Monday, December 09, 2013

American Dream: a Danish Reality?

High social mobility isn't a clear net positive

The American Dream is a national ethos of the U.S. Perhaps every third Hollywood movie describes the life story of a person born to poor conditions who makes it. The Americans themselves believe that this social mobility is one of the virtues in which the Americans beat other nations. The only problem is that the data suggest otherwise:
The myth of the American Dream (CNN Money)
Someone evaluated the "probability that you will be stuck in the same class as your parents", i.e. the social immobility of a sort. Denmark only has 0.15 so it's a country where the "dream" is true. Canada, Japan, France, Pakistan are between 0.3 and 0.5 but better than the U.S., the U.K. is slightly worse than the U.S., and Peru is much worse at 0.67.

What's wrong here?

One of the reasons of the persistent belief in the social mobility of the U.S. economy is that it probably used to be true in America, perhaps as recently as a century ago. After all, Europeans (and others) would mostly come to America as poor people near a financial crisis. One may say that all the rich dynasties were and are descendants of such poor immigrants.

However, things have changed, it seems. The idea about the exceptional American social mobility may be a true feature of the American movies – but not so much the American life.

The basic theme of the movies sounds touching. However, I still think that one should ask whether a high social mobility is something that a nation really wants. I am not so sure about it.

My doubts were energized when I heard Barack Obama's talk claiming that the income inequality threatens the American Dream. What the current U.S. president calls the American Dream could perhaps more accurately be called Karl Marx's dream or Vladimir Lenin's dream. When Obama articulates these ideas this clearly, he makes you sure that you want to avoid this American Nightmare.

A deeper problem is that if you think about Obama's left-wing caricature of the American Dream rationally, you will ultimately agree that Obama is actually right. Any sufficiently quantitatively well-defined realization of the American Dream ultimately does boil down to the amount of redistribution etc.

The reason is that the GDP growth per generation is just something of order 50% in the long run – both in countries where the American Dream rules and those in which it doesn't. And this relative growth is arguably not changing certain things "qualitatively". And even if it were changing them, the income boundaries between the classes are arguably being increased, anyway.

My point is that if a country has a very high social mobility, people must move up but there must also be many people who move down!

In fact, the number of the down-movers must be pretty much comparable to the number of the up-movers if the social mobility is high. The existence of the negative entries – entries that not only exist but they are actually equally important as the positive ones – is something that is routinely being overlooked or censored.

I am convinced that this outright denial of the existence of negative numbers is really a necessary condition behind the propaganda that "a high social mobility is a clearly positive thing". As you may predict, I view social mobility as a pretty much "morally neutral" quantity and too high values of social mobility are clearly bad according to my world view.

One should separately discuss what are the natural causes of social mobility or social immobility; and one should separately discuss what are the policies that change the social mobility relatively to the natural values (they usually increase it) and whether these policies are good for the societies.

Concerning the former, there are very good reasons behind the inertia. People inherit DNA and some skills (or their shortage) from their parents. Sons and daughters are often taught many things by their parents (this type of transferred information is somewhere in between the DNA heritage and the financial heritage). Moreover, they sometimes inherit the assets, too. It's natural because offspring are still closer to you, emotionally and/or genetically, than a vast majority of the people in the world.

Centuries ago, it was normal in Europe for men to inherit the crafts from their dads. In certain corners, it was really an exception if someone violated this rule! And it did work. Of course that I think it is a silly oversimplified feudal stereotype if someone wants to artificially enforce such rules. On the other hand, I do think that there are very good reasons why such patterns might often be true "naturally". Such correlations follow from biology and the mechanisms inside the society and they often play a helpful role in the society.

Concerning the latter point, policies that deliberately change (increase) the social mobility, well, I think that they require a high degree of redistribution. The redistribution is meant to help the poor ones to become richer – even if they can't pay for the required investments etc. – and these funds are taken from the wealthier ones. An inheritance tax may attack the correlations between the parents and their heirs more directly.

One should also remember that some of the methodologies may produce high values of the "social mobility" for societies with generally lower degrees of social inequality. I don't want to go into details. While I have doubts about the positive character of policies that try to increase "social mobility", I am absolutely convinced that policies artificially trying to lower "social inequality" are pernicious.

To summarize, one may continue to react to various movies and works of fiction in the same way as he always did but he may still want to use a different, more rational attitude towards the social and political questions. When he does so, he may easily find out that some "ideals" that have been incorporated into the national ethos should better preserve their status of exceptions. Too high degrees of social mobility are probably impossible without a significant degree of the government's redistribution (i.e. state-sponsored organized theft) and they tend to produce an insufficiently structured and stable society.

Some inertia is really a good thing. At least to a certain extent, the respect towards this near-constancy – the respect towards the social immobility – is a subset of the conservative values, something that every decent human believes. The ability and freedom to keep and protect his or her or their (personal, corporate, or national) financial reserves against a drop by "too many classes" is a manifestation of the concentration of capital, a feature by which the modern societies differ from the old and poor ones, something that allows us to achieve things that our ancestors couldn't achieve.

A free enough society keeps the boundaries between the classes penetrable (and of course that the hermetic isolation would make our economies not just unjust but highly inefficient, too) but it won't try to artificially push many people through these boundaries. Spoiled brats without talent who inherit hundreds of millions may be annoying but one shouldn't forget they're not the rule. There are many skillful and bright sons and daughters who are often more capable of dealing with certain responsibilities than random comers from other classes. The number of such skillful sons and daughters is much higher than what you would predict if you were assuming no correlations between the parents' and offspring's skills.

So please, leave the artificial mass production of people in classes different from their parents' classes to the Hollywood filmmakers. Dreams belong to the film screens and beds; attempts to mindlessly import dreams into the real world usually end up with nightmares.


  1. I would say, the spirit of the American Dream is supposed to mean, that America is (or was) a meritocracy much more than some (most) other countries, especially several decades ago. Meaning, that with hard work, entrepreneurship and bit of luck etc you can make it there. Everybody should see that it is always an exception, not a rule. I have never understood the American Dream as the U.S. Government pushing huge quantities of people upwards. But people who are so inclined know, that they just may make it, under the right constellation etc. I think that it is quite healthy, keeping the hopes and spirits in a society high. Much better than the collective "bad mood" and despair that leads to the election of populists, stalled economy and so on.

  2. Sorry for posting before I read the full post, but while variability in social position may not be super important, progression probably is. The nature and mechanisms for these changes are important.

    I read a post on it today, but I can't remember where. I thought it was through MarginalRevolution, but I can't find it now and might have happened on it another way.

  3. It is difficult to draw conclusions from such a study without knowing the methodology and with only a few countries being compared. However, on the whole, I would expect some correlation between greater economic freedom and higher social mobility, since when it is easier to make a fortune it is also easier to loose it.

    Now looking at the latest Heritage Foundation index of economic freedom

    we see that Australia, Canada, and Denmark (higher in social mobility) are also rated above the United States in economic freedom (the US has been sliding down for several years now) but in other cases it is the other way round.

    It would be interesting to see the how Singapore and Hong Kong (traditionally to of all economic freedom listings) perform in this social mobility study but it seems that they were not included.

    The lack of details and the uninformative choice of countries makes me rather distrustful of the results.

  4. The important issue here is whether a country has a meritocracy. We actually do, for the most part but the playing field is not entirely level and, of course, it cannot be.
    That it is the responsibility of government to help the leveling process is evidenced by the fact that free public education for grades 1-12 has existed for more than a century and (almost) no one doubts its virtue. The extent to which the government ought to help equalize opportunity is the salient difference between the political left and the political right and it was always so, even in Ancient Rome.
    My two siblings and I have been vastly more successful than our parents, demonstrating that we have enjoyed the opportunity for upward mobility. This country has been very, very good to us. It has not always been so, however.
    My maternal grandfather’s parents owned slaves in Moore County, North Carolina. These poor folks had zero chance to move upward until they were freed by the Union Army under William Tecumseh Sherman. I have personally listened to my grandfather describe his mother's crying in their front yard after they lost everything but their house to the Union Army. More recently, in South Africa under apartheid, it was illegal for any black person in any company to occupy a position higher than the lowest position of any white person in that company. Again, zero mobility. No sane person today would support either slavery or apartheid.
    I would also, point out that any taxation comprises wealth redistribution. The difference between the left and the right is quantitative, not qualitative, not to denigrate its importance.

  5. US was the country of pioneers and of freedom. But this epoch ended. US is abandoning frontiers and is becoming the country of fat and feminism

  6. So, I guess it basically come down to whether wealth is used as leverage to preserve relative position vs. overall growth.

  7. When I was growing up the American Dream was the idea that even working-class people could enjoy a relatively affluent good life. The term "middle-class" became a euphemism for those who did. It was only later, under the influence of certain talented immigrant groups from poor parts of Europe who came to America with nothing, that the American Dream was re-interpreted to mean the opportunity to become rich, to succeed in terms of "getting ahead," of rising to the top. I make this observation for what it is worth.

  8. Centuries ago, it was normal in Europe for men to inherit the crafts from their dads.

    This is coming back. Teaching runs in families. So does employment at national labs, seeking academic positions, and running for political office. It certainly isn't a rigid as during medieval times, but it seems to me more prevalent than when I was young.

    It seems to be the natural course followed by human social evolution. It only seems to break down in periods of massive social disruption, such as the Civil War, WWII, and as a follow on to WII, the educational opportunities afforded by the GI bill.

  9. Hi, Luboš awesome blog. I wish I understood half of this particular post. I like that you despite defining yourself as a string theorist, you keep an open mind and seem ready to accept other concepts as long as they seem to make sense.

  10. "My point is that if a country has a very high social mobility, people must move up but there must also be many people who move down!"

    This is well understood in America and has been for a long time. There's an expression that originated during the Gilded Age that followed the Civil War, "Shirt sleeves to shirt sleeves in three generations". In other words, one generation makes a fortune and lives high, the next two dissipate it until they're back to being ordinary working people again. While you lived in Boston did you ever go to Newport and visit the huge mansions there? The descendants of the people who built them are nobodies today.

  11. I imagine North Korea ought to have low social mobility. One family always at the top, everyone else always at the bottom.

  12. The thing I have always hated that Left wingers do, is try to say that the American dream is "a house" or "a x." *Stuff*. The very idea is appalling.

    Anyway, regarding the study, and it's claim of a low probability of people being a different class *from their parents*, I don't find this to be a good measure of mobility. The true measure of mobility is whether the "class" as measured by your income at the start of your working life-about 16, generally-is in a lower group than the end of your working life. I think the probabilities on that are much better in America than 50%.

  13. Here is an example of what I feel is a much better study:

    For those households that were poor in 1996 (bottom quintile ) there was a 50% probability that they were in a higher quintile by 2005. Older data show that 86% of household that were poor in 1979 were no longer poor by 1988, and another analysis shows 95% of households in the bottom quintile in 1975 were in a higher quintile by 1991:

    Over a long enough period, virtually everybody who starts off poor in the US doesn't stay that way.

    So I have to disagree with you Lubos, the American Dream is very real.

  14. There was always a skid row, don't get me wrong. My point is that today a blue collar job doesn't bring you an ozzie and harriet lifestyle.

  15. Gene, you might profit from a look at Michael Young's book on Meritocracy. He's the guy who coined the term:

  16. I just came across this post several years later. An incidental but amusing comment. It is actually not quite true that physics is always able to be separated into tree level + loop contributions (where you can identify in a 1-1 manner classical + quantum contributions respectively), rather it is almost true. In quantum gravity, there are eg 1 loop contributions that contribute directly to classical scattering amplitudes. See eg John Donaghue's papers: hep-th/0405239.

  17. Super post, Eugene, I can't think of anything to add myself ;-)

  18. If the following is at all typical, it is the idiots who are getting control of your kids, and unless nothing is done about it you can forget about any kind of freedom and any social mobility except that ordained by the redistributive authorities:

  19. You seem to assume mobility in the extremes - the very rich/very poor. Mobility, up, as an achievement, even on a modest middle-class median basis is just as American as getting rich overnight.

  20. As I recall, meritocracy was a term coined by a former, now dead, Harvard president, during the heyday of the American progressive movement to save bond holder Wall Street capitalism : since it conjoins "merit" (pragmatic performance) with "tocracy" (status based on inherited blood) it's a contradiction in terms. In any event, Happy New Year Lubos.

  21. LOL, Don, Happy New Year to you, too, but I think that every little piece of your decomposition of "meritocracy" is at least partially if not completely wrong.

    First, the decomposition isn't to "merit" and "tocracy" but "merit" and "cracy". Second, "merit" isn't "pragmatic performance" but "what one objectively deserves". Third, the second part of the word "cracy" has no relationship to inherited blood, it just means "power" or "strength". So "meritocracy" means the "power given to the actual achievements and credit for them that one objectively deserves" and there is no contradition in this term whatsoever.

    Finally, the term wasn't coined by a Harvard president but by British sociologist Michael Young.

  22. Well, thank you Lubos I often make mistakes. I forgot to add I do enjoy your blog and all your efforts. "What one objectively deserves" strikes me as rather like the assertion you get what you objectively need.

  23. May I ask you some fundamental values that you hold?

    Do you believe in GOD?

  24. How do you know all the information that you have is the truth?