blaming Capitalism or affluence or industrialization for those evils is like blaming the cat for removing the scones from the oven and eating them – with jam and cream, mind you. (Yes, younger kid did that. He seemed absolutely convinced it was true, too. He was four.)

And invoking to resist these evils the untamed primitive (No? “Smash capitalism” and well… OWS in general) which IS the found of these evils is not only insane, it is counterproductive.

It is also where our culture has been for the last twenty years, caught in a recursive loop where everything – such as the collectivist massacres and poverty around the world – that doesn’t fit the narrative is swept under the rug, and “shocking” things that shock no one are continuously hurled Tourette’s-like at the one civilization that COULD have been shocked by WWI or seen anything wrong with death on that scale. (Hint, other cultures BRAG of how many they kill/how many of them are killed in war.)

Which is why people like Christie and Heinlein are reviled. Because if you read them you might get the idea that well… there were people wanting to smash capitalism back in the twenties, and that they were poseurs and a little ridiculous. Or that women CAN be competent, brilliant and still wish to create a new generation of humans.

The Texas-Wisconsin Paradox and intergenerational income mobility

There has been a spate of papers in the past couple of years calling into question whether the US is the highly mobile, equal opportunity nation we like to consider ourselves to be, compared to the developed countries of the Old World and OECD (See American Exceptionalism in a New Light by Markus Jantti, et al and Intergenerational Social Mobility: The United States in Comparative Perspective by Emily Beller Michael Hout). This argument has been contested by others (See Why economic mobility measures are overrated by Tyler Cowen). Having lived and worked in Europe, North America, and Asia, this new view of lower American mobility compared to others is inconsistent with my experience and perception of those countries. Anecdotal assessment does not trump empirical data but it is a catalyst to skepticism. Cowen and others raise important points. I want to explore an avenue of criticism which I have not seen discussed elsewhere; the impact of cultural heterogeneity on aggregate intergenerational income mobility statistics.

In a “perfect” world, someone in one quintile would have an equal chance of ending up in any one of the five income quintiles (i.e. the difference of the quintile of the parental home into which they are born and the quintile at which they arrive at some point in life, say retirement or death). In order to take this randomness as the standard of fairness and equality, one has to assume that the quintile in which one is positioned, both at birth and later at death, is simply a function of luck. This assumption is a common one among the glitterati and chattering classes. Anything less than random distribution is taken as evidence of structural impediments, discrimination, protectionism, etc. In some countries these structural and cultural impediments are real though I do not believe them to be in America.

However, if one accepts that people are purposeful, then the quintile to which they evolve is a function of exogenous circumstances interacting with cultural and individual attributes such as values, behaviors, knowledge, skills and patterns of decision-making. For any given set of exogenous circumstances, some individuals/cultures will be better positioned to make more productive decisions than others. Likewise, over a period of time and a range of exogenous circumstances, it is likely that some individuals/cultures will be more responsive and adaptive than others. It is demonstrable that certain cultures are more robust over time (they survive and evolve) and/or are more prone to greater productivity. In other words, values, behaviors, knowledge, skills and patterns of decision-making are the decisive determinants of productivity and continuity over time (and over a broad spectrum of random exogenous events) rather than luck.

The validity of the expectation that fairness is represented by equal intergenerational mobility is belied by looking at national economies. Were one to accept the premise that fairness is defined as random quintile movement between generations, one would expect to see dramatic changes in the order of national economies each 25 years. While virtually all economies have improved in the past 250 years (ten generations), the relative order of national economies has remained relatively stable, i.e. there is very little intergenerational movement of national economies. Intuitively we understand that this a function of national cultures and institutions rather than random luck. Countries with stable law, property rights, personal and commercial freedoms, etc. combined with cultural attributes such as future-orientation, tolerance, risk aversion, personal accountability, diligence, work-ethic, trust, etc. are and remain more productive than other countries lacking these attributes. Countries that have evolved up the hierarchy of productive countries (Chile, Singapore, South Korea, Taiwan, etc.) have all been countries that have a winning combination of such elements. There is no correlation between a country’s luck (natural endowment of resources) and its hierarchical position of productivity.

Countries that are already productive and have robust cultures that predispose them towards further productivity retain their positions in the rankings. This makes sense to most people and we do not expect dramatic changes in rankings from generation to generation because we do not believe that national productivity is simply statistical luck. Nor do we believe it should be.

Why is it that we expect that dynamic to be different at the individual level? We don’t. We want the rules to stay the same for all individuals so that there is some form of manageable predictability on which to base life-decisions but we don’t expect all individuals to make equally good decisions. The reality that there are some configurations of culture (values, behaviors, knowledge, skills and decision-making) which are more adaptive to a broader range of exogenous circumstances is simply an evolutionary reality which can be transmitted via cultural structures. While we can identify a portfolio of specific cultural attributes which correlate with productivity, we are not at a point of knowledge where we can identify the exact mix and relative importance of the particular attributes. For example are personal freedoms more important to productivity than stable laws? We know they are both important but we don’t know how important each is overall or relative to each other.

At the level of individuals, there is a broad range of evidence, which individually is not particularly robust but which cumulatively is more compelling, supporting the idea that quintile placement is not a matter of random luck but is a purposeful achievement based on certain combinations of values, behaviors, knowledge, skills and patterns of decision-making (see Creating an Opportunity Society by Ron Haskins and Isabel Sawhill for empirical evidence of the significant impact of behavioral norms on life achievement as well as A Farewell to Alms by Gregory Clark for evidence regarding the impact of “middle class” cultural values). See Surnames and the laws of social mobility for evidence regarding the durability of constant re-achievement of success across multiple generations.

Once we accept that quintile placement is not a matter of luck but of purposeful achievement, then we are freed to investigate what variables in which combination are most likely to yield the highest level of robust, continuing productivity over time. In a dynamic, heterogeneous, and uncertain environment, it is difficult to pin down cause-and-effect. At the same time there are some trade-offs that emerge under many circumstances: With more freedom comes greater inequality; With greater equality comes lower productivity; With greater heterogeneity comes greater inequality, etc.

This all serves as background to what I suspect may be happening with regard to measured intergenerational income mobility between the US and other developed countries in the OECD. The first point to make is that the US is the most culturally heterogeneous large OECD country (Singapore comes close in terms of heterogeneity but is only 3 million people.) Broadly the US is made up of 65% descendant of northwestern Europeans, 15% descendants of Africans, 15% descendants of Hispanics (Mesoamericans and Spanish heritage), and 5% other. In all other large OECD countries, there is far greater cultural, ethnic, and temporal homogeneity (temporal homogeneity reflecting the degree of recent emigrants). Most other OECD countries are at 85-95% homogeneity compared to the US’s 65%. This opens up the issue of apples to oranges comparisons, the nature of which can be illustrated by the Texas–Wisconsin educational paradox where Texas does a better job of educating (as reflected in test scores) each of its ethnic/cultural subgroups compared to Wisconsin but Wisconsin has higher average test scores.

How can each of the constituent components in Texas be higher but the overall average be lower? Differential scores between the constituent groups, i.e. Asians score highest on average and then in descending order, whites, Hispanics and then African-Americans. While all groups score higher in Texas than in Wisconsin, Texas has a dramatically higher proportion of its population from lower scoring groups than does Wisconsin. Basically Texas is a White, Hispanic and African-American state whereas Wisconsin is a White state. So which state has the better education system? The one that has higher overall average scores from a high scoring homogeneous group or the state in which each ethnic/cultural group scores higher than their corresponding group in the other state?

In the field of international education comparisons, Programme for International Student Assessment (PISA) is an attempt to compare educational K-12 outcomes across the OECD. The US usually lands pretty much in the middle of the test results seeming to indicate a relatively poor performance considering the per capita expenditures on education (far higher in the US than elsewhere). However – apples and oranges. The US is basically educating three heterogeneous groups – descendants of northwestern European and heirs to Western Civilization, descendants of Africans and heirs to 250 years of subjugation, and recently arrived descendants of Mesoamerican and Spanish civilizations. I have not seen a thorough disaggregation but the elements I have seen seem to indicate that the US whites score close to the top of the PISA tests compared to European countries, US African-Americans score at the top compared to the few predominantly black countries that participate in PISA and US Hispanics score at the top compared to Latin American countries. So an overall middle performance but with every sub-group performing higher than their apples-to-apples peers. The Texas-Wisconsin paradox at work again.

There is a similar paradox, little discussed, in terms of violence. Overall, the US is a much more violent country than most European countries but this ignores the fact that there are dramatically different levels of violence within different sub-groups. Nearly fifty percent of murders in the US occur within the African-American community (which represents approximately 13% of the overall population). If, once again, you break out violence by group, you find that white America has levels of violence close to or below most of the large European countries, African-Americans better than most black majority countries and Hispanics better than most Latin American countries. The Texas-Wisconsin paradox at work again.

My suspicion is that measures of intergenerational income mobility are similarly plagued by the Texas-Wisconsin paradox. I do not have the measures to prove it, in part because this is a relatively new field where there is not a lot of reliable historical data. If and when we are able to get that data, I suspect what we will find is that there is relatively high levels of intergenerational income mobility among whites, principally driven by educational attainment and family structure. I suspect we will find relatively low intergenerational income mobility among African-Americans but with a 10-20 year kink in the trend line around 1950-1970 when labor market, legal structures and cultural practices opened up opportunities for all African-Americans but which had the net effect of burgeoning opportunities for the elite in the community and depressing opportunities for the less advantaged. Specifically, the cycle of single parenthood which emerged in the 1950s onwards will have had a powerful depressing effect on income mobility overall. Finally, the record for Hispanics will be very mixed. I suspect that culturally integrated Americans of Hispanic descent (i.e. Hispanic Americans whose families have been in the US for several generations) will show the same level of intergenerational income mobility as whites but the larger number of new and first generation immigrants will show very low intergenerational income mobility and their large numbers will swamp those of the entire group. It usually takes large immigrant groups 2-4 generations to integrate and take on the macro-culture and until that culture change has occurred, the intergenerational mobility will continue to look like that of their original cultures of origin.

Human system variation and selection

There are five sources of variation in the human system: 1) genetic, 2) epigenetic, 3) phenotypic, 4) cultural, and 5) path dependent individual variation. These five sources of variation are manifested in an individual as they interact with a dynamic, heterogenous and varyingly uncertain/unpredictable exogenous environment. The outcome, then, is determined by a less-than-clear combination of some minimum of 15 combinations of variables (more when allowing for unique combinations arising from internal variation, interaction and feedback loops). Hence the difficulty of nailing down simplistic, universally explanatory root causes when it comes to the human system.

Informal cultural mechanisms protect against private predation

From Constraining Predation: Formal and Informal Institutions by Ed Lopez. He quotes from the abstract -

Previous findings suggest that informal, cultural rules underlie constraints on government predation. Following this logic, this study asks how contract enforcement is achieved – through formal or informal mechanisms? After controlling for reverse causality, the empirical results suggest that informal cultural mechanisms protect against private predation and support contracting institutions while the formal institutions are insignificant.

This is interesting because it implies an even greater weight on cultural values and behaviors as the variables responsible for success (productivity). I read this report to be saying that there are better or worse government structures but unless the appropriate cultural values underpin those structures, you won't necessarily see the expected benefits from those structures. I don't disagree but it is interesting to see empirical evidence beginning to arise that would support that supposition.

At every turn there are bargains seeking each other but, because they cannot find each other, men are left in extreme want

From Essays of Michel de Montaigne essay number 35, On Administration. Hat tip David Post

My late father, a man of a decidedly clear judgement, based though it was only on his natural gifts and his own experience, said to me once that he had wished to set a plan in motion leading to the designation of a place in our cities where those who were in need of anything could go and have their requirements registered by a duly appointed official; for example: “I want to sell some pearls”; or “I want to buy some pearls.” “So-and-so wants to make up a group to travel to Paris”; ‘”So-and-so wants a servant with the following qualifications”; “So-and-so seeks an employer”; “So-and-so wants a workman”; each stating his wishes according to his needs.

It does seem that this means of mutual advertising would bring no slight advantage to our public dealings; for at every turn there are bargains seeking each other but, because they cannot find each other, men are left in extreme want.

In my opinion, one of the least remarked upon dynamics of history is the reconnection of humanity. We made our way out of Africa some 50-100,000 years ago and had occupied the old world by 40,000 years ago and the new world by 10,000 years ago. The last major land masses to be occupied by modern man were Madagascar and New Zealand, 2,500 and 800 years ago respectively.

During the expansionary phase, disparate group interaction was constrained by always being able to move beyond the neighbors. Once the landmasses were settled, and particularly once we moved from hunter gathering to settled agriculture and from nomadic to settled villages and towns, there emerged the need for new and better skills (i.e capacity to manage disparate interactions between mixed groups). The past five thousand years have essentially been one mass learning exercise of how to deal with increased densification of populations and increased interconnectivity.

The last major transition was about five hundred years ago when, for a variety of cultural, economic, and technological reasons, the routes were opened (first by sailing ships then ultimately by roads, rails, etc.) for mass, routine and frequent connection between remote and heretofore isolated communities. De Gama or Magellan or Columbus can claim the title for the advent of the new age of interconnectivity.

Montaigne lived 1533-1592, the century after the great reconnection began. It is interesting to see in his note that even at the dawn of reconnection and long before the internet, Twitter or Facebook, people were beginning to address the conceptual implications of greater interconnectivity.

That part which laws or kings can cause or cure

H/T Megan McArdle. From Samuel Johnson, artfully describing the limits imposed by the frontier of knowledge and the capacity of good intentions to bring about good outcomes. The lines are by Samuel Johnson though they appear as a contribution by him in Oliver Goldmsith's The Traveller.

How small, of all that human hearts endure
That part which laws or kings can cause or cure!

Malthusianism is a psychological disposition more than an intellectual conclusion

From Farming the Sahara and the End of Malthusianism by Walter Russell Mead.

Slowing population growth. The restoration of massive swaths of farmland to nature. Increasing world food supplies. Lower food prices for billions of people. Massive water supplies beneath the driest deserts. Abundant oil and gas. The 21st century is looking like it will be a very different kind of place than the greens and Malthusians have warned us about.

Malthusianism is a psychological disposition more than an intellectual conclusion, and we have no doubt that the alarmists among us will find new looming catastrophic shortages to warn us about. But it’s striking nevertheless that centuries of failed predictions haven’t dented the confidence so many people have in what is so clearly a wrong-headed approach to world affairs.

We must get better results

Scott K. Johnson in Re-thinking the way colleges teach critical thinking echoes my post, Critical Thinking - much talk and little action.

Though critical thinking is universally regarded as a pillar of higher education (including by employers seeking college graduates), results show that students are not developing their critical thinking skills to the extent we expect. For their 2009 book, Academically Adrift: Limited Learning on College Campuses, Richard Arum and Josipsa Rocksa followed a little over 2,300 college students through their first two years of school. They found “a barely noticeable impact on students’ skills in critical thinking, complex reasoning, and writing” and “no statistically significant gains [in these skills] for at least 45 percent of the students.”

These students may be learning things, but they’re not becoming better thinkers or writers. That’s a remarkable failure to realize the promise of a college education—and that disappointing reality actually appears to have gotten considerably worse over the last few decades. It’s irrelevant how much blame should be placed on the school and how much on the students. We must get better results.

The consequence of complexity, then, is diffuse cynicism

From Kludgeocracy: The American Way of Policy by Steven M. Teles.

While liberals are harmed by the opacity of kludgeocracy’s successes, conservatives are hurt by the lack of traceability of its failures. The fact that so much of our welfare state is jointly administered — either inter-governmentally or through contracting with private agents — makes it hard for Americans to attribute responsibility when things go wrong, thus leading blame to be spread over government in general, rather than affixed precisely, where such blame could do some good. The consequence of complexity, then, is diffuse cynicism, which is the opposite of the habit needed for good democratic citizenship.