James Heckman on Inequality and Economic Mobility
Jul 26 2021

Denmark-books-300x200.jpg Economist and Nobel Laureate James Heckman of the University of Chicago talks about inequality and economic mobility with EconTalk host Russ Roberts. Drawing on research on inequality in Denmark with Rasmus Landersø, Heckman argues that despite the efforts of the Danish welfare state to provide equal access to education, there is little difference in economic mobility between the United States and Denmark. The conversation includes a general discussion of economic mobility in the United States along with a critique of Chetty and others' work on the power of neighborhood to determine one's economic destiny.

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Explore audio transcript, further reading that will help you delve deeper into this week’s episode, and vigorous conversations in the form of our comments section below.

READER COMMENTS

krishnan chittur
Jul 26 2021 at 9:45am

It makes perfect sense why we do see furious attempts at denying the impact of parenting today – there are these “pundits” who claim that one of the problems we have today is that there are intact families and parenting should be “societal” (or something like that). Indeed there are organizations today that explicitly call for destruction or certainly no support for intact families.

We have a system where the people seeking office want to keep their offices (and so power) and have learned that offering more and more is the way to keep their offices, power. It may very well be that they know that by giving people free stuff, they will keep people dependent – one way to understand this is to see what they do with their own families, dependents – I imagine they will insist on their kids develop independent skills.

Thanks – and a message I am worried does not resonate today – even as it appears with some economists – and a reminder of how economics is far, far from the hard sciences while some pretend it is possible to model humans!

David Chisholm
Jul 26 2021 at 6:32pm

I don’t think I have heard any “furious attempts at denying the impact of parenting”.    But I don’t get out much 🙂

The only time I have heard people even come close to downplaying the importance of family is when countering someone who is saying that we don’t need govt assistance programs we JUST need to strengthen families.

And to be clear, like the guest, I am talking about stable families, not marriages.

 

krishnan chittur
Jul 26 2021 at 9:07pm

I was thinking of some recent radical movements that explicitly seeks to reflect Marxist Aims to disrupt the nuclear family – perhaps because those movements really see how a nuclear, supportive family helps children and often buffers against the forces of central control.

There are so many examples of poor immigrant families where kids are encouraged and supported and they earn their way into top magnet schools around the country – and we see aggressive attempts at limiting their admissions – driven by envy (IMO) because they may recognize the fact that the “nuclear family” may have contributed to the kids’ success and the activists are unable to do the same – so they decide to tear down what works in the name of “equity”.

In the US, there is almost a perfect inverse correlation between average earnings and percent births fo unmarried women (Mark Perry at aei.org/carpe-diem writes about such).  No, “unmarried” does not necessarily mean “no nuclear family” – but the correlation is stark – evidence that having that “family” is critical and something we cannot ignore.

Richard Fulmer
Jul 26 2021 at 11:29am

A person’s reaction to the finding that family influence matters even in Denmark will depend on what he or she is focused.  If the focus is on human flourishing, the reaction will likely be that we should work to strengthen families.  If the focus is on equality, the reaction is more likely to be that we should work to eliminate them.

Floccina
Jul 26 2021 at 12:30pm

I’ve been following this debate for a long time and I feel I have a lot to say. This may not be the right forum so sorry.

First, I think Denmark is an odd selection. Italy and Spain have lower murder rates, less child abuse, and higher life expectancy. The difference in length of life between Italy and Denmark is about as big that difference between USA and Denmark. Also the Inuit (Greenland is part of Denmark like Puerto Rico is part of the USA). But the people talking about Denmark like the Government policies of Denmark and the Government of Italy and Spain are not so respected and they talk bout Denmark. If you rather talk up Italy and Spain you tend to not think it is there great Governments.

It seems that even since ancient times some have known that what people need to live a good productive life is wisdom. Like the wisdom in the Bible book of Proverbs, be diligent, save, don’t drink to much or do drugs too much etc.

Finally I am a UBI/NIT supporter because I think it can allow us to have a better welfare system and maybe even spend less Government money but some of my allies UBI/NIT supporters seem to think it will make the poor be much better people, that is, they’ll go and get better school, drink, commit less crime and take drug less. But IMHO there is only 1 reason to enact a UBI/NIT and that is to all the lowest earners among us to consume more goods and services and it might have corrosive effects among some of the poor. Even most of the poor today are richer than the middle class where in not so distance past so why think giving people more money will be revolutionary. Is it poverty that causes the lack of skill, drug use and crime or is it the lack of skill, drug use and crime that causes the poverty?

Bob
Jul 26 2021 at 1:59pm

Dr. Heckman and Russ  conclude that the lack of impact on outcomes is because the parents of the children who outperform their peers have instilled in them certain values, but the parents of children without mobility have not. For many reasons, its wonderful that good parents do that. But since you are measuring income,  isn’t it more plausible that the economic system in Denmark rewards whatever genetic abilities the parents have, which abilities are more likely to be inherited by their children?

Jeff
Jul 26 2021 at 2:59pm

I was curious to understand why around minutes 17-22 as Dr Heckman was describing the study(ies?) that there were not questions if the models were pre-specified or registered or how many models were run. These seem to be questions that arise more with some guest than others.

Joe Born
Jul 26 2021 at 3:25pm

I have no reason to doubt that Denmark’s Gini coefficient is lower than the US’s.

Still, I wonder whether in making that comparison Dr. Heckman was using the same statistics as Phil Gramm and John Early did in contending that:

“The average top-quintile household pays on average $109,125 in taxes and is left, after taxes and transfer payments, with only 3.8 times as much as the bottom quintile: $194,906 compared with $50,901.”

Winston
Aug 23 2021 at 10:12pm

On an apples to apples comparison, Gini Coefficient is lower in the U.S. than almost all other OECD countries, and lower than Denmark.  A little known fact is that the Gini Coefficient reported by the World Bank and other major institutions does not set forth a common definition of what qualifies as “income” and there are fairly significant differences between countries.

There is some great work by John Early of the Cato Institute in their “Policy Analysis” Issue #839.  Figure 4 from the paper lays out a true apples to apples comparison including all state and local taxes, transfer payments, and non-monetary value transfers like medicaid and social security.

Dave Chisholm
Jul 26 2021 at 4:39pm

The thrust of the discussion as I understood it was:

“Many people point to the Scandinavian model as ideal, but despite their large social welfare system, social mobility is no better then in the US, and we think this is due to family influence. Therefor social welfare programs are ill conceived to meet their stated goals”

Based on the evidence provided a fair alternative statement could be:

“Danish society, compared to the USA, provides:
More individual and press freedoms,
Slightly better health outcomes but for almost half the cost,
Dramatically less inequality,
Half the crime rate,
Higher ranking in democratic processes,
Lower corruption index,
Lower political strife,
Higher happiness score,
Same social mobility,
and an unemployment rate of 4.2%”

So tell me again why we should brush off any suggestions that they may be on to something?  Choosing to highlight a single dimension that is “no better then” seems like unproductive cherry picking.

Your findings about family do not surprise me at all.   However, while I don’t want to wade into the Chetty argument,  I would add the thought that a persons desire for belonging might play a big role in their decision making. If all my friends work at the plant, that provides me a strong incentive to do the same.   So it is not simply the case that my parents didn’t know better and should have read to me more.  The desire to belong, to share a local culture is very strong in many people, as Russ has talked about many times.

Thanks for the episode.

David Schatsky
Jul 26 2021 at 7:45pm

I completely agree. Heckman seems angry that people advocate providing free childcare and education in this country. He feels this way because in Denmark, these benefits do not produce social mobility–at least no more than the U.S. system does. But these benefits, and the taxes and transfers that pay for them, provide people on the lower end of the income scale with a much better quality of life than they would otherwise enjoy. And the system seems to have the support of higher-earning Danes. Rather than attacking social support, we could focus on trying to understand how to further improve our society by researching what types of programs -do- improve social mobility.

Mark Z
Jul 26 2021 at 10:29pm

If it’s true that generous entitlements don’t enhance social mobility, it’s an important criticism, and supporters should stick to arguing for them for strictly as a means of increasing consumption among poor people. Also, we should be open to the idea that no programs boost mobility. There’s no law that says the null hypothesis has to be false.

Chris Douglas
Jul 26 2021 at 6:25pm

It sounds like there should be a distinction between a social safety net and social welfare initiatives like a UBI (i.e. between social safety nets and wealth creation). A system that prevents the disadvantaged/underserved from becoming *more* disadvantaged/underserved still generates a benefit for the society. It also seems like none of the serious research out there suggests that a social safety net is alone the driver of wealth creation, or that there are no significant trade-offs when you allocate more resources to a safety net.

Dimitry
Jul 27 2021 at 8:51am

The paper summarizes the findings thus:

“This paper compares social mobility and inequality in U.S. and Denmark. Without doubt, after taxes and transfers, Denmark has a more equal income distribution and greater intergenerational social mobility in terms of income. This is a consequence of its tax and transfer policies and not because of its skill formation policies.”

So it’s true that the bottom majority benefits greatly, where as the top minority does not suffer as much (they retain the ability to transfer their values to their children).

To say that this system is not a benefit to society is looking at a single interpretation versus the overall picture of the society this creates. For instance, people in the US feel trapped in their current standing. The cost of school and child care limit one’s mobility whether upward or even horizontally (a better job with similar income). In Denmark, the state offers its people choice: you can study, you can have spare time to pursue hobbies even when you have multiple children. Whether a person takes that choice is up to them, but no one can deny the benefits of feeling like it’s your choice.

Russ mentioned that measuring happiness doesn’t mean much in way of actionable policy since so many factors come into play. However, I would argue that the Danish model provides people with more of what makes for a good life: a bottom that won’t land you on the streets, options in terms of changing your skills, not feeling like children are a burden to a good life, a longer life, generous vacation and parental leave, a wealthy class that doesn’t seem so out of reach, etc.

Jill Blevins
Jul 27 2021 at 9:32am

Stopped taking this seriously when he complained about mothers not feeling fulfilled by changing diapers and all this “selfish Me Too movement” attitude. Me Too is standing up and speaking out against sexual violence.

Maybe get a woman or a mom on the show once in a while if you’re discussing women’s or mom issues, hmm?

Thucydides
Jul 27 2021 at 11:26am

This interview was excellent by reason of much interesting data, but the underlying presupposition is that of the discredited blank slate.  Prof. Heckman is puzzled at the lack of social mobility as measured by how children do compared to their parents in Denmark, which has lavish social welfare interventions to support egalitarian aims.  He wants to explain it by a lack of family nurture.  What is never mentioned is that people differ widely in personality, abilities (including intelligence), and social behavior, and that these differences have a large genetic component, and this might account for much of the difference. I hope the time will come when such an egregious omission is regarded as it rightfully should be as discrediting the work.

Paul Jeffery
Jul 27 2021 at 11:44am

It is obvious that the education & performance of a child depends a great deal on the adults that address their needs starting immediately. The children in better environments will achieve more due to many factors including nutrition as as guideline.
Governments can assist, but not replace these requirements. What is lost on governments & parents (providers) is when you provide you also deny in a ratio of two  to one. When you give a gift (car) you take away the knowledge of how to get it YOURSELF and the esteem of ACCOMPLISHMENT. The person who works to buy a car at 16 learns more than the 6 year old that is given  a bicycle. Both decisions need good adult decisions. Governments and parents should think about the appropriate gifts and what they wish to project.
Progressives are not wrong in wishing to aid citizens and conservatives are not wrong in wanting to look at consequences. Too bad they each denigrate the other.

 

Paul
Jul 27 2021 at 4:06pm

People say it is “obvious” that parenting and family make a big difference. But then all the adoption and twin studies that people like Brian Caplan cite, show that it is mostly genetics, and a component we don’t have a clue about. And shared environment (i.e. family) has zero effect on the outcome of children. It is depressing as a parent to be told that parenting has no effect on how your kids will end up.

Of course, most people are raising their own genetic kids, so you can’t easily separate things. But adopted kids grow up to be very like their biological parents, and not like their adoptive parents. Of course, this is talking about “normal” environments, not growing up in a war zone or locking your kids in the cellar.

Ajit Kirpekar
Jul 27 2021 at 4:49pm

I agree with Heckman’s worldview and I share a lot of his outrage, but I think he needs to really readjust his messaging because anyone slightly to the left of him is going to find his arguments sounding more like a harangue than anything. This is something people on both the left and the right need to get better at – be less dismissive and leaning in outrage and you might have a ghost of a chance of convincing someone with strong priors.

As a sidenote, a completely underplayed subplot to this discussion is how Denmark survives with such a high tax regime. By that I mean, how does it deal with avoidance, immigration, and the disincentives of the welfare state? My priors would have assumed that any country passing such absurd marginal tax rates and so generous a welfare state would be plagued by pathologies on either end.

Does anyone have any thoughts on this?

Dave Chisholm
Aug 1 2021 at 1:04pm

Good comment.

We have been told that such high tax rates would inevitably ruin a country, that well meaning social programs lead to an unbearable loss of liberty.  But doesn’t Denmark’s example prove that this is a lie?

In the 70 years since WWII, Denmark’s lavish social welfare state has NOT devolved into a Solzhenitsyn nightmare. In fact they are doing great.

Also, don’t they prove that it is possible for a country to have a single payer health care system without getting on the fast lane to totalitarianism?

I think we should all be curious about how they do it.

Winston
Aug 23 2021 at 10:19pm

Denmark is only 5.8 million people and nearly 90% ethnically homogenous, and thus, a high level of social trust.  Same as Norway, Sweden (although becoming less so), and Finland.  Much like a family or Kibbutz, the larger and more diverse it becomes, the less trust and greater odds that altruistic welfare schemes will fail.  Trying to overlay that model on a large and diverse country like the United States is a fool’s errand.  Sweden may be an interesting case study in the coming years, as large numbers of immigrants are allowed to enter but not fully integrated into the predominant culture.

Rodrigo
Jul 27 2021 at 4:50pm

Such a shame. Two smart guys that arrive at the correct way to see the data but after 1h of conversation can’t reach the obvious conclusion. Are they afraid of saying the G word or do they really believe that parenting style is all that is? Come on, people. We know that adopted children don’t have the same kind of correlation that biological ones do. It is not that difficult to reach the conclusion that the transmission of social class is by genetics. There are twin studies that attest that and the work of Gregory Clark also points at the same direction. It feels like people really love to dig their heads into a hole and not work through the most obvious steps to reach an undesirable conclusion.

Ajit Kirpekar
Jul 27 2021 at 5:11pm

One retort to the genetics argument. There appears to be a wage premium for being the first born as opposed to the later born child. In fact I believe the relationship is negative the more children you have. That at least informs something that’s going on besides genetics

Tate Barnes
Jul 28 2021 at 6:18am

Heckman went a bit off piste. Lots of quoting others’ work as if he is having a discussion meant only for a PhD in his field, rather than something relatable to the wider Econtalk audience, but I suppose I can’t expect him to be as well versed on interview etiquette and audience awareness as yourself. Russ, you did your best to chart a course for the interview and introduce some core philosophical points, but Dr. Heckman unfortunately wandered vaguely back in the direction of the data. Heckman’s use of the word family suggests that it is a distinct measurable thing. I’m not talking about modern family structures, I’m referring to the varied and changing ends that each family member seeks and the means they use to obtain them. The non measurable points like love, support, and any number of skills, attributes or traits and the ways they combine and recombine over a child’s life aren’t something that can be controlled for or fixed by a government policy. Parents also already implicitly know that their actions have consequences. If parents make terrible life decisions which impact their children’s life, there’s not a lot that government can do to change that. Social mobility will come from the children seeking and finding a way. The seeking comes naturally through wanting a better life. The receipt of the seeking can come from a thousand different sources, a teacher, a friend, their manager at McDonalds, their basketball coach, a podcast and sometimes, but only sometimes, their family.

Nick
Jul 28 2021 at 5:57pm

The question of freedom is central to the Denmark model. Is the average Dane more free than the average American?

I would argue they are, even though they are subject to higher taxes. A poor American is restricted by the quality of their school, by having to go into debt to afford college and healthcare. A Dane is free to choose whatever path they want. Why should we care if someone from an insecure family doesn’t choose the “right” option – it’s their choice! Conservatives believe there’s value in forcing people to the edge of poverty and making them work menial jobs. To them that is flourishing as they are contributing to wider society. I believe flourishing comes from dignifying them with the freedom to live the life they want to lead.

Ajit Kirpekar
Jul 28 2021 at 6:43pm

“Conservatives believe there’s value in forcing people to the edge of poverty and making them work menial jobs. To them that is flourishing as they are contributing to wider society. I believe flourishing comes from dignifying them with the freedom to live the life they want to lead.”

This is strange kind of characterization.  But to the rest of your point —

If you believe Heckman’s argument, the poor person in America is constrained by his or her parental circumstances and or neighborhood where they are being raised. As such, spending more on education and other services won’t accomplus the stated goals everyone wants. A cynic might conclude that to truly “level the playing field”, everyone’s children should be sent to boarding schools.

In any case, I take another view that its also unfair to tax high income earners and have them effectively subsidizing the rest of the country. That same cynic might suggest those incomes are not fairly earned or all through luck, but I don’t think that’s the case at all. A lot of the highest paying jobs require tremendous talent and or tremendous work ethic and real sacrifices.

Ajinkya
Jul 29 2021 at 2:20pm

Wouldn’t investing in neighborhoods as suggested by Chetty et al, also help improve the childhood family environment? Since neighborhood also affects the family environment, improving the neighborhoods should improve quality of family too right? I don’t see the tradeoff between investing in neighborhoods and empowering families to take care of their children as Dr Heckman suggests.

David Gossett
Jul 29 2021 at 4:58pm

This episode was brilliant. Russ did a fabulous job letting Heckman just riff. If I had been taking notes, my hand would have cramped midway through.

“The highest form of wealth is controlling your time.” – Morgan Housel. This is very profound and I think explains the current job market. People found out the value of time during the pandemic. I can own an $80K Mercedes or watch Pixar movies with the kids. I think many woke up and realized they need a lot less stuff — and perhaps richer experiences in their lives.

Think about that young person in the poorest neighborhood. They, too, want to control their time. What has the greatest ROI? Studying? Being a part of a social group? Winning a video game? Hanging with a parent? Helping someone else? Working? The teenager is transitioning from having time to having responsibilities. This is a tough transition for anyone.

Greg Silverman
Jul 29 2021 at 6:58pm

The conclusion of the study is that the perfect is the enemy of the good. That some percentage of Danes are not flourishing and living to the full potential of their talents means they would be better off in the rat race and poverty we see in the United States.

The discussion in the podcast did not delve deeply enough into what live is like, with regards to crime, mental illness, etc., to justify it’s conclusion that life in Denmark is not good. And while their was dismissal of happiness measurements that say Denmark is doing well, what is Heckman’s conclusion other than they are not really happy?

Katharine Anne Frazier
Jul 29 2021 at 10:05pm

Fascinating conversation. I am very curious to learn more about the family support interventions he mentions that seem to be yielding positive results. Specifically, efforts helping parents/families learn to provide better support for their children. He mentions studies on this in Jamaica and China. I’m curious if there are organizations in the US that focus on this? It does not seem common, but perhaps I’m just not aware.

Charles M Boland
Jul 31 2021 at 12:26pm

I am a longtime listener who has learned a great deal from listening to Dr Roberts and his guests.

This episode was one of the best I have listened to.  For far too long we have been fed a lot of misleading information about the Scandinavian model and its benefits.

Thank you.

Charles Boland

 

Ajinkya
Jul 31 2021 at 1:03pm

I don’t think that we can compare the Denmark study and Chetty study, because of external validity issues i.e. the effect estimates in Denmark may not be relevant to the US. Even if we assume the underlying mechanism from family environment to economic mobility outcomes is the same in the US and Denmark, clearly the demographics of Denmark are markedly different from the demographics of the US. Therefore, we would have to account for the covariate shift when trying to reach conclusions regarding the US from the Denmark study.

Genevieve Signoret
Aug 1 2021 at 11:59pm

I have long been a deep admirer of and learner from both professors, Roberts and Heckman, and of this podcast. But this episode was disappointing. It does not negate their past good work or the fact that they are both well-intentioned. Or the abundant valuable content in this podcast—I learned, I took notes, of the names of the scholars Professor Heckman recommends, I was excited by the cool study he did, the fantastic quality of the Danish data, and his refutation of the study saying neighborhoods determine all.
I have not read  Professor Heckman’s paper but assume it involves econometric techniques. I waited for Professor Roberts to push back on the study with his customary expressions of skepticism as to what we can learn from econometrics. He did not. I hope this was not because, in this instance, he liked the paper’s results. This is not the first time I have noted that his skepticism seems to be selectively targeted depending on a study’s policy implication. If I am being unfair, please call me out.
Both professors rightly say we need character and morals but then say these have been lost. They are alluding to … when? When was this golden age? It’s an empty statement no one can refute if you cannot name the time period when people were more moral.
Professsor Heckman’s characterization of the #Metoo movement (apparently edited out of the “highlights” here) was off-base, ill-informed, and profoundly insulting to all victims of sexual abuse. Hurtful.
Professor Heckman’s policy conclusions are a non-sequitur. His study showed that Denmark’s welfare state fails to promote more mobility than does the American much less generous welfare state. This shows only that policies such as those of Denmark are insufficient to achieve much mobility. It does not show that they are a failure across the board or in any way bad. Suppose Danes seek to institutionalize sharing, kindness,  lower consumption inequality than ours, less skewed health outcomes. Are they failing on all these counts too? Suppose they are  aware that they cannot reshape family life, so they say, “Let the State do what it can. After that it’s up to families. Mobility will be low but at least we’ll know that the State did everything in its power to even the playing field, it is not because of hunger or lack of health care or crummy schools or that the wealthy did not share.” Since when is the degree of inter generational mobility the sole criterion by which we judge social policy? Whoever said that it was the Danish State’s single focus?

Dylan Wiliam
Aug 2 2021 at 5:13pm

In this podcast, Dr. Heckman correctly pointed out that the analyses reported by Raj Chetty and his colleagues on the effects of locales on educational achievement rely on assumptions that are not just questionable, but flatly contradicted by much available evidence. However, the same applies to his own arguments. To attribute differences in educational outcomes in Denmark to parental behaviors requires assuming that the heritability of educational achievement is negligible. However, as work by Robert Plomin and his colleagues in the UK has shown, perhaps as much as one-third of the variation in educational achievement is genetic in origin. Indeed, the available evidence is consistent with the impact of parental behaviors on educational outcomes is small (as Bryan Caplan has argued) or even zero.

It is also odd that Dr. Heckman’s paper with Rasmus Landersø on the Danish education system uses teacher qualifications as an index of educational quality, when a large body of research shows that the relationship between teacher quality and teacher qualifications is weak, if not actually non-existent.

Finally, much of the discussion about intergenerational mobility seemed to be based on an assumption that the relationship was linear, as it is in the UK and the US. However, as Bratsberg and his colleagues have shown, in Denmark, Finland, and Norway, it is convex https://onlinelibrary.wiley.com/doi/10.1111/j.1468-0297.2007.02036.x ). The sons of more affluent fathers do indeed earn more, but for the less affluent, the relationship between earnings of fathers and sons is essentially flat. We may not be able to stop wealthy parents from advantaging their children, but it seems it is possible to prevent poverty from producing intergenerational disadvantage.

Ben Prytherch
Aug 4 2021 at 4:31am

There’s quite a large straw man in Dr. Heckman’s argument: he says that those who advocate for adopting Denmark’s policies in the US do so on the basis of social mobility.  Huh?  I don’t recall hearing Bernie Sanders or AOC or their supporters pushing this claim.  Their claim is that Denmark’s policies reduce inequality, which Heckman acknowledges is true.  They claim that Denmark’s policies reduce hardship for people who are worst off.  I pulled up Heckman’s paper and at the very beginning he asserts:

“Many progressive American policy analysts point to Denmark as a model welfare state with low levels of income inequality and high levels of income mobility across generations.”

There are no references and no quotes.  When I look up the Justice Democrats platform, I don’t see anything about “mobility”.  When I google “Bernie Sanders mobility”, I get nothing.

The difference, of course, is in comparing *relative* income to absolute income, something Russ loves to talk about.  I’ve never heard a progressive claim that the policies they propose will result in the socio-economic statuses of parents becoming uncorrelated with those of their adult children.  I hear progressives talk about inequality in nearly every sentence they speak.

It is not clear who, exactly, Heckman is arguing against when he points out that social class still exists in Denmark.

Martin Frické
Aug 6 2021 at 6:18pm

This is not my area. But I am surprised that there was no mention of the Flynn effect and Flynn’s conjecture regarding one aspect of it. [Russ has had, for example, Bryan Caplan on Econtalk, who has reviewed Flynn; and Heckman cites Flynn in some of his papers.]

The relevant part is that measured IQ for groups is increasing at a rate not explicable by genetics. The measured IQ of American Blacks in America is lower than the measured IQ of other groups in America. However, that difference is not genetic. The measured IQ of American Blacks, the children of American servicemen serving in Europe, born and brought up in Europe, is not different to that of other groups (in Europe or the US). So, something non-genetic is producing the increase in IQ. And, whatever that is, seems to work fine on most everyone including children of US service-folk in Europe. But it either partially absent or does not work well on some groups in the US. Flynn, in this context, conjectured that there was a factor at work ‘cognitive stimulation’ and he added flesh to this proposal. (For example, single parent families tend not to provide comparatively good cognitive stimulation.) Flynn adds plenty more, including policy.

Flynn died in December 2020. But he has an important recent book, 2019, A Book Too Risky to Publish: Free Speech and Universities, which has material on this and other topics (Universities, cancel-culture, charter schools (a favorite topic of Russ’s), etc.).

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AUDIO TRANSCRIPT
TimePodcast Episode Highlights
0:37

Intro. [Recording date: July 7th, 2021.]

Russ Roberts: Today is July 7th, 2021, and my guest is economist James Heckman of the University of Chicago. He's the Director of the Center for the Economics of Human Development there. And, he was awarded the Nobel Prize in Economics in the year 2000. His first appearance on EconTalk was in January of 2016, discussing the state of econometrics.

Our topic for today is economic mobility and inequality drawing on a recent NBER [National Bureau of Economic Research] working paper in March of 2021 that he coauthored with Rasmus Landersø. That paper is "Lessons from Denmark about Inequality and Social Mobility." There's also a non-technical version of that paper with the results that I may quote as well, and we will link to both of them.

Jim, welcome back to EconTalk.

James Heckman: Well, it's nice to see you again Russ. It's been years.

Russ Roberts: It's been too long.

James Heckman: We've been interacting for more than 40 years now, for sure. So, good to see you.

Russ Roberts: Yeah. That's a little scary. Yeah. It's a little scary.

James Heckman: Well, it's good. We're still doing it.

Russ Roberts: Yeah; that's a good sign.

1:36

Russ Roberts: A lot of people point to Scandinavia--Sweden, Finland, Norway, and Denmark--as countries with policies that the U.S. [United States] should adopt. What are some of those policies that people, especially economists, have in mind? And, why do economists often argue for emulating Scandinavian social and economic policy?

James Heckman: Well, it isn't just economists. It's a lot of politicians.

I mean, this is a practice that goes back. I don't know when it started, but I know that it was very prevalent in the years that Clinton--Hillary Clinton--was running for President--when she was actually in the U.S. Senate.

And, then of course, more recently Danish policies have received a lot of attention from politicians like Bernie Sanders and various Progressive politicians.

And so, there's a famous headline--I have to, I can't quote it literally--but I believe that it says something--it was in the Washington Post maybe seven years ago, six years ago. And, it says: The American dream is now lived in Scandinavia.

That was the essence of what's going on.

And, that Scandinavian policies will provide a basis for providing social mobility for equality and giving a sense of fairness to the larger world. All the concerns about inequality that people have mirrored and discussed and continued to discuss to this moment.

Allegedly those problems are solved once we look in Scandinavia.

And so, Sanders, in particular, and the current Progressives in the Senate and the House in the U.S. Congress, and other agencies around the Washington--other groups around Washington--continuously point to things like the fact that childcare is completely subsidized. Completely subsidized. College tuition is free. Nobody pays any tuition. That, healthcare is universal; and access is open to everyone. And, that expenditure, at least as measured on school as measured by teacher salaries and other dimensions of child equality when in school--the schooling that children are getting--is about the same. Sports[?] could be the same, teacher salaries and universal overall parts of Denmark. There may be a slight modification for cost of living, but it's very close to universal.

And the reason why--you know, I can confirm that all these policies are in place, is that I've been analyzing what is called registered data from Denmark. Unlike the United States, in Denmark, they are registered. Everybody signs up at birth; and they end up at death in the Register.

And so, we can monitor every major event, every event, actually in the life of Danes, from birth to death--you know, where they go to school, when they're born, what the quality of the school is, who else went to school with them, what neighborhood they lived in. We know a lot of things about them that we don't--and we know what earnings they had, what unemployment they had, where they move, who their neighbors are. And so, we're able to really measure the full extent of what a welfare state in Denmark is acting on: how people are sorting, how people are interacting. So, it's a very rich opportunity to study social mobility in Denmark.

But, as you were saying--as you were saying--Denmark has actually been viewed as a model state. And, the Danes themselves view it as a model state. It's not a Socialist state. They would avowedly say [?00:05:19?] saying: A social welfare state, they would say: Huge tax agent; but huge provision of public services. More than a half, I think, of all benefits that people receive come from the state, one way or the other.

And so, this is viewed as ideal.

And people see the Gini coefficients, especially after taxes and transfers, are much lower in Denmark than they are in the United States. The income--

Russ Roberts: And, that's a measure of inequality, the Gini coefficient.

James Heckman: Of inequality, wage inequality.

So, by a lot of the standard measures that OECD [Organisation for Economic Co-operation and Development] and many political thinkers and discussants and economists, of course, too, would see Denmark as being a garden of opportunity, maybe a garden of Eden for social policy.

6:03

Russ Roberts: And, a part of the reason I think it's attractive is, just, to policymakers, besides the idea that you might be in favor of some of those policies, is that in a lot of the Scandinavian countries measures of--I'm going to say measures of measured happiness, because those are fairly high, if not some of the highest in the world. I'm highly skeptical of those measures, self-reported. I'm not sure that they tell us about across countries or even within countries. But, people do pay attention to them. We've had a number of episodes on that those factors on EconTalk.

And, I think people then say, 'Well, look: This reduction in inequality, in disposable income, in particular,'--and you were careful not to say anything about wealth, because I think wealth is quite a bit less equal in Denmark than people might think--

James Heckman: It is--

Russ Roberts: There is a large private sector in Scandinavian countries, which is why they're not really Socialist. They are Social Welfare states. There's a large public provision of certain kinds of services: education, childcare, and so on.

But, people say, 'Look, they do all these services. They provide all these services at taxpayer expense and look at the great result. People are happy.'

Now, you, of course, care about something other than just measured inequality. And, the point of your paper--you're free to comment, by the way, on this happiness literature if you want, because I think it's a bizarre thing--but the part that you focus on, which I think is quite interesting, we've also talked about it quite a bit on the program, is the question of mobility across generations.

So, you use the image in one of your papers of the apple falling close to the tree. So, if your parents are rich, are you going to be rich? If your parents are poor, are you likely to be poor? What are your opportunities for rising above, both in relative and absolute terms--two concepts that are often confused and conflated? They're very different. But, those are the things that you're particularly interested in.

And, what's surprising, I think, about your paper and fascinating, is that you'd find that actually, in terms of intergenerational mobility--the ability of children to overcome handicaps of how they were born, their parental income, their family income when they were children--it's actually not so different from the United States. Is that an accurate summary of what you found?

James Heckman: It is. And, that fact that you just summarized is a shock to many Danes. My co-author, Rasmus, who is at the Rockwool Foundation--I shouldn't mean that--Rockwool Foundation is the name of it. And, he has become a star of a certain type, a media star, not because that's his instinct, but because, literally, the finding is so dramatic and challenges right at the core of what Denmark thinks it's all about.

So, yes, I think it's really disturbing to many people that, in fact, intergenerational mobility--properly measured in terms of skills, in terms of how the next generation is really faring--is pretty much the same. Family influence is very strong in Denmark, about as strong as it is in the United States. And, you can measure that many ways: It's not just the influence of family income. It's parental education, it's aspects of the parents, and various kinds of ways to describe the family.

So, it is not 'Solve the problem,' which is, or some people call it a problem. Like, you have not broken the link between the family and child outcomes, to the extent that people have hoped.

Russ Roberts: [?]

James Heckman: And, this is the number, these kids all get universal pre-K [pre-Kindergarten]. I forgot about that. This is something that the Danes--again, everybody points to that. Again, Hillary Clinton, in an earlier era, Bernie Sanders to this day, and many, many other, not just politicians: economists, and foundation heads, and so forth. It's become a commonplace. And, I think that is something that really needs to be reexamined.

10:16

Russ Roberts: So, just to restate the argument of the people who favor these policies and use Denmark as an exemplar, the idea would be that: Okay. Sure, rich people have bigger houses than poor people. Rich people have maybe two or three cars; a poor person might have one car or no car. So, rich people get more of certain things. But by providing the most important things for one's future economic ability and success--that is education, and to make sure parents who don't have, who are unemployed, have income and are not constantly away and scrapping with anxiety and stress about it--a lot of people have argued that if we could put those policies in place in United States, all children would start from the same starting ground, starting line.

And, then: yes, there might be some genetic differences across people. That's inevitable. There will be differences in grit or perseverance. But, the idea would be that, rather than having a world where the rich get all the education and the poor, because they don't have the resources, are stuck with an inferior level, in theory--in theory--Denmark, everybody gets the same, as you said, same expenditures on education no matter what district you're in or where your neighborhood is, and can get up to college--any kind, up to Ph.D., I think you wrote--that all of that is tuition-free, no out of pocket expenses. And, therefore everybody has the same opportunity.

But you find that they do not.

So, why do you think--assuming you're correct; we're going to take it as a given. We're not going to go into the weeds to figure out whether how important any distinctions that are left are. But, assuming you're right, that rich children in Denmark tend to do a lot better than children who grow up in poor families in Denmark, despite the attempt to equalize educational access. Why is it? What is happening in Denmark that's offsetting or what's failing with their education system? It's often highly touted by the way, as many of the Scandinavian systems are. What's going on there?

James Heckman: Well, I don't know if it's a failure. I think it's just a fact that family life plays a fundamental role in shaping our children either succeed or fail. So, and I think that's something that we currently deny in discussions in the United States. It's so politically incorrect now. I mean, there's a whole literature now--we're talking about Black Lives Matter and we talk about opportunity for African Americans--to completely take the whole issue of the family off the table, even though the issue of the family has been on the table since W.E.B Du Bois was writing about this in the 19th century. It has always been on the table by serious scholars. But, it's not just for African Americans. It's for everybody. Family life plays a central role, and economic and social policies that ignore that are going to ignore a fundamental source of inequality.

The Danish study is a very nice example. It's nice because what it shows is by the measures that people use--people are using these measures of Gini coefficients: how unequally distributed income after taxes and transfers are in Denmark versus the United States. And, they look to those measures and say, 'Here, see? It's equality, everybody's equal.' And, in some sense, they are equal, because taxes are very high; we can't rise too high and you can't really sink too low because you have a very safe social safety net.

So, all of that is true.

Nonetheless, the role of the family remains. And it's powerful. And, that to me was very striking. I had no idea it would be this strong and persistent. We have several papers on that, not just the NBER [National Bureau of Economic Research] paper: we wrote an earlier paper, which we published, unfortunately in a Scandinavian journal. So, it's Scandinavian Journal of Economics, which is less well-known, of course.

But, the fact of the matter is, is that we've documented this and have a series of studies. And, my coauthor at the Rockwool Foundation has also documented how policies that have been targeted or not targeted have led to educational inequality and changed the nature of redistribution and inequality in Denmark itself.

So, I think it's interesting because we have such good data. Denmark is a wonderful laboratory. We can look at many factors and we can examine the role of private markets, private choice, and families in creating this inequality. And, it's real. The influence is real and lasting.

And so, when people talk about inequality being less in Denmark, what they're always talking about is after tax, and after transfer, you qualify very nicely [inaudible 00:15:14]. Before tax and transfer, there is a fair degree of inequality--what the wages are before taxes and transfers--and that doesn't account for all the other aspects of redistribution in the system.

So, there really is inequality in the sense that people with different skills are being paid different amounts of money. It's just that they're allowed to keep less of it. And, that the state plays a far more powerful role in shaping what the final consumption bundle is.

But, that doesn't change family influence. It still matters which families have parents reading to them, looking out for the child's wellbeing, trying to find a good school, trying to find a good teacher, taking the kids to the zoo, doing all of these things that parents do. And, that plays a fundamental role that people don't like to admit.

And the Danish family, there's a lot of cohabitation in Denmark. You know, back in the 1960s and 1970s, Denmark and Sweden were considered free-love countries--you know, that the traditional American model of a marriage was broken because there was a lot of cohabitation and experimentation.

But, nonetheless, what you'll see is that in Denmark, there's a tremendous--even the cohabitation turns out to be a form of a relationship that's very, very stable. And, once children are born to a cohabiting couple, frequently they marry or they stay together as a union over the course.

So, the family is a much more stable entity, despite all of this alleged freedom. They can choose. This is a choice that people make. And, I think that's fine.

But, the fact of the matter is that children are growing up in stable, two-parent homes with a lot of support, but those parental years, those years at home, and the guidance that parents provide are playing a crucial role and they continue to play a crucial role despite all of the transfers, and free tuition, and childcare, and preschool, and this and that and the other thing.

17:17

Russ Roberts: I want to make sure I understand the basic facts that you're trying to--

James Heckman: Yes, please--

Russ Roberts: explain or understand.

James Heckman: Maybe I'm going on too quickly.

Russ Roberts: No, you're doing fine, you're doing fine. But just do one clarification: Cohabitation just means two people living together who aren't married. And they might have a child. And, those impacts are very different, you are suggesting, than, you're suggesting, a one-parent family with a child--

James Heckman: Oh, totally, totally--

Russ Roberts: a single mother, a single father.

But, the point I want to get at, there's sort of two things here I'm worried listeners might confuse, and I'm a little confused, which is: You're saying the family is very important. I certainly believe that or am prone to believing it. But are you saying the following? Let's try this: So, you grew up in a poor family, let's say, and you're in Denmark. And, we could also consider the United States. So, you grew up in a poor family and your parents are poor--meaning your parents are poor, their wages are low. You might have--there might only be one parent at home. So, they may struggle to get the best, the highest-paying job they'd be able to get because they have to worry about childcare in a way that a two-parent family may not have to worry. But, it sounds like you're saying that, so for that family, when that kid grows up, you're saying, they're going to end up again, something like their parents--low income--but they're going to get a kick and a boost from the welfare state. So, even though the family might play a role in replicating the original pre-tax, pre-transfer distribution of income, the government offsets it with some taxes and transfers. They take money away from the richest, most successful families, many of whom those, they had come from rich families in their childhood; and they boost up the poorest families because they get their education provided for free, they get their childcare perhaps provided for free or highly subsidized.

So, what's discouraging about this if you're a Dane? If you're from Denmark and you hear this result, why wouldn't you just say, 'Well, so what? What's the big deal? So, the welfare state has to compensate for the fact that poor children end up with poorer income when they grow up, in the poorest part of the income distribution when they get older. And, richer children, they also end up richer; but, eh, the government kind of smoothes it out.' Is that how they'd react or am I missing something?

James Heckman: Well, that's the current policy. Yes. And, they're very proud of that policy. So, there's no question. If I were to just state what government policy is and what many Danes would agree to, they would be completely on board with what the statement is that you just made. However--

Russ Roberts: What are they missing? What did you find that's surprising to them?

James Heckman: Well, what we find is that the children across generations are no more skilled than the children of low-skilled parents--skilled in terms of education, in terms of the social and emotional skills, in terms of various aspects of striving, in engagement in society--are really very different. There's no stratified by family origin, and that, yes, they get the same material resources, but they don't have the same strategies for life. And, they're not really fully inclusive. And so, the sense of agency of being a Danish child, being fully developing your own potential is thwarted.

And, in fact it is thwarted.

Here's an example: In our earlier work, we didn't cite it in this particular paper today, the one you were citing a minute ago. But, the structure that we found earlier was there was a program designed, targeted towards children who are very disadvantaged. And, these are kids who had dropped out of school or given some kind of a remedial training. And so, it was all well-intentioned.

But, what happened is, the subsidy that they were given was a subsidy that more or less induced them more or less not to go to school and not to work. And then the lifetime consequences of participating in it.

So, yes, they were equalized when they were 18 and 17, but when they were 35 and 36, they lacked the skills of those who had not participated in the program.

And so, there are strong, powerful disincentive effects operating throughout the whole system.

So, it's an issue that if you're guaranteed an income and you're told you basically don't need to strive too hard, and you basically are told when you're in school, that 'Yeah, you know, you can finish school, but you can also get this subsidy that's targeted towards disadvantaged children,' those children will take that; and they will not develop the skills that their counterparts might had they not participated in those programs.

So, there's a sense of incentives facing these children that do not promote their skills and their participation in the larger environment. So, they become--I don't want to say detached, but they develop much less of what their potential might be. And, in that sense, I think it creates a mentality that I think is very, very dangerous for their own wellbeing. It's harmful. And, that's part of it.

But, the other part is that a lot of these parents in the welfare state, they're all well-intentioned. I'm not suggesting there's a malicious group of parents that are out there trying to hurt their children in any way. But, some of the less-advantaged parents who are still advising their children in the day-to-day, 'Do your homework. Go to school. You know: do this, do that. Don't commit petty crimes,' and so forth, and so on--those influences remain, and those children are not insulated against that.

So, they may have more money, more food on the table. They may have more income security, but some of the basic values that parents and families provide are missing, and that is not achieved. And, it's not achieved by preschool, it's not achieved by these nurseries or childcare centers or formal education. None of those factors compensate for what is missing, which is the early family years. And, it's not like a government program per se is going to somehow galvanize the parents--not, at least the kind that are in place in Denmark.

And so, I think the really important thing to recognize is that, to me, the study emphasizes in a way that I'd never recognized the powerful role of the family. That the family is everything.

And, as an American looking into the whole discussion of inequality in the United States, seeing these $2 trillion packages, people trying to reenact the welfare state, you realize that these Biden formulas are basically reincarnations of the Danish welfare state, almost line by line. Unlimited childcare. Universal pre-K. Free college tuition. You go down the list of things that Biden promised in his Presidential Address; and that many others--and it's not just Biden. It's not even just Democrats. A lot of Republicans, a lot of people really believe that if we put this list of social policies in place, the world is going to be a better place and provide opportunity. But, it doesn't.

And, that's the part that I think--there's an improvement. There's a material improvement; but you're not changing the dependents[?dependence?].

So, one of the traditional measures of educational mobility is what the education of the family is: what the parents' education was, what the education of the children. Okay? And so, what happened--it's very interesting in Denmark: we have long time series. You go back 100 years. When I say, 'we,' you know, we have--Denmark is of course, a very, very--they're famous for collecting data and for being very, very meticulous in analyzing the data. You know, the Danish actuaries in the turn of the last century, where they founded actuarial science. But there's a lot of data, a lot of government statistic inaccurate[?]. But, one thing that was true was that in the 1900s, say 1910, a lot of Danes, there's a lot of inequality. If your father didn't go to school, you were much less likely to go to school. That's true in Denmark. And, Denmark was primarily a rural society.

And so, what happened was that Denmark started expanding programs in the rural areas and targeting towards disadvantaged children that didn't have education.

And so, for a while, those targeted programs operated in a way that actually promoted educational attainment. So, there was a big rise in the early part of the 20th century for Danish children to have much more education than that of their parents.

Well, suddenly then--and this is an interesting part of it--around the middle of the 20th century--and this is work, by the way, from my co-author and a guy named the Christiansen[?Christensen? ?J. Christensen vs. N. F. Christiansen?] who works with me. And, these guys actually showed that around the middle of the century, the educational policies became universal.

So, instead of going after the disadvantaged, they became across the board.

And, what happened was, the social mobility that had been witnessed in the first half of that century, started to vanish. And, the reason why it vanished is very interesting, and that is: Universal policies give a tableau. They give you a check. You can go out and cash this check; you can go to this school.

But, what educated parents, more affluent parents are better able to draw on that chip, to advise their children, to reinforce what is being learned in those schools.

And so, those universally-provided program actually turned out to be a vehicle for promoting social immobility--relative immobility that actually decide this idea of educate--so who was advantaged by the universal program? The most advantaged.

And, this is a finding that's been--it's not just true in Denmark, by the way. There's a study that was done, oh, I would say it's school choice in Boston. A guy named Chris Walters at the University of California at Berkeley, very good economist. He studied use of school choice. And, he found that school choice was actually very beneficial. And, he found that school choice was particularly beneficial--charter schools--very beneficial, and for the most disadvantaged children.

But, and this is the interesting part, who are the kids that were going to charter schools? Among those eligible, the most advantaged. It was the parents who sought out those schools.

So, even though the bottom of the barrel would benefit more, their parents weren't that informed.

And so, this universality really created more inequality than was originally intended.

And so, that's the way that inequality can operate. The family plays a very important role. It's kind of like a captain in the wheelhouse telling the child what to do, where to go, what opportunities to take, what steps to do and what not to do. Should you commit crime? Should you study at night? Do you do your homework? And on and on and on. And, it's those subtle influences that nobody wants to talk about.

Russ Roberts: Can we talk--

James Heckman: And, they're real. And, it's beautiful because Denmark is a case study where almost every obvious solution, well, externally involved[?] solution is at work here. Everybody's got the same tuition, everybody's got this and that; and yet everybody doesn't go to college. They don't. They don't take advantage of these programs. And they don't--they're not getting a reading and writing and support.

So, we started off this program talking about the role of a family, and I would want to say, 'Yes, let's talk about that,' because that is what I think the main lesson is that comes from this. And, that even though you can tax and transfer successful people, but you can't tax and transfer them and make them into more effective or less effective parents. Those are things that actually need a somewhat deeper approach to really thinking about how you provide true social opportunity for children. It's not just a matter of money.

29:48

Russ Roberts: We'll come back to that. I want to come back to something you said a few minutes ago, which is: you know, I make--you made an allusion to our relationship going back 45 years or so.

James Heckman: When you came from the Social Security Administration.

Russ Roberts: Yeah. I had taken a break.

James Heckman: You, and I, and Tom MaCurdy.

Russ Roberts: Yep. Long time ago.

James Heckman: Long time ago, yeah.

Russ Roberts: But, I was taught, in the mainstream of economics at the University of Chicago as every undergraduate and graduate student is taught, that, utility--wellbeing--is a function of stuff. That, the more you consume, the better off you are.

And, one of the implications of that--at least in the narrow sort of, I would call it empty version--is that if you make $50,000 a year at a job that you might enjoy, and I replace that job and instead give you a $50,000 annual check, you could argue--and many economists would--that you're better off, because now you still have $50,000 of stuff to choose from with your income constraint; and, you have leisure, which is a value, and you can enjoy it by watching YouTube or learning Hebrew or mastering the guitar.

And yet, we know in real life--and this is what you were alluding to about agency and dignity, and we call it often on this program, human flourishing--if you don't have a good set of skills, if the only way you have access to stuff is through the government giving it to you, your quality of life is not the same as when you exercise the skills you've acquired on your own, that you've chosen to acquire, that you've struggled to achieve and gain--and then apply them to making the world a better place by working, through the commercial world, serving others, by producing something that other people are willing to pay for.

And, this idea, I think, that--it gets at a lot of, I think, interesting ideas that I hope we explore over the next months and even years on EconTalk, this focus on a Universal Basic Income [UBI]. The idea that we can jumpstart development by giving people cash. It's a topic I hope we'll have an episode on soon. This idea that, if just give people stuff, then they'll be not just better off even, but they'll have the ability now to take advantage of that and to grow into--they won't have the pressure, say, of poverty on them.

And what this--Denmark, this result in Denmark at least is suggesting is that: actually it doesn't help so much. Giving people equal access to education, which you'd think would be this great leveler, doesn't seem to work.

And, you're suggesting that's because the family differences still persist. And, families are where we spend a good chunk of our day. About half of our waking hours--just like, only half is in education. And, a lot of that isn't really education, it's just a rear end in the seat. It's not actually the creation of human capital.

And, this romance we have about this equal access or free tuition is--it's masking what's really going on under the surface.

Your point is that the families who--for better or for worse--the families who have lots of stuff already, can push their children in directions--there's a hidden variable underlying that the data is what you're suggesting. And, you're calling it family, but it's really about guidance, advice, molding, mentorship, maturity, moral character--all kinds of attributes that aren't in the dataset. But, the point I just want to--

James Heckman: Well, they're slowly becoming in the dataset. I mean, I can talk about other work where we actually measure these attributes. But, yes, increase--no, not usually in public discussion and usually not in public datasets; and not on the public dataset in Denmark either--

Russ Roberts: And just to clarify.

James Heckman: Sure.

Russ Roberts: Just to clarify: when you're talking about how remarkable the Danish data are that are available to you: one thing you did not mention but I assume you just overlooked is family status--that you have not just--we know every economic event of a person's life, how much they earn and so on, but I assume you also know something about their parents' income, their parents' education, and so on. Correct?

James Heckman: Absolutely: Where they work; we know their employer and we know their peers. We know their neighbors. I can tell you in Denmark--this is all very confidential data, so I'm not going to the local newspapers and, ratting on some billionaire or millionaire who's paying or not paying debt. But, literally I can find out what the social life is like: what the environment is like of a child growing up. Who the parents are associate with? what neighborhoods they live in? what are the property values? How do they appreciate? And so forth and so on. And, then, what's the role of the school. And, what's the role--so, yes, we have a lot of information.

But you're absolutely right that these factors--I mean, as you know, there was a book written in the 19th century. I remember reading it a long time ago. I came across it in a used bookshop: The Reign of Quantity. And, what this person was saying is what many people have said, and I think probably before and since, which is that it's just not a matter of money. It's just not a matter of numerical, this, that, or the other thing. It's just not a matter of scale and dimension or any of these measures we normally take. There's an element called quality.

And, in this case, the family is playing a very important role. But, it's not--one thing you didn't mention in your dialogue, and I would add to, is: Not only is the family providing this environment, it's literally shaping the preferences. It's shaping the sense of definition of self, of the children from those families. It's motivating them or discouraging them one way or the other. And, that I think is an under-valued role.

And certainly in the United States, you can't talk about it. You can't talk about it now, even though it's probably the Number One problem. And, most people who are perceptive about the underlying problems in American social life would admit that.

But, the fact of the matter is, is that: Yes. But those traits are increasingly being measured. I mean we can't. I'm now in the middle of looking at interventions, not just in the United States but in China, Jamaica. And, we look at things like grit, we look at things like how much do children--and these are interventions, by the way, that work with families. And, they encourage the families to interact with the child. That's all they do. They're just basically teaching parents how to deal with their children. That's another whole story. But it does get to the essence of how would you target family life and that dimension of family life, how families who influence their children, how much more successful the children can be. And, we have a lot of studies on this now, and they're being watched and being carefully evaluated and finding real benefits. But it's not money.

See, this is the other part of it. I mean, there's this whole group of people--I hate to mention; I won't mention names, but it's crazy--in these large foundations, and all these people mean well. They're doing these experiments. They're going to give poor people $2,000 more a year for three years and see whether or not the neuroscience of their brain is transformed.

There's a demented study you've probably heard about by a guy who is actually a colleague, but it's crazy. He was--one of the powerful pieces of evidence in support of giving people money by this guy was that the people who are starving to death get lower IQ [Intelligence Quotient] scores than people who aren't starving. That's viewed as the importance of money. Come on. I mean, I put that on the same par as saying, 'People who make decisions too quickly tend to make more mistakes than those who make it too slowly,' can make it in rational.

But that's getting off target. What I'm saying is that some of the basic ideas about how we make the decisions that shape our lives, that's what families are doing. They're really guiding people. And, they're mentoring. They're really saying: Johnny comes home, somebody beats him up at school, gets him in the arm. Johnny can have several reactions. One, you can go back and beat up the guy, you give Johnny a clobber or a gun or something. Or, you talked to Johnny and say, 'Look, try to avoid it.'

So, there are a lot of ways that parents shape the lives and actions of their children. And, it goes throughout the 18, 20 years the children are living at home and maybe longer.

38:53

Russ Roberts: Well, I want to talk about the work. We're going to move away from Denmark for now. And, I want to talk about United States. I want to talk about two type pieces of work that, uh, Raj Chetty and his coauthors have worked on, one of which we've talked a lot about on this program in passing. The second, not so much. So, the first one is about the American dream and the second is about neighborhood effects.

So, in terms of the American dream, the study that gets an enormous amount of attention--which I find bewildering, but, I want to hear your take--is the finding that in America, in the old days, you'd have a 70% chance of out-performing your parents economically. So, I think it was 70 or 80. And, then that means that only 20 or 30 do worse, but most of them do a lot better than their parents. That's one measure of the American dream. Some say it's owning a house. I say, that's the dream of the National Home Builders Association, not the American people.

But, certainly we like this idea, Americans like this idea of, 'I want to do better than my parents.' That would be progress. And, in the more recent cohort, I forget the birth year, I want to say 1984, but I'm doing this from memory. More recent work you--

James Heckman: It's in the 1980s. Yeah. Yeah.

Russ Roberts: It's in the 1980s, you're born in the 1980s: that doesn't hold anymore. You only have a 50% chance of out-performing your parents, which means you have a 50% chance of under-performing them. Which means, basically, you're stuck. You don't have any--on average people don't progress. And, only the richest--it's often claimed that only the richest--people are benefiting from economic growth. It's not widely shared. And, the poor can't "get ahead."

This, I find bizarre because there's a ton of evidence when we look in time series data, where we follow the same people over time, that not only did the poor do a lot better than their parents, but the biggest gains often in percentage terms to start with, and even sometimes in absolute terms, go to the poorest people up until very recently--this is not like a one-time phenomenon. And, more importantly--and this is the part I want you to react to--Chetty's results, with this co-authors, depend on a lot of assumptions. And, as I've often applauded them on this program, they relax those assumptions--in the appendix, not in the body of the papers so much--but in the appendix, they give you a tremendous amount of information about the sensitivity of their results, to the assumptions they made.

Those include things like family size and assessing economic wellbeing, because obviously that's going to change your access to goods: if you're living in this large family with many children versus a small family with a few children. There's going to be issues about all kinds of different factors: whether you measured inflation correctly, which is a huge challenge when you're making these studies over time.

So, they relax different assumptions, and they show that, 'Well, actually it might not be 50%. It might be closer to 70%, or 68%.' And, all of a sudden it's like, 'Well, wait a minute. What's our best estimate here?'

And, I feel like the flagship banner of 50% is the one that was chosen not because the assumptions were the most accurate or made the most sense. It's just, it's the most dramatic. It certainly is the one that journalists have latched onto and spread. 'The American dream is dead.'

Do you think those results are reliable? Not whether they're--obviously they were careful with the data, as careful as they could be, but do you think we fundamentally understand the transmission of intergenerational mobility in the United States in those datasets?

James Heckman: Well, I don't know if you saw my film: we had an exchange I had where I discussed--

Russ Roberts: I have seen it.

James Heckman: those [crosstalk 00:42:37] Chetty's papers. You saw?

Russ Roberts: I have seen it and I will link to it; but go ahead, for those who have not seen it.

James Heckman: Okay. But, the reason I suggest that is that I raised a lot of these issues with Chetty and he was right in front of me. So, this was not like I was writing some obscure column. I was sitting there in a lecture hall in Princeton with hundreds of people in the room asking him, specifically, 'Well, can you answer this? Can you answer that?' Which he refused to do by the way. There was very little response, very little give and take, more or less refused. That's the strategy. I mean, it's all right if you have the New York Times supporting you: in a lot of places that's equivalent to having gold-plated credentials, and you don't need to worry about lesser life, like some academic raising points that the data may be wrong.

Let me just point out: One of the reasons why I went to Denmark was that we can address some of the same questions in Denmark as we did in the United States. We can look at questions of social mobility and we can look at questions in the way the data were actually collected.

The data Chetty had are not as described. He does not really have long-term follow-ups for these children. He starts the joke that he does not have complete family histories. He does not have a lot of the information that we know to be important about family life.

For example, I'll give you one factor that's very important. It's been found repeatedly, and we certainly find it in Denmark. If the parent--if a parent--has committed a crime, especially, has gone to prison, or has somehow been treated adversely by the criminal justice system, the child--usually the boy--is much less likely to avoid that problem in the next generation. There's a very strong intergenerational transmission of criminal activity. Well-documented. Pittsburgh University study--

Russ Roberts: Deeply depressing.

James Heckman: Yeah, it is depressing. But, the fact of the matter--but Chetty can't control for that. What Chetty can do, is: He has very, very crude data. He doesn't follow individuals over their full life cycles. He has a little snippets. Technically speaking, for a lot of the people who are in his survey, he doesn't even know who the parents were or what the family structure was. He can find them at certain selected periods of time after their birth[?].

Now, at least slowly, slowly getting better and better data, but in Denmark, we actually have complete life cycles. We know from the time of birth until, you know, late in the life of the child--and as an adult, I should say. And, we can see that there are tremendous differences in the quality of data. And it's not just better data: It makes a difference about what the exposure is. What is the family that's between captured in the Chetty study? And, what is it about the so-called neighborhood--he has really featured a lot the neighborhood.

And, so, you know, I would say about the Chetty study, the following would be--I would make the following more precise point. First of all, the data are not what they're cracked up to be. It is not really a true measure of the life cycle of the wellbeing of children. It is not study of family influence. 


Secondly, and something that I think plays a crucial role in the whole study, is it ignores the role of family in sorting and choosing neighborhoods where children grow up. And, the reason why this is--

46:10

Russ Roberts: Jim, before you go on, I just want to clarify: There are two different kinds of studies that Chetty and his co-authors have done. One I described in some detail. But the second one you're now talking about--to sort of give listeners some background--it's been incredibly influential. It's this idea that where you grow up--the neighborhood you live in--is destiny.

So, if you grow up in, quote, "a poor neighborhood," you will be poor. If you grow up in a rich neighborhood, you will be rich. And, the implication, as far as I understand--I want to be fair to Chetty. And, I just want to say to listeners, I've invited Chetty to be on the program before. Either he hasn't chosen to be on it or he didn't get my email. And, I'm not saying anything negative about him. And, I certainly would love to hear his defense. And I'll let listeners watch the video that Jim referenced, and you can decide whether Chetty didn't respond to your criticisms or not.

But, in that work--I'm being fair--in that work, as I understand it, neighborhood--not just country, not just state, not just city--but neighborhood is destiny.

So, if you grew up in important neighborhood, it's the neighborhood itself somehow that has disadvantaged you and that then we need social policies to offset that handicap.

And, your claim in the Denmark paper is that those neighborhood effects are merely proxies for family differences that they don't have data on. Is that correct?

James Heckman: That's correct. This is a basic idea that--what I'm growing on is a very old idea. And, it's actually written--and it's an important component of Milton Friedman's old book on the consumption function, which sounds like lightyears away from the current discussion. But, at the time, when Milton Friedman was doing his work, one of the many different ways, you could basically split the data--and this was back in the 1950s when the data were cruder than they are today--what you could do is you could form aggregates of places like cities or neighborhoods and so forth. And he used that in a very creative way; but what he was doing and what's relevant right now is the fact that in these neighborhoods, there's a lot of sorting going on. That poor people tend to live--

Russ Roberts: Explain what you mean by that.

James Heckman: Well, I mean, the people who are more disadvantaged, say, by level of education, say; by a level of background--criminal activity, various kinds of other participation in social welfare programs; by people who are earning less money and therefore demanding less--lower quality--housing and so forth. Well, there are a lot of projects that actually concentrate the poor in there for various reasons--put them geographically in the same location and provide benefits.

And, you know, and then that--a lot of U.S. policy as given today where money is given the schools or given the organizations, if the percentage of children in the school on free lunches and welfare lunches is over--above--a certain threshold.

So, there is the kind of--and in fact, we know that people sort, and in fact, the one thing we do know: sorting is an important part of any free market system. Of any system. And, if anything, sorting has gone up in the last 20, 30 years, the last 50 years. There's much more sorting on income, on education, on a bunch of traits that--

Russ Roberts: Meaning--

James Heckman: we think are influencing families--

Russ Roberts: Meaning people who have high-income are much more likely to live with people who have high--in the neighborhood of people with high income.

James Heckman: Yeah. They're buying comparable quality housing. They want comparable quality schools.

Russ Roberts: Schools, yeah.

James Heckman: And, so, by the way: even though we're off Denmark for a second, there really is a sense that, even though teachers are paid the same--they're paid the same--that high quality teachers--and we know their quality because you know what their grades were in school; we know what their college transcripts were, so we can really measure quality--that in more affluent neighborhoods, you find that the teachers who show up teaching there are higher quality. And, this is just an old, Chicago argument, right? You can't pay them any money, but you can give them higher-quality students, which makes their lives much more enjoyable. So, it's a non-market response to a market imperfection.

But, anyway, coming back, there's a lot of sorting going on. And that's ignored completely in the Chetty study. He just ignores that, because he doesn't have good data on family background. He doesn't know what exactly family influence is like. As you say, you don't know criminal history. You don't have any measure about, really, the education of the parent. These data are very, very crude. A lot of these are administrative data, like internal revenue service stackings[?].

Russ Roberts: So, you're arguing that a lot of Chetty's results are actually being driven by, not the neighborhood, but by the characteristics of the family that he can't [crosstalk 00:51:08].

James Heckman: By the people who sort into that neighborhood. That, what we call 'neighborhood effects' are really family quality effects. And, as a result of sorting that goes on in the labor market.

And we can find that. And, we go back to Denmark--I keep going back because we have so much better data there--we find that once we control for that kind of sorting process, these neighborhood effects go away.

I mean, it's literally, that: what is a neighborhood? It is an agglomeration of families and what families do. And so, we're back to families again, but--

Russ Roberts: Well, let's--

James Heckman: Let's go back to the first study. I think going back to the very first study: you want to talk about Chetty's earlier study. You mentioned this figure about how, you know, 70% of families and children did better.

If you look closely at Chetty's Atlas of Opportunity, have you noticed where some of the states are that have the best social mobility? Have you seen the ones that have the highest rates? They're in Western Kansas, they are in Nebraska, they are in places out on the Great Plains. Now, what do we know about the Great Plains?

Russ Roberts: We got to move there so your children will thrive. Everybody should go to go Kansas.

James Heckman: Yeah, but you got to become a farmer first, my friend, and go into a declining industry.

Russ Roberts: And, you need probably a few grandparents as farmers, too. You got to acquire both.

James Heckman: Exactly.

Russ Roberts: You got to move and build a heritage.

James Heckman: No, but see some of these dimensions about how mobility has declined, you have to understand that some of the--the first cohorts in these Chetty studies start from people who were born or so were raised. And, at first samples in the 1940s. In 1940, we were coming out of a Great Depression, and we are leaving agriculture. The U.S. was still highly agricultural. So, if you look at social mobility in the 1940s and 1950s, a huge amount of it had to do with the recovery of the economy--

Russ Roberts: People leaving the farm--

James Heckman: and the mobility from the rural to the urban areas. And, that's true for blacks and for whites and everybody. We gave up on the farms. Agriculture became very productive, and we left behind a group of people, very few people, who were on average making like more income.

So, the fact of the matter is that study--those studies are very heavily flawed.

But, let me just give you a--you were mentioning the atlas of opportunity, or I was, this influential study that's in the New York Times. I have a colleague named Magne Mogstad, very smart guy. He's Norwegian, a member of the Chicago faculty. He's the Gary Becker Professor of Economics at the University of Chicago, very accomplished individual. He and his coauthors did something very interesting. They took a look at these neighborhoods that are in the atlas of opportunity. And, remember, these are zipcodes. These are very small neighborhoods. And, he asked a very narrow statistical question--none of the above, nothing more--just asking: Are the mobility pattern in one neighborhood statistically significantly different from those in another? In other words, could all of this arrives by chance? And, the answer was: Yes, it could. These were not statistically significant differences. These atlases were just basically artifacts. It was numerology. It was not hard evidence that these neighborhoods are somehow predictive.

And, of course, as I said earlier, the neighborhood analysis ignores the fact that people sort; and it's crucial. It's crucial to their identification. It's a great, crucial identifying assumption. We've done a lot of work on it in the context of Denmark. I'm assuming the Danes are not like the United States, the mobility processes there--the key identifying assumption in the Chetty work--the key assumption; he acknowledges it; if you look at his papers, he acknowledges it--is that basically people decide where they live--where they live--basically randomly in terms of the age of the child. Right? Anybody who has had kids knows that when you have, like, three- and four- and five-year-olds, you start thinking: What school is this kid going to go to? What neighborhood--they sort. And all that mobility associated with family settling down, it's all over: A lot of it is over by five, six and seven in terms of the age of the child, certainly by the age of the second child.

That's all ignored. It's basically assumed that it's a random process. That is the key. It is so crazy. And, you can see that on the video: he said: 'Ask a real estate agent.' Do you think people aren't asking you about the quality of schools? Are they asking about what the crime rates are? And, when are they doing that? When their kids are 16 years old, or their kids are basically five and six when they're really trying to decide a neighborhood?

And so, literally, what this is, is this is kind of like a social planner's dream: You can randomly assign people and they have--and nature is randomly chosen where people decided to live or not live. It just defies the nature of what families do.

56:14

Russ Roberts: But, I think we should move away from Professor Chetty's work for a moment. And, again, I invite him to come to EconTalk and defend his work. I hope, I hope he will. I'll explicitly and formally invite him after this episode airs. And, he may choose to, he may choose not to, it's up to him.

But, I'm going to defend Chetty, even though I've been skeptical of his findings. Like all of us, I'm sure he has some political views. He has an ideology. I think he believes deeply that he is in search of the truth and that he has found it or identified it.

And, just, as a explanation, by the way, when you say an identifying assumption, that's a technical term for an econometrician trying to measure the impact of one variable, and it can be hard to do.

And so, the assumption that neighborhood choice is random is what allows him to conclude what he does.

Well, I think he--well, I know he said it many times, he said it publicly, that he thinks these kinds of econometric techniques--techniques that you were not literally part of, but certainly the field that you've spent your whole life in--are the road to good economics, the road to truth, the road to good public policy. And, that that's how we should teach economics.

He's a very outspoken advocate for teaching economics as a form of empirical work rather than an art, rather than a field of human behavior. He's an applied statistician.

Now you think his statistical work is flawed. I'm sympathetic to your view. But, to defend him, he feels otherwise; and many others do as well. So, just, I want to give him the benefit of the doubt and again, invite him to come defend himself in the first person.

James Heckman: Well, I have no--one thing that I find ironic is that years ago, I wrote papers with Chetty's father. So, I've known Chetty--I've known Chetty since before his birth. Um, no--I was just cleaning out some boxes and I came across a draft of good paper, I think--it's still highly relevant, with--Chetty's father is a Health Economist at Boston University. A good economist. Very good economist. Learned a lot from him. We were together at Columbia [Columbia University] years ago.

But, no, I don't want to attack Chetty per se; and I can't say whether he's sincere or not. I can honestly say he's not careful with data. And, I can almost honestly say he's not careful with econometric ideas.

So, I don't know what you've heard him say, but you might want to tune in on some of his lectures that he gives to HUD [Housing and Urban Development] and to some of the other agencies, especially during the Obama Administration. He might sound very measured in certain academic settings, but when he's sitting there on the stump in HUD with a bunch of people willing to hand out huge sums of money, trying to support more work on neighborhoods, then you're going to find a very different person, more evangelical and the less econometric [inaudible 00:59:19]. All I can say is that he--

Russ Roberts: Perhaps. He is not alone in that way.

James Heckman: No, he's not alone. That's very well.

But, what I am suggesting is that this is such a basic point. And, the point has advantages. The point hasn't been taken--it's not been--the point has not been met. And it's been out there now, at least since the time I made that video.

And, I can't imagine anybody who listened to this not thinking exactly that point. Anybody trained in economics. I mean, what the hell? The only reason why it wasn't immediately said--it wasn't like a king without clothes, little boy falling out--was it's cloaked in a kind of obscure econometric language, which sounds very, very, very exact.

And, you know, when I had this discussion at the Princeton that you saw, the other commentators, none of them were econometricians. None of them were statisticians. None of them understood the technical difficulties. They didn't. There were commentators. They liked the message.

There was one person, I think it was the Dean of the School of Education, Berkeley, and William Julius Wilson, who is a very good friend--not technical person. And, then this guy who writes for the Wall Street Journal, Dalston. I mean, all these guys were econometric weaklings. There's no other word for them. And, they didn't challenge the basic quality of the data. They were overwhelmed and they thought this is an amazing piece of work.

And, I happen to be an economist and it was probably a huge mistake that I was invited. And, I think that nobody watches, listens or--so, that's okay. But, the message here is very, very important. And, that's the part that actually bothered me. But, yes, I agree that, from a certain point of view, I agree with everything you said; but I think the reality speaks otherwise.

Russ Roberts: Well, again, listeners and viewers can watch that video; we'll link to it.

1:01:20

Russ Roberts: I want to move to a more philosophical question, in terms of policy and these findings of yours and of others that disagree. I think most people understand that family is important. They may not want to emphasize it in their policy discussions. You know, one of the issues that's come up--we've talked about charter schools in this program--is that, some of the best charter schools, what they're really good at is picking parents, not so much picking the students--

James Heckman: Exactly. Exactly--

Russ Roberts: And, they find ways to get parents who are driven, ambitious and will motivate their students, their children, to be the ones that get chosen. They put up a lot of hurdles.

And, I think that's true. And, there may be good reasons for that, but it does cloud our assessment of these schools that have a public policy generally.

But, if we accept your point that family's important--and, I think every parent accepts it because most parents do pay attention to all these things: we do try to motivate, inspire, lead our children--what's the role for public policy, then? What's left?

Now, there's sort of two choices here. There's the Denmark model, which basically says, 'Okay, we've got a lot of problems with families' differences, but we'll try to offset those with public policy taxes and transfers to do the best we can.' One view. Second view would say--I don't, I don't like either of these, but these are sort of the standard two views that are out there. The second view would say, 'Well, obviously if the family is important, we have to find ways to make the family better. And, we should subsidize families staying together as two parents,' especially as other institutions in our society are struggling. Most, obviously being the religious community, which used to be a key complementarity to the family--the way that religion and family would work to create values and ethical and moral character: That's dying in America, it feels like. Should government step in? Are there programs that that government could activate and fund that would help the family? My view is that's a mistake for a thousand reasons, but I'm curious what you think.

James Heckman: Well, I don't think the government should step in. And, I think the idea of shotgun marriages and the idea of forcing stable two-parent families under the gun or whatever, is not going to work. It just doesn't work.

I do think there's a larger issue which needs to be addressed and has been historically addressed. I don't know how much of the work of Gertrude Himmelfarb you ever read. It's more about--

Russ Roberts: I know a little bit about it.

James Heckman: Well--

Russ Roberts: Not much--

James Heckman: a lot of people--I know that Posner thinks lowly of her. And, she can--she was, she's now dead, but she was a--there was an element of prudishness. But she wrote a lot about Victorians and that was a response to poverty in the 19th century. And, that's a response that doesn't receive--and that was a kind of theme, partly by religion and partly by social, but it was probably adoption of cultural policy. I don't think it was a sense of a government mandate in the law. I think there was a sense about what--[crosstalk 01:04:44]

Russ Roberts: It's a set of norms.

James Heckman: Norms.

Russ Roberts: Set of norms. Yeah.

James Heckman: Exactly. And, the churches promulgated that. But, there was a sense in which we recognized that a certain set of values were very beneficial for the society as a whole--you know, respecting laws, respecting each other, a sense of civility. All of those were basically part of that culture.

That wasn't always true. If you go back to England in the early 19th century, you go to these reform movements, like the Methodist Revival or the Welsh Revival, there were a lot of these religious movements. You've heard of, like, the First, the Second, and the Third kind of Great Awakenings. Those are religiously motivated. They were really people recognizing that they needed to reform their lives.

So, we went from the poor houses to a form of Victorianism. I'm being very crude now: I'm recognizing--I'm not really taking into account--you know, if Himmelfarb were listening to this, she'd be horrified. But, nonetheless, if you look at what her work is, these Victorian values played a very important role, I think, in kind of motivating people. That's true. [? 01:05:55] was right. There are a lot of superficiality, hypocrites. Nobody was a true Victorian in the sense. And, it became a party game, it became open season on Victorianism in the early part of the 20th century--eminent Victorians, Lytton Strachey, and all of those people.

But, the fact of the matter is there was kind of the cultural force suggesting what appropriate behavior would be, which led movements like Prohibition and so forth. Now some of that--Prohibition was a disaster; you know that.

And so, the question then becomes, how do you achieve that moral force? How do you achieve the recognition of those values? And, I think that is what probably needs to be attacked; but I'm not--for sure, I'm for sure feeling that some government policy is not going to do it.

But, having some politician say, you know, 'Be good to your kids,' or--the only government policy that I favor in this regard. And, I think it does help to an extent.

And, it comes back to your comment on charter schools. I think a government policy that kind of builds the role of parents as a guide, as a cultivator of the morals and motives, and academic achievements of the children--programs that kind of encourage parents or caretakers, whoever they are in that capacity--can be very successful.

That's completely voluntary. You're coming into people's homes, people can say, 'Go to hell.' And, it's like charter schools. You were criticizing charter school. I think it was great that charter schools are operating as a filter. What they're doing is they are encouraging parents who care about their children.

Russ Roberts: I wasn't criticizing them, just for the record. I was saying--

James Heckman: Yeah. No, no, but I'm saying--

Russ Roberts: that clouds our ability to assess their effectiveness, per se.

James Heckman: No, it is in a sense if we randomly apply it to the population.

Russ Roberts: Yeah.

James Heckman: But, what we're really doing is--and this is something people don't like to admit--we're tapping into something else. And, then maybe we can think about it the way you just described. And, then describe to the parent, 'Look, if your kid does go to the charter school and you do put in the time and effort your kid's going to do better than you do.' So, I would turn it around and say: No, it's not like we can randomly[?]--see, right now, you have this whole group of people doing assignment in charter schools and does it work and does it not work. And, the persistent finding is it works because for the most disadvantaged--it does work for the most disadvantaged--but the most advantaged get in. Like the Walters article I was telling you about earlier. But, that's found across a number of programs. And there's a reason for that.

And so, I think what it's really telling you is you want to think of policies that ignite. And, some of those policies are policies that are internally grown---you know, for a while, are no longer true, unfortunately. But, you know, Bill Cosby at one time when he was free of all of these charges and public controversy, was a major spokesman for trying to insist that black parents take care of their children and motivate them. Now, he's discredited, but there are many other African-American figures who are doing exactly this role.

Russ Roberts: And, that's all--

James Heckman: They recognize. Still--

Russ Roberts: That's all private. That's all private. It's all[?] cultural--

James Heckman: Exactly.

Russ Roberts: And, it's great. I think it's great. But, I want to actually--go ahead.

James Heckman: Go ahead. No, no, no. But, when you talk about government policy, what I see coming in, especially now in these kinds of--I mean, there's this whole--there's a group of people, they're very enthusiastic. They claim to see a big impact on child development and on child achievement by giving families more money. And, what they're doing is they're studying a correlation and they're not really--and they claim to be doing these experiments, which show this. Now the government--the opening of casinos on Indian land apparently did lead to more Indian children going to school, except for one little detail: that some of these programs have had the feature that they could only collect the money if they sent their kids to school.

So, it was basically what's called in Mexico, Progresa. There are these incentive programs offered to families to try to get their kids to go to school. And, those seem to have an effect on the children, especially in rural areas where the kids are agricultural labor.

So, I think there are policies which we could encourage more active family life. But, the fact is that there needs to be a sense in which the parents--I mean, we've got this huge group of people that are having children and not being responsible for them. Just, not taking into account the wellbeing of the children. There's a loss of accountability that somehow has been sanctioned. It's been sanctioned, and it's viewed as liberating, right? [crosstalk 01:11:05]

Russ Roberts: Well, it is.

James Heckman: No, it still is. It's MeToo, I want to--you see these stories, the woman gets on and says, 'Oh, I was being oppressed. I wasn't being the true me. I was spending all my time, washing the diapers and taking care of the kids. And, now I could be--I knew avant guarde artists in Paris and I'm going to run away from my family.' And, that's viewed as the final expression of human liberation. And, with it, then, is the decline of any sense of accountability for one's actions, including, including the children and the aftermath, the consequences.

And, I would say the same is true for this whole discussion about masks and other things. There is a fundamental failure for people to be held accountable, to say, 'Look, we get vaccinations. We get smallpox shots. We do certain things because there is a responsibility for the larger population.' And, that is, I don't want to call it a moral duty, but it is a duty. If you're going to be a part of society, you should try to make sure that society thrives. And, I think we don't hold it responsible.

I think it's crazy that this issue of masks has become a political issue. It's not political.

Russ Roberts: It's a tragedy.

James Heckman: It's a tragedy. It has nothing to do with infringing on the liberty of others. It has to do with something that every economist knows--externalities. What you're doing is you're making it easier to transmit a disease to vulnerable people.

I don't know, but you see that's part of the whole era of 'It's me and me alone.' And, I think that's--here, I'm sounding very evangelical or something, but--and I'm not appealing to a higher authority necessarily. Although, appeals to a higher authority in an earlier era were successful.

Russ Roberts: Were effective. Yeah.

James Heckman: Yeah. They were effective--

Russ Roberts: But they're gone, mostly.

James Heckman: I don't know if that kind of a appeal is going to work anymore.

Russ Roberts: I don't think so.

James Heckman: Nobody's going to believe that--I just think it's too secular, society, these days. And, I don't think that's going to be effective in most [?].

1:13:10

Russ Roberts: Well, I want to close--we're out of time--

James Heckman: Sorry I'm getting carried away with long lost Denmark. Maybe we're back to Kierkegaard, I don't know. [crosstalk 01:13:20] Denmark.

Russ Roberts: Oh, fear and trembling, fear and trembling. I actually, I want to pick a different philosophical issue to close with than we've talked about so far, which is: I think a lot of our focus as economists and policy analysts is driven by what's measurable, generally. And, we spend a lot of time focused on income, and equality of income, and growth and income; and it's not irrelevant, but it isn't the thing that human beings care the most about. I think the thing that people care the most about is friendship and love and connection to other people and dignity and respect and agency, and a sense of meaning in your life. And, income doesn't do that. We can talk about it all day long: it's not good to be hungry, we all understand that. No, one's suggesting that it's irrelevant, income.

But our focus as economists on income, because it is easily measured and collected by the government, when what we really care about are these other things like agency, dignity and responsibility, and a sense of meaning--we're playing a weird game, because those are the things we can measure. Then those are the things we develop policies for, that we then see if they work, because those other things--the dignity thing--it's just too hard. We don't have anything to say about it, not in the dataset. And, I feel like--

James Heckman: Well, we do. But, we do. We can look at individuals who lead lives[?], where they are self-sufficient--where they are actually taking care, they're making their own way, and they're able to make their own choices. And, they act as autonomous beings. We can measure autonomy in many ways, in terms of life cycle choices, the people who go to prison, and don't; the people who take certain actions--including these actions regarding children and mobility, where they live. I think we can, but I agree with you. Of course, going back to the one of your earlier comments, the way that people have responded to it, the whole happiness movement: We completely agree with what you just said. But that's kind of the ultimate form of hedonism. What the idea is, 'I just want to be happy. That's my goal in life.'

And, in fact, I don't even know if that's true. I mean, think about the--what was it? Aldous Huxley. Remember the famous book? And when we think about the--

Russ Roberts: Brave New World.

James Heckman: The Brave New World. We think of those people who are kind of caught up in that kind of drug-induced happiness state.

Russ Roberts: Soma, was the drug.

James Heckman: Soma, exactly. Which by the way, did have a gentlemen--there really was something called soma and it really did exist. And, it came down from the Northern part of India. But, that's another whole story. There is a drug, there is a flower, and you can see it in Afghanistan to this day.

But, put that on the side. The fact of the matter is that the--that you're right, it's the agency and dignity. It is striving [?] that matters. And, Nietzsche would say that: It's the conquests that--we all know that.

Remember there was a person who was in Chicago as a psychologist when you were a student, a guy named Csik Mihaly. You remember that?

Russ Roberts: Nn-nn.

James Heckman: Well, Csik Mihaly wrote the book. And many coaches and, like, motivators use the book--but, it's about the value in life is responding to the challenge. It's not the final goal: it's getting to the goal. It's striving.

Now, Richard Robb has recently written a book--

Russ Roberts: Yep. He's been on this program talking about it--

James Heckman: Yeah, no, exactly. So, I think, though--although I think he should have kept more of the Csik Mihaly line, but that's another whole story--but nonetheless, I think the structure of striving--and that's the part that people find difficult. And, I think maybe that's because politically it's easier to sell this notion of not striving: that we have these objective measures.

So, you know, in my own narrow interest in child development, for example, people use income as the measure of disadvantage. Whereas, my measure and the one that I think matters most is the quality of the home, the environment in which the child is raised. And anybody who knows child development knows that that's valid. But, nonetheless, the measures that are used in public policy. And so, understanding--so that's where--so you're saying, is there a public awareness and is there a public policy? I can't see many public officials standing up and say, 'Respond to life's challenges.' Okay. But--

Russ Roberts: No. They're saying, their favorite line is, 'What can I do to make life easier for you?' Period.

James Heckman: Yes, exactly.

Russ Roberts: 'Let me take someone else's money.'--

James Heckman: Well, of course: 'Here's another $2000 this month,' and something. No. Exactly. And, the idea--and so we really are building this dependency state and with the entitlements and with this whole sense, we're slowing eroding this ability to sort of operate in an autonomous fashion.

And so, even though Brooks may say the autonomous agent, the free-roaming individual is somehow dead, and we all are in this common union together. Yes. We like friendship. But, we also want to have a sense that we've done something ourselves. However modest. What was it? Veblen had this book, it was really very good. And, it was probably instinctive workmanship. And, he really did. He was kind of the Freud of the early 19th century among economists. And, he really did say we have this deep desire to be a craftsman, to have accomplished something.

And, there's a deep sense of pride, whether it's putting a bottle--a ship inside a big bottle--whether or not it's a building your own home, whether or not it's even having a beautiful garden. Those senses of accomplishment--and everybody would say that, even the most destitute welfare client would take pride in saying, 'Look, see, I made this side[?]. I improved my room. I have this window. My house is a much nicer place[?].'

But, so I think most people want that sense of achievement. And, I just think we need to be motivated more. But, the trouble is that now with electoral politics being what it is, that different groups can only promise more and more goodies, and say you can do it without effort. But, the labor/leisure choice you were referring to: most people--I mean, years ago--you know Victor Fuchs, right?

Russ Roberts: Sure.

James Heckman: Victor Fuchs at Stanford. Remember years ago, I was doing work on labor supply. As were you. And we have the traditional labor/leisure trade-off. I remember Victor asked me a very good question. I was just out of graduate school. And, I remember--he says, 'You have this idea of leisure, but you realize that people really enjoy their jobs.' And, he's right.

Russ Roberts: We did. Some. Some. Not everybody.

James Heckman: They do. They enjoy the work.

Russ Roberts: Not everybody, but many.

James Heckman: Not everybody. But--of course, if you are lifting heavy weights in the bottom of a gold mine somewhere in Siberia, my guess is you [?don't?] enjoy it. But, even there, I bet you there are some people who lift weights much better than those who don't. And, they would enjoy being a master lifter of weights in the bottom of the gold mine in Siberia.

So, I think that we don't appeal to that aspect of humanity. And, I think we're the poorer poor[?]. And, the question is: Is there a way to proceed? And, yes, it is. I think what it is, is that we not just tell people they're responsible: We sort of tell them the consequences of their being responsible. And, then we leave it to them.

That's been the guiding principle, a lot of my work, on early childhood recently: That it's really educating the mother or the caregiver to tell people how powerful her role is. Just to say, 'You have an important role and you can do something about it.'

And, it's very surprising how many disadvantaged mothers will rise to that occasion. They will see it. Right? Because the child is the one thing they value the most in life. This is their creation. This is something that they--this is their legacy.

I think, if we're clever--I'm not trying to devise a political campaign to carry the 33rd war or something. What I'm really suggesting is that if we really are careful in reconstituting the way we think about what value, I think we can do something. I think we can motivate people to do that.

Russ Roberts: My only criticism of that is that the goal isn't to help mothers be more inspired to help their kids stay in school longer and make more money. Their goal should be to educate their children into the fullness of what it means to be a human being.

James Heckman: Oh, exactly. [?]--

Russ Roberts: And, I think we've lost that.

James Heckman: Well, I think we have, because many people would argue that many of these values--I mean, you can see it now. It's even in the Smithsonian, some of the--I'm told the Smithsonian Museums, that attitudes towards hard work and aspirations for the future and saving for the rainy day, that's considered an attitude that is basically being foisted on you from an external society, and it's not intrinsic. And, I think there's no evidence that a policy of that sort leads to anything resembling that quality of life. Nothing.

Russ Roberts: My guest today has been Jim Heckman. Jim, thanks for being part of EconTalk.

James Heckman: Well, nice to see you again, Russ.

Russ Roberts: Always.

James Heckman: Hope to see you again. Take care.


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