Thinking Citizen Blog — the American Dream (Part I): the Challenge of Definition and Quantification

Thinking Citizen Blog — Tuesday is Economics, Finance, and Business Day

Today’s topic: the American Dream (Part One): the challenge of definition and quantification

Whether or not the American dream is alive and well or dead and buried depends on your definition and choice of metric. You could for example define it for immigrants or the native-born. Perhaps it is alive for the former and not the latter. You could define it loosely as “having a decent shot at a decent life if you work hard.” Or you could define it narrowly as “making more than your parents did.” Historical analysis is complicated by the fact that “making more than your parents did” depends on whether your parents grew up in the depression of the 1930s or the boom of the 1960s. Experts — please chime in. Correct, elaborate, elucidate.

METRIC #1 — Odds of someone born into the bottom income quintile rising out of it

1. What would you expect? 10%? 20%? 30%? 40%? 50%? 60%? 70%? Please make your best guess as to the actual percentage before reading on.

2. What would be the threshold percentage for deciding whether or not the American dream is alive and well? Please make a decision before reading on.

3. This exercise is important. I will explain why.

THE 2007 BROOKINGS/PEW STUDY: the Conclusion and the Data

1. Eight years ago, I asked the Dean of the Kennedy School to identify for me

a.) the most definitive study of social mobility in America and b.) Harvard’s most respected expert on the subject.

2. He recommended the Brookings/Pew Study of 2007. The study’s conclusion: the American dream is a myth.

3.) Fine. Not surprised. That’s what I thought. Then I saw the first table showing the percentage of people born into various quintiles of income and the odds of them rising or falling out of them. What??????? The data, to me, were totally at odds with the conclusion. The data: 60% of those born into the bottom quintile rose out of it. And 60% of the top quintile fell out of it! I would have expected that only 10–15% would have done so. Were my expectations out of whack?

THE ADAMS HOUSE POLL OF FACULTY, TEACHING FELLOWS, AND UNDERGRADUATES

1. For the next several years I polled college students, faculty members, graduate students. Without exception the expectation was 5–20% of the bottom quintile rise above it. For the American dream to be alive and well you would need 40–60%.

2. Why the discrepancy between reality and expectations? Newspaper headlines are based on the conclusions of the studies not the data. And no one has time to actually look at and analyze the data.

3. Then I had lunch with Harvard’s expert, Christopher Jencks. What am I missing? I asked. I am not a statistician but it seems to me that the conclusion of this study is at odds with the data. His reply: I wasn’t missing anything.

Conclusion: Wow! (to be continued)

YOUR TURN — Please share:

a.) the coolest thing you learned this week related to business, economics, finance.

b.) the coolest thing you learned in your life related to business, economics, finance.

c.) anything at all related to business, economics, finance.

d.) anything at all

Passionate about education, thinking citizenship, and art.