Monday, November 14, 2011

How I Think about Nature vs. Nurture

The last post may have raised some questions about how I am conceiving of the timeless debate of nature vs. nurture, I seem to be claiming that providing income can change individual behavior.  This isn't entirely how I see it, I see providing income as changing aggregate but not necessarily individual behavior.  The distinction is important.

How I see this working basically goes like this.  Assume the population has a normal distribution (or other kind of distribution, it doesn't really matter as long as an assumption of unequal talents is used) of traits that lead to what most would recognize as success.  This doesn't mean just the success of wealth, few would consider a lottery winner to possess any particularly meritorious traits and most would consider astronauts or Olympic gold medal winners to possess traits leading to success, even if they aren't at the top of the income distribution.

Now, we'll assume that a certain portion of these people will always succeed in life under any conditions, it doesn't really matter if it's 1% or 5% as long as we assume it is a minority (since the majority was oppressed throughout most of history it has to be a minority, I'm assuming success in any institutional environment).  Also, we'll assume that a certain portion of people will be unsuccessful in any institutional environment.  Doesn't really matter how many, but since some European countries have achieved poverty rates of below 5% it probably isn't a large proportion.

These people we can ignore.  They'll do well under any setup, so who really cares?

What matters is the roughly 90% of people that are responsive to policy.  This is what we have to focus on.  That there are Bill Gates or Steve Jobs out there who probably would have had incredible ideas that would have made them money, whether born as medieval peasants or where they were, doesn't really matter for policy.  These stories get trotted out, but upward social mobility existed in ancient Persia or Sumer, that these people exist isn't an argument against policy since they've been present even in the most oppressive of social circumstances.

For most of the people, most of the time, the environment is a better predictor of behavior than individual level traits.  In previous eras it was believed that few people had the mental faculties to be literate and participate in politics, it should be obvious nowadays that instituting policies to open up these advantages to the masses have proven these prejudices wrong.  For these people, institutional circumstances matter very much, if they feel relatively deprived they may become depressed and not invest themselves and become upwardly mobile.  However, a simple windfall, whether something random like the lottery or a social reform such as the EITC, can spur a portion of these individuals to greater efforts.

Theoretically, of course, the question exists of what motivates more people to succeed.  Doubtless, there are some people that given a basic income will become indolent and lazy and not work.  There are others that will do well only if deprived, they feel the need to overcome adversity and this is what drives them to success.  The question is really, what is the proportion of the types of people that respond to different incentive structures?  This is an empirical question, providing more supports will motivate some people while reducing the motivations of others.  There is no way to target these interventions.

The data points really strongly to the idea that the portion of people that respond more strongly to having their relative deprivation lowered, rather than raised, is quite a bit higher.  Comparative evidence regarding Europe points to this, give people more support and income mobility increases (of course, make it harder to work and unemployment increases, I'd really like to separate European style income supports from their labor market and financial policies which I think are atrocious).  Also, looking at US mobility supports this, easy access to land and high wages rates promoted upward mobility.  As relative wage rates fell, so did upward mobility.  We can also look at workforce participation, incentives such as the EITC lead more people to work and out of poverty, before we had most modern social programs poverty rates were vastly higher and many people, particularly in rural areas, had very limited contact with labor markets.  Give them some supports, and they integrate with markets and start becoming upwardly mobile.  They weren't like this however when they were at their poorest and most deprived, it was only after something was done about it that things change.

I kinda went on a tangent, but my basic point is that I think of the population as a distribution.  Any reform will help some people and hurt others, and stasis should also be though of as helping some people and hurting others, it's better to think of a menu of potential policies in order to not introduce status quo bias, this isn't a reason not to engage in change.  The question is, what is our data of the portion of people that will be helped relative to those that will be hurt, to the best of our knowledge.  Both individual level traits and the social environment matter, however, since policy doesn't generally impact individual level traits these traits are essentially irrelevant for policy purposes.  The question is how the broad majority that is more responsive to environment in regards to their economic success responds to policy changes.  This matters not only for some conceptions of social justice but also for economic growth.  It matters very much for the capitalistic process of creative destruction that new ideas and challengers are constantly rising to challenge old notions, promoting the chances of a greater range of individuals will enhance this process and thus economic growth.

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