> The economic story of the past decades is supposed to be the death of the American Dream. Income inequality has risen, the wealth of the middle class stagnated, and stories of the poor working their way to prosperity became just stories.
I think the article doesn't really do a good job to change that view. The inequality has risen and the wealth of the middle class has stagnated. This is absolutely true.
Things like raises are no longer the norm, bonuses in many jobs have disappeared, prices and debt have risen much faster than the rise in income. At the same time, wealthy people continue to grow their wealth.
The fact the top 0.0001% gained their wealth not by inheriting it doesn't change what is happening to the poor, middle class, etc. as a result.
The widening wealth inequality as it relates to inheritance can be explained mostly by one simple concept, something Buffett himself call the most powerful force in the universe: compounding. Wise people with money, given enough time, will rocket to become insanely wealthy. Compounding does nothing for the middle class who generally spend most of their income, and it works the opposite way for the poor who are debtors. Over time this force will make the wealth gap worse and worse, which is exactly what's happened.
"wise people with money" or did you mean "people who are wise with their money" - America seems to have a default setting of rich people = good, poor = stupid.
I don't think the commentor implied that people without money couldn't be wise, but just that people who are both wise and posess money will be able to make it grow.
Just run a little experiment in Excel to see what I mean. Plug in 100 numbers representing wealth in a normal distribution. Then fast forward these over say, 25 years. But the key here is that the top ~20% grow at 15%, the bottom 20% grow at 0%, and everyone in between grows at inflation so about 3%. This is generally what happens in the real world, for the most part. Watch how skewed that normal distribution becomes over 25 years.
So, what would you call people that continually make poor life decisions over and over and end up in large amounts of debt for the foreseeable future? Smart?
I believe it's a combination of a necessarily present (as opposed to future) bias, and stress reducing available concentration for good decisions, because that's what the studies on the matter support.
The last sentence is the most important point of the article and probably should have been a separate article on its own:
> America’s .0001% is becoming more meritocratic, but the means of a middle class background remain a necessary launching board.
So in other words the most important aspect is to be from the middle class to be successful otherwise your chances are much less. Makes sense on many levels such as chances of personal development due to financial and psychological stability. Poverty has been in the news lately and I read an article on how being poor impacts IQ simply because it becomes the mind's obsession of finding means to survive.
> being poor impacts IQ simply because it becomes the mind's obsession of finding means to survive.
While that's poetic, I'm very skeptical that you could even prove that empirically.
It's much more likely (because it is empirically demonstrable) that IQ is more strongly impacted by genetics (IQ of the parents), prenatal care (especially with respect to smoking and binge drinking), and childhood (mal)nutrition. I'm not sure how you would even test "obsession with survival" controlling for those things, all of which are much more common in poverty-stricken households.
I'm not saying that worrying about the next meal isn't terrible, but I am saying that we need to make sure we're not getting our causes and effects mixed up here. We can't just emulate "middle class" advantages for poor kids and expect the playing field to be level.
In other words, it's not as simple as saying being middle class is necessary to be successful, because to some degree, having minimally successful parents is necessary to be middle class in the first place. And why are parents successful? Probably things like good impulse control, general responsibility, mental health, and innate intelligence. Many of those things have certain genetic components.
So how do we make sure every kid has a fair shake at being rich? I'm not sure there's a good answer to that since it seems like so many of your cards are dealt in who your parents are. If you're really worried about it, I suggest you support substance-abuse recovery programs and food banks. Keeping kids healthy, well-fed, and free of birth defects are things we should be doing anyway.
I read that article. While those studies are interesting, they are definitely limited and far from conclusive. For example, they didn't control for genetics as far as I can tell. It's entirely plausible that "rich" people are rich in the first place because, statistically speaking, innate intelligence lets them make better financial decisions even under duress.
While it's possible and interesting, I certainly wouldn't make policy recommendations or support charities based on that kind of evidence.
In the meantime, while independent parties come up with something more conclusive, let's try to affect known vectors for stunted childhood development like parental substance abuse, prenatal care, and malnourishment. And, again, these are real problems we should be doing something about anyway.
I don't think you can control for genetics, at least not directly. There is no intelligence genetic marker as far as I know which only leaves testing the IQ/intelligence of the whole family tree as the only option. However getting access to ancestors might not be feasible. On the other hand having a large pool of people is good enough since the distribution of intelligence is usually uniform and not restricted to things like class or parental income.
Here's one way to control for genetics - compare orphans who were adopted early (Pre 1yo) and then see what the correlation between their IQ and both the parents and adoptive parents IQ. (Or use income as a proxy for intelligence; it might be hard to get the dead parents to take an IQ test)
> I don't think you can control for genetics, at least not directly.
That's my point, really. My conclusion is that these studies are interesting, but the body of evidence isn't scientifically rigorous enough that it should affect policy decisions.
Are you seriously asserting poverty is not a known vector for stunted childhood development?
Do you realize there are millions of impoverished people in this country who can't afford to eat healthily? You are aware of the effect nutrition has on childhood development right? Do you realize there exist impoverished parts of this country which simply don't have access to fresh healthy food?
There's literally hundreds of ways poverty stunts childhood development...
If you actually read the thread, he's asserting the same thing you are asserting. What he's disputing is the idea that one of the chief reasons poverty is hard to get out of is that, once there, the mind is too fixated on survival for higher intellectual achievements.
Technically, I'm asserting that we don't have enough evidence to say one way or another and that we shouldn't let studies like these affect our decisions or worldviews yet.
I do know that I felt less intelligent when I was more worried about money, as though some fixed cognitive reserve were depleted by worrying about uncertain near-term survival, leaving fewer intellectual resources for long-term planning and development.
Same here. I think the same phenomenon is observable in middle class and below: a person's main concern becomes surviving, leaving less/little time for introspection and learning.
To be clear, I don't deny it's plausible. I deny that the science is convincing. With all due respect, the combination of a few anecdotes and a couple limited studies should not carry much weight.
The strongest indicator of a child's ACT score is the INCOME of the parents. Increasingly IQ tests are being revealed as being culturally-based, too. And the things that you list; things like impulse control, general responsibility, mental health, are strongly influenced by the environment that the subject must contend with.
Eugenics always seem so seductive, but, like phrenology, much is revealed about the outlook and tendencies of the practitioner rather than the subject.
Don't make the really vapid errors in logic of trying to dismiss something by name-calling it "poetic", followed by the really vapid claim that IQ "strongly impacted by genetics", followed by failing to link to a single fucking legitimate study showing that "strong impact".
You're not proving cause and effect here. IQ and earning power are correlated but the relation has been proven to run both ways. Low IQ may or may not lead to low income but low income has been shown to lead to low IQ scoring.
Barring occupations like professional sports, though, common sense would tend to suggest that that a higher IQ would tend to lead to a higher salary in the majority of cases.
> The top 0.0001% gained their wealth not by inheriting it
How did you come to that conclusion? I looked for that in the figures, but I couldn’t find what percentage came into money from an inheritance. Perhaps it’s placed in the 12% ‘Diversified/Other’ category, but the impression I got from the article was that they tallied how the money was earned in the first place, not where the ones holding the purse got it from.
I believe your interpretation of the article in this aspect is incorrect. For instance, 4 of the top 10 spots are taken up by members of the Walton family. Those people inherited their wealth from Bud and Sam Walton, the founders of Wal*Mart.
> Kaplan and Rauh find that America’s wealthiest are no longer a collection of Rockefellers and Carnegies. During the period the researchers investigated, the number of individuals on the Forbes 400 who were the first in their family to run a business rose from 40% to 69%. Sixty percent of individuals on the list grew up wealthy in 1982 while only 32% did in 2011.
> Although being born into wealth is less and less necessary for admission to the club of America’s wealthiest individuals, ...
Do some math. According to Wikipedia the population of the USA is 316,856,000. The 0.0001% of the population is 31685 after removing partial human beings caused by mathematical division. If the Forbes 400 list is used as a sample space for the rest of the 0.0001% then the numbers seem plausible. Note that I'm just playing "mathematician" and I haven't analyzed the 400 people in the list or did anything deeply scientific.
I think the article doesn't really do a good job to change that view. The inequality has risen and the wealth of the middle class has stagnated. This is absolutely true.
Things like raises are no longer the norm, bonuses in many jobs have disappeared, prices and debt have risen much faster than the rise in income. At the same time, wealthy people continue to grow their wealth.
The fact the top 0.0001% gained their wealth not by inheriting it doesn't change what is happening to the poor, middle class, etc. as a result.