A reader emailed me recently and wanted to discuss the issue of whether America is a "land of opportunity." Like many people, he was of the opinion that America's low intergenerational income mobility means that we're not the land of opportunity that many Americans think we are. He went on to speculate as to why Americans labor under this delusion.
But is it a delusion? As I see it, the question has as much to do with philosophy and semantics as it does with actual economics. It all hinges on what "opportunity" means, and what it means for a country to be a "land of opportunity."
Thought Experiment 1:
As a thought exercise, consider a world in which ability is 100% heritable; if your parents have abilities of 57 and 73, you will have an ability of 65, with absolute certainty. And suppose that in this world, income is purely a linear function of ability (I=kA, where k is a positive constant).
In this world, your income will just be the average of your parents' incomes. Intergenerational mobility, as measured by the likelihood of being in a different income class than your parents, will be zero at the individual level, and at the household level will be determined entirely by who you marry.
Is this world a "land of opportunity"? It's a pure meritocracy, after all. But no one's income differs from that of their parents.
Thought Experiment 2:
As another thought experiment, imagine a world in which income is determined entirely by luck. When you are born, a die is rolled that determines your lifetime income. In this world, therefore, no one's income will be correlated with their parents' income at all. There will be a very large degree of observed intergenerational mobility.
Is this a land of opportunity? You have the chance to be in a different income class than your parents, and your chance is just as good as anyone else's chance. But that's all it is - chance. You are completely at the mercy of the dice.
You may feel that one of these hypothetical worlds is a "land of opportunity," but I think you'll be in the minority. What about a combination of the two? If income were a weighted sum of inherited ability and pure luck, would that make us a "land of opportunity"? Would it depend on the weights?
I doubt many people would say "Yes." The reason is that inherited ability is just another kind of luck. If income is the sum of luck and more luck, it still probably doesn't feel like a land of opportunity. Luck just doesn't feel like opportunity to most people; that's almost certainly why low intergenerational mobility bothers people in the first place (because it implies your income is determined by the luck of your birth).
So what do we feel does constitute "opportunity"? I'm not sure, but after thinking about it, I think it has to do with a third variable: effort. I conjecture that we think of a "land of opportunity" as being "a place where hard work allows you to succeed."
If I'm right, this means that we value opportunity because it fits with a certain moral model that we have regarding rewards, punishments, and free will. We view humans as being able to freely decide how much effort to put forth; hard work is a choice. And we think society should be setup so as to reward hard work and punish laziness - to change the incentive structure of people's effort decisions so as to maximize the effort that they choose to put out.
Furthermore, I don't think we want this kind of society because of a concern for economic efficiency. Leisure is fun! Rewarding hard work does not necessarily increase utility, even if it increases production. Instead, I think that our desire to reward hard work and punish slot comes from a moral value judgment that work is good in and of itself.
This, I am guessing, is why the idea of a low-mobility society bothers people. If your parents' income determines your income, it means that working hard does not bring the rewards that it ought to bring. The people who are most concerned about low mobility are not, then, socialist types who want to redistribute outcomes; they are old-fashioned moralizers who want people to reward people for working hard. They are angry that Horatio Alger stories to rarely come true.
What does this mean for the debate about opportunity? Well, much of the pushback against the "low mobility" complaints has come from libertarian and conservative circles. But this fight may not be about differences in values - libertarianism vs. socialism - as much as it is a debate about facts on the ground. Libertarians and conservatives who claim that America is still a "land of opportunity" are saying that it's still the case that hard work still gets rewarded here, as it ought to be; and those who complain about intergenerational immobility are claiming that hard work isn't as rewarded these days as it ought to be. So I think both sides should realize that this is what they're arguing about.
As a final note, what about my own values? Well, I was raised to think that "equality of opportunity" was a good and desirable thing. But until today, I didn't really realize what that meant. And now I'm starting to question my own values! Do I really care about how much society rewards hard work for hard work's sake? I'm not sure if I do. Maybe there are other kinds of equality that I care about more...but that is a subject for another post...