Editor’s note: As it turns out, Scott Winship’s observations regarding Alan Krueger’s mobility claims has attracted considerable attention, not all of it favorable. Below, Scott offers some closing thoughts. Thanks to Scott for enriching our conversation on these issues. I’ve learned a great deal from the exchange, both about the underlying issues and about the discursive styles of the various interlocutors.
Several researchers have misinterpreted my point in criticizing Krueger’s mobility claims from last week. Here it is, stated as clearly as I can muster: Krueger was deceitful in his claim that the middle class is shrinking, and the Great Gatsby Curve is remarkably weak evidence that mobility is declining.
Let me start with the second objection to the Krueger claims, related to the now-famous Great Gatsby Curve. My assessment has been the subject of quite a bit of criticism from Miles Corak, my Brookings colleague Justin Wolfers and others. Miles and Justin basically accuse me of not knowing my stuff, making arguments that weaken my own casse, and trying to muddy up Krueger’s evidence indiscriminately to cast doubt on it. Harsh, Heather.
I’ve outlined my detailed objections to the evidence at length, but there is more to say.
To review, Krueger plotted inequality against immobility across ten countries, computed the best-fitting line through the points, and then used this Great Gatsby Curve to estimate that today’s children will have less mobility than their predecessors. I want to emphasize for the record that I am agnostic on the questions of whether economic inequality robustly correlates with economic imobility across nations and whether economic inequality causes economic immobility. What I did assert in my critique of Krueger’s figures is that for purposes of projecting whether mobility is on the decline or not, extrapolations using the Great Gatsby Curve are “uninformative”. The approach is an exceedingly weak one, which replaced the even-more-flawed approach from the president’s Osawatomie speech. The specific way that Krueger implemented the approach also has specific weaknesses (such as using inequality measured in adulthood rather than in childhood).
Justin made the colorful charge that my criticisms of the Gatsby Chart’s imprecision actually strengthen Krueger’s and Corak’s case. Wolfers apparently thinks I am arguing that all or some of the ten points in the Gatsby Chart are measured imprecisely, such that they are equally likely to be too high or too low, too far left or too far right. He also appears to think that I am arguing that the perfectly estimated best-fitting line would be flat, indicating no relationship between inequality and immobility.
If I were arguing both of these points simultaneously, I would indeed be inadvertently strengthening the other side’s case. This would be embarrassing. Since I am actually making neither argument, it is just frustrating, since most of Justin’s readers will assume he is right and will not end up reading this post. So to be clear, I am arguing that the Gatsby Curve is too imprecise for worthwhile estimates of the trend in American mobility. It may be too flat (if most of the error in the points is of the equally-likely-to-be-high-low-left-right variety). But it may be too steep. Many of the issues I have raised do not necessarily imply that the Gatsby Curve is too steep—Justin is just wrong about this.
Let me illustrate dramatically with two examples. The economic theory that Miles cites regarding why inequality might affect mobility is most logically applied using wealth inequality data rather than income inequality data. For five countries where there are comparable wealth Gini coefficients (see Table 3), the Gatsby Curve (using Miles’s immobility figures and the wealth Ginis from roughly 2000) really is flat. The correlation is 0.01, while the correlation using income Ginis from roughly 2000 is 0.64. (Ask me if you want the spreadsheet.)
For another illustration of how imprecise Gatsby Curves are for this sort of exercise, take a look at the last three rows of Jo Blanden’s Table 5. The rows provide 18 estimates of mobility-inequality correlations, using 6 different sets of mobility estimates and 3 different income Ginis. If Miles and Justin are right, these 18 estimates should be similar. But they instead range from -0.15 to 0.87. That is to say, the Gatsby Curves are all over the place. (And, yes, I realize that the Ginis are measured at different times, but as I noted, Krueger is using Ginis for the wrong time (adulthood instead of childhood). Miles and others have not found this objection compelling up to this point.)
If the Administration wants to say, “There is a relationship across countries between inequality and mobility, so that would lead us to expect that with rising inequality there will be less mobility,” that’s less objectionable, in a sense, than trying to nail down a point using the Great Gatsby Curve, giving the illusion of precision. However, the claim would still be weak, for a number of the reasons I have laid out. Better yet would be to just say, we have too little mobility and to support it with the comparatively rock-solid evidence on levels of American mobility. That is, one does not have to tie insufficient mobility to inequality, and one does not have to show that mobility is declining to argue that it is insufficiently high.
Noah Smith is the only person who has attempted to defend Krueger’s claim that the middle class has shrunk, which obscured the point that it has shrunk by his definition because more people are now richer than middle class. Noah claims that this claim isn’t deceptive at all, that it is narrowly true and illustrates a point about rising inequality. Brad DeLong gleefully approves.
Give Noah the point that in a narrow sense, the middle class as Krueger defines it has shrunk. Was Krueger being deceitful? Summarizing the chart that showed a declining middle class, he said, “we have more families falling into either extreme end of the distribution, and fewer in the middle.” No—we have more families falling into one extreme end, and it is not the low end, it is the high end. For that matter, the upward mobility estimates from the Osawatomie speeech used the same constricted definition of middle class: upward mobility from poverty to richer-than-middle class did not count as upward mobility in those estimates. There is absolutely no reason to be substantively concerned about whether the poor have less oportunity to make it to the middle class but no further.
I hope readers have found this debate to be informative, and I am grateful to Reihan for letting me crash here for a few days. I have spent too much time on it this week to continue, barring some response that I feel compelled to defend myself against. I share Justin’s hopes that the Gatsby Curve will spark a lot of additional research on this question—I’ll certainly be pursuing some of it.
Without arguing for or against the merits of the data analysis:
Has anyone here actually read The Great Gatsby? I refer to a book. I did so just recently (in preparation for a light opera on the theme, coming soon to a place nearby).
Gatsby, AKA Gatz, was basically an opportunistic con artist. He performed well as a junior officer in WWI, which got him connected to other things. But his overall level of con was so great that the reader might have thought he was lying about his war record, even though it apparently was true. In the states, he got his big break by cozying up to a rich man who evidently liked the cut of his jib, or whatever. At no point is it shown where Gatsby actually does anything productive, other than graze off wealth created by others (primarily in the form of liquor sales during Prohibition) as it passes by his feeding trough. The story, in total, is not so much about his wealthy lifestyle, but about his obsession for an old flame.
Gatsby is not an example of social mobility. When he dies, there is effectively nothing left. Knowing Gatsby was not a useful social connection, as is evident by the refusal of nearly all who knew him to attend his funeral. The seemingly wealthy people who frequented his place, while he was in his prime, were largely parasites.
Reply to this commentLinkReport AbuseI've been thinking about this debate for the past week, and it occurs to me that there is a much simpler explanation for why inequality would be negatively correlated with mobility. In a more homogenous society, there is simply a smaller gap between quintiles so it takes less of a change in income to show up in the data as movement to a new quintile.
Imagine that, instead of looking at inequality and mobility data for individual European countries, we looked at inequality and mobility data for Europe as a whole. In lumping the richer and poorer countries of Europe together, we would see higher inequality and each income quintile would be wider. As a result, someone who had enough of an income gain to move to a new quintile within an individual country might be stuck in the same quntile in Europe as a whole and reported mobility would be lower.
Similarly, the United States is composed of economically disparate regions. It's entirely possible that the United States could have higher inequality and lower mobility than each individual European country but lower inequality and higher mobility than Europe as a whole. And individual states would almost certainly have lower inequality and higher mobility than the United States as a whole.
That effect should easily explain a negative correlation between inequality and mobility. There is no evidence here that the children of the wealthy are disproportionately advantaged in countries with greater inequality.
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