Saturday, July 07, 2007

Random Luck and Life Outcomes

Economically, my life has been pretty good. Some of that is due to my amazing charm, good lucks, and brains, as well as my immense amount of modesty. But a lot of it also has to do with luck. I was lucky to be born in a modern, industrialized society, the United States. I was lucky to be born and live in an innovative region (the 128/495 tech belt near Boston). I was lucky to be born in a reasonably successful family that could make sure I saw the doctor and ate reasonably well (a few too many peanut butter and strawberry jelly sandwiches though) I was lucky to be born into a family that highly valued questions and made games of imagination a regular occurrence, as well as weekly library trips. I was lucky to have parents who read to me, and encouraged me to read. I was lucky to have parents who highly valued education and sacrificed greatly for those opportunities. I was lucky to be able to reasonably safely explore boundaries and flights of fancy. I was lucky.

Most of these advantages and pieces of luck that I have enjoyed were in place from before I was born to before I was capable of making minimally constrained choices on my own. I had minimal control over the formation of what I have come to expect as "normal" and "typical." These norms are beneficial and internalized norms that have prompted me to be socially and economically successful. I got lucky.

Tyler Cowen at Marginal Revolution is linking to a paper that examines some of the determinants of economic success. Success, at least in our society, is heavily determined by existing conditions and the choices of our parents and grand parents.

We find that as of age 20, differences in initial conditions account for more of the variation in lifetime utility, lifetime earnings and lifetime wealth than do differences in shocks received over the lifetime. Among initial conditions, variation in initial human capital is substantially more important than variation in learning ability or initial wealth for determining how an agent fares in life.

So what does this mean for federal policy if the goal is to enhance and expand the individual and societal option space?

Fully fund Head Start and expand the income guidelines to encompass a much broader range of children. Ensure that every child has health insurance that is accessible and affordable for the families to be able and willing to use the insurance instead of hoping that the kid gets better on their own. Enable 100% application of appropriate neo-natal care. These are the simpler goals as they are build-offs of pre-existing and reasonable successful programs.

The bigger changes are significant changes. For instance, establish a funding mechanism to pay parents and adult caregivers during the time off for a newborn. You might do this by enhancing the Family and Medical Leave Act by reducing the size of the firms that it is applicable for, and also creating a sliding scale of compensation for the twelve weeks funded by the unemployment funds. Lower wage individuals would receive 90 or 100% of their wages from the fund, while high wage individuals would receive 40 or 50% of their wages.

More importantly, do something (what, I don't know) to ensure that by fifth grade, every child is able to read at a competent level. I know from my previous experience in human services for high risk youth, a lot of the youth in high school were struggling despite their earnest efforts because their reading abilities stagnated at the second grade level. If the reading skills are there, learning becomes significantly less frustrating when a youth starts to assert responsibility and control over their choice space.

Finally, recognize that our rhetoric of pulling oneself up by the bootstraps does have its existence claims, but it is a relatively rare event when the pre-existing social environment and parental choice pathways have significantly narrowed the option space. Not everyone is lucky to be borne into a good situation, and we should as a society increase both the probability of good luck and compensate those who are, through no fault of their own, unlucky to a decent equalization of early conditions.

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