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The Not-So Great Gatsby Curve

cpwill

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Interesting - and heartening.

The best evidence linking inequality per se with stagnating upward mobility is the “Great Gatsby” curve, popularized by Professor Alan Krueger in a speech last year. The chart shows a very direct correlation between the level of inequality in a country and inelasticity of incomes:



...That said, I’ve always doubted the utility of Krueger’s Gatsby curve. First, as Scott Winship noted in a piece in this space, the relationship Krueger documents depends on studies with widely varying methodologies. Moreover, it’s always struck me as a bit of an apples-to-oranges comparison: Norway is a different country with different demographics and a different culture. The Gatsby chart, with one fell swoop, reduces those differences to a single liberal talking point. That’s a reasonable tactic if you want to score political points; it’s virtually useless if you want to understand what drives economic immobility (which, again, is too high)....

I always wondered what an apples-to-apples comparison might look like – whether, for example, inequality in U.S. cities is related to economic mobility in those cities. But until recently, we didn’t have the data to make that comparison. Thanks to the Equality of Opportunity study by Professors Raj Chetty and Emmanuel Saez, we now do.
The study’s authors measured economic mobility in over 750 “commuting zones” across the country. These CZs map closely onto Census-defined metropolitan areas, with slight variations. So I decided to make a chart of my own comparing the absolute upward mobility in a given CZ with the inequality in the metropolitan area. I’ll admit that after the chattering classes erupted over the Krueger chart, I expected at least some relationship between inequality and upward mobility. So what I found was striking:



In short, in our 48 largest metro areas, there is no meaningful relationship between inequality and upward mobility....


If Krueger’s chart is the Great Gatsby curve, then this is the small Gatsby curve. But the small Gatsby curve has the advantage of comparing things that are actually somewhat alike – specifically, large, densely populated urban areas. And when you do that, the “strong, negative relationship” between upward mobility and inequality disappears.


Let me emphasize that this doesn’t mean we should ignore upward mobility or the fact that America could use a lot more of it. It does, however, show that the Left’s obsession with inequality is a distraction from the real issue. Inequality is an inevitable consequence of living in a society with people of different aptitudes and ambitions. Upward mobility, on the other hand, is about the American Dream. And the connection between the two is tenuous at best....


Important lesson, ya'll. Someone else doing well doesn't mean you are held back from doing the same ;).
 

KevinKohler

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Interesting - and heartening.



Important lesson, ya'll. Someone else doing well doesn't mean you are held back from doing the same ;).[/FONT][/COLOR]
This dismisses the entire point of comparing other countries (cultures) in the first place. Of course study on upward mobility conducted entirely in the US is going to yield inconclusive results...it's not no basis for comparison other than itself.
 

KevinKohler

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To be fair, however, the first graph is silly, too. It assumes that correlation equals causation. Upward mobility in the higher rated countries like Denmark has little, if anything, to do with income equality, and everything to do with the fact that higher education is free in some of those countries. Anyone can go to law school if they've got the will and the brains...no 400+ thousand needed. Well, not FREE...the cost is socialized. The next country, Sweden, can afford all the social programs it wants, because they charge the rest of the world to secure their wealth...from social programs. Germany has a corporate culture bent less on pure profit, and more towards pride in ones work, making the best, no matter what, gestalt. And who knew? Turns out to be a really good business model, that results in a solid, strong middle class of skilled craftsmen.


Dishonest graphs are dishonest.
 

ttwtt78640

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Perfect upward mobility would appear to occur if all earned more every year, spent (comsumed) it all and left nothing to their offspring (the perfect longevity based union system?). Perfect income equality would appear to occur if all were low skilled, low educated, low paid drones that slaved away 14 hours/day making clothes/shoes for export (is that really a good goal?).
 

joG

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Interesting - and heartening.



Important lesson, ya'll. Someone else doing well doesn't mean you are held back from doing the same ;).[/FONT][/COLOR]
I am not sure that "inequality is a distraction from the real issue". That depends on other things; which issues you take.

But the study does seem to show that whatever inequality is used here does not correlate with upward mobility.

Do you have a chart for the countries in the Gatsby Curve?
 

head of joaquin

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Important lesson, ya'll. Someone else doing well doesn't mean you are held back from doing the same ;).[/FONT][/COLOR]
It does mean you have less money, power, health care, and the benefits of this society, not to mention that you will likely suffer more from the recessions caused by the income gap, as the rich fuel bubbles with their excess cash.

This doesn't make your fawning point very well, does it?
 
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