Economic Storytelling

story telling

Last time, we heard Nobel Prize winner Robert Shiller promote the use of narratives in economic policy-making, on the theory that it would produce more humane outcomes than mathematical modeling — for example, reversing trends such as soaring economic inequality, loss of upward mobility, stagnant purchasing power,  and declining cultural wellbeing.

Narratives are up to the challenge, proponents say, because:

  1. Humans are natural storytellers.

 “Our storytelling ability, a uniquely human trait, has been with us nearly as long as we’ve been able to speak. Whether it evolved for a particular purpose or was simply an outgrowth of our explosion in cognitive development, story is an inextricable part of our DNA.”

The Power Of Story, Aeon Magazine (Jan. 12, 2015)

  1. There’s nothing like a good story to make you rethink your life.

“The careers of many great novelists and filmmakers are built on the assumption, conscious or not, that stories can motivate us to re-evaluate the world and our place in it.

 “New research is lending texture and credence to what generations of storytellers have known in their bones – that books, poems, movies, and real-life stories can affect the way we think and even, by extension, the way we act.

“Across time and across cultures, stories have proved their worth not just as works of art or entertaining asides, but as agents of personal transformation.”

The Power Of Story

  1. Narratives supply a welcome sense of meaning:

“Each of us has a story we tell about our own life, a way of structuring the past and fitting events into a coherent narrative. Real life is chaotic; life narratives give it meaning and structure.”

Silicon Phoenix:  A Gifted Child, An Adventure, A Dark Time, And Then … A Pivot? How Silicon Valley Rewrote America’s Redemption Narrative, Aeon Magazine (May 2, 2016)

  1. Stories are catchy: brain scans show that listeners’ and readers’ brains mirror the storyteller’s — another reason why they make good change agents.

“fMRI data [shows] that emotion-driven responses to stories… [starts] in the brain stem, which governs basic physical functions, such as digestion and heartbeat. So when we read about a character facing a heart-wrenching situation, it’s perfectly natural for our own hearts to pound.

“Just when the speaker’s brain lit up in the area of the insula – a region that governs empathy and moral sensibilities – the listeners’ insulae lit up, too. Listeners and speakers also showed parallel activation of the temporoparietal junction, which helps us imagine other people’s thoughts and emotions. In certain essential ways, then, stories help our brains map that of the storyteller.”

Silicon Phoenix

  1. American capitalism already has an established story genre — the “redemption narrative” — that it can rely upon to good effect.

“For Americans, the redemption narrative is one of the most common and compelling life stories. In the arc of this life story, adversity is not meaningless suffering to be avoided or endured; it is transformative, a necessary step along the road to personal growth and fulfilment.

“For the past 15 years, Daniel McAdams, professor of psychology at Northwestern University in Illinois, has explored this story and its five life stages: (1) an early life sense of being somehow different or special, along with (2) a strong feeling of moral steadfastness and determination, ultimately (3) tested by terrible ordeals that are (4) redeemed by a transformation into positive experiences and (5) zeal to improve society.

“This sequence doesn’t necessarily reflect the actual events of the storyteller’s life, of course. It’s about how people interpret what happened – their spin, what they emphasise in the telling and what they discard.”

Silicon Phoenix

  1. Redemption narratives make good citizens, and never mind if there’s some ego involved:

“In his most recent study, the outcome of years of intensive interviews with 157 adults, McAdams has found that those who adopt [redemption narratives] tend to be generative – that is, to be a certain kind of big-hearted, responsible, constructive adult.

“Generative people are deeply concerned about the future; they’re serious mentors, teachers and parents; they might be involved in public service. They think about their legacy, and want to fix the world’s problems.

“But generative people aren’t necessarily mild-mannered do-gooders. Believing that you have a mandate to fix social problems – and that you have the moral authority and the ability to do so – also requires a sense of self-importance, even a touch of arrogance.”

Silicon Phoenix

  1. Stories are good for the American capitalist ideal.

“From a more sociological perspective, the American self-creation myth is, inherently, a capitalist one…. The sociologist Paul du Gay [believed that most people] craft outward-looking ‘enterprising selves’ by which they set out to acquire cultural capital in order to move upwards in the world, gain access to certain social circles, certain jobs, and so on. We decorate ourselves and cultivate interests that reflect our social aspirations. In this way, the self becomes the ultimate capitalist machine.”

Silicon Phoenix:

But of course, not everyone shares these rosy opinions of narrative economics, or of the current practice of American capitalism. We’ll hear from the naysayers next time.

Homo Economicus [4]: Enlightened Self-Interest

homo economicus

The concept of “homo economicus” captures the belief that the rigorous pursuit of self-interest in a free market improves things for everyone. This belief powered Milton Friedman’s famous dictum that “the social responsibility of business is to increase profits,” and finds a philosophical ally in Ayn Rand’s “objectivism”:

“The core of Rand’s philosophy… is that unfettered self-interest is good and altruism is destructive. [The pursuit of self-interest], she believed, is the ultimate expression of human nature, the guiding principle by which one ought to live one’s life. In “Capitalism: The Unknown Ideal,” Rand put it this way:

‘Collectivism is the tribal premise of primordial savages who, unable to conceive of individual rights, believed that the tribe is a supreme, omnipotent ruler, that it owns the lives of its members and may sacrifice them whenever it pleases.’

“By this logic, religious and political controls that hinder individuals from pursuing self-interest should be removed.”

What Happens When You Believe in Ayn Rand and Modern Economic Theory, Evonomics (Feb. 17, 2016)

Thus Ayn Rand became the patron saint of American capitalism in its current iteration. This is from a 2017 Atlantic article:

“’I grew up reading Ayn Rand,’ … Paul Ryan has said, ‘and it taught me quite a bit about who I am and what my value systems are, and what my beliefs are.’ It was that fiction that allowed him and so many other higher-IQ Americans to see modern America as a dystopia in which selfishness is righteous and they are the last heroes. ‘I think a lot of people,’ Ryan said in 2009, ‘would observe that we are right now living in an Ayn Rand novel.’”

Critics point out that there is no such thing as a free market or objectively rational self-interest, arguing instead that the market is inescapably skewed toward policy-makers’  beliefs and values — i.e., their particular interpretations of what “self-interested” behavior looks like.[1] As a result, economic policy always comes laden with ethical and moral beliefs about “good” vs. “bad” outcomes, which the not-so-free market then dutifully delivers:

“Milton Friedman argued that competition between big businesses suffices to safeguard the public interest, but in practice it is almost always insufficient, especially where there is collusion among the players to safeguard their market dominance – and their political influence.

“Free-market economists have an unwarranted faith in the capacity of price adjustments to produce technological changes in production and patterns of consumer demand. Their theories imply that the price system has infinite capacity to shape sustainable outcomes.

“But if the self-interested market behaviours continue to seek an unchanged goal – more personal incomes with which to purchase more material goods – ultimately they cannot be fulfilled.

 “Ultimately, the short-term self-interested economic arrangements are not sustainable anyway. As the US economist Kenneth Boulding once said: “Anyone who believes that exponential growth can go on forever in a finite world is either a madman or an economist”.

“Economic inequalities also predictably widen where self-interested market behaviours dominate. Capital makes capital, while those without capital often remain consigned to poverty. Certainly, the very rich have become notably much wealthier during the last three decades while neoliberal ideologies and policies have been dominant. In the absence of strong unions and governments committed to some degree of egalitarian redistribution, the unequalising tendency is inexorable. The result is predictably unhappier societies that experience a higher incidence of social problems, as empirical research complied by Richard Wilkinson and Kate Pickett clearly demonstrates.

“Something has to give. An economic system that rewards amoral self-interest creates economic instability, fractures economic insecurity, fosters concentrations of economic power, exacerbates economic inequality and violates ecological sustainability. So much for the self-regulating market economy!

“There is currently much talk of ‘social responsibility’ in business and of ‘triple bottom line accounting’ that emphasises the use of social and environmental criteria, as well as a financial criterion, in assessing business performance… Indeed, businesses developing reputations for responsible behaviours may reap benefits in the form of worker and customer loyalty. But unless and until ethical behaviours become integral to how markets function – by directly affecting ‘shareholder value’, for example – it is hard to see the overall effect as much more than window dressing for ‘business as usual’.”

Oh, The Morality: Why Ethics Matters In Economics, The Conversation (in partnership with the University of Sydney) (March 22, 2012)

More on ethics and economics next time.

[1] For more on whether the market is truly “free,” see this article and this one. Or if you prefer, here’s a short video and here’s a TEDX talk.

Archeconomics

archangelI made up the term “archeconomics.” I’m using “arch” in the sense of “first principles” — e.g., as in “archetype.” An “arch” is the larger version of the smaller expressions of itself — e.g., not just a villain but an arch-villain, not just an angel but an archangel. Life goes big when an arch-something is at work:  experience expands beyond circumstance, meaning magnifies, significance is exaggerated.

Archeconomics is therefore the larger story behind economics.

I ended last week’s post by referring to the larger story behind the rentier economy. As usually happens when I’m on a research trail, several commentaries have appeared in my various feeds lately that look beyond the usual opinionated mash of current events and instead address over-arching ideas and issues. All of them deal in one way or another with the current status and possible future of the liberal worldview — an arch-topic if there ever was one.

The term “liberal” in this context doesn’t refer to political liberal vs. conservative, but rather to historical liberalism, which among other things gave us post-WWII neo-liberal economics. Mega-bestselling author Yuval Noah Harari describes this kind of liberalism in his latest book 21 Lessons for the 21st Century:

“In Western political discourse the term “liberal” is sometimes used today in a much narrower sense, to denote those who support specific causes such as gay marriage, gun control, and abortion rights. Yet most so-called conservatives also embrace the broad liberal worldview.

“The liberal story cherishes human liberty as its number one value. It argues that all authority ultimately stems from the free will of individual humans, as expressed in their feelings, desires, and choices. In politics, liberalism believes that the voter knows best. It therefore upholds democratic elections. In economics, liberalism maintains that the customer is always right. It therefore hails free-market principles. In personal matters, liberalism encourages people to listen to themselves, be true to themselves, and allow their hearts — as long as they do not infringe on the liberties of others. This personal freedom is enshrined in human rights.”

If you read Harari’s books Sapiens and Homo Deus. you have a sense of what you’ll find in 21 Lessons, but I found it worth reading on its own terms. Two recent special magazine editions also take on the fate of liberalism:  Is Democracy Dying? from The Atlantic andA Manifesto for Renewing Liberalism” from The Economist. The titles speak for themselves, and both are offered by publications with nearly two centuries of liberal editorial perspectives.

Another historical liberal offering from a conservative political point of view is “How Trumpism Will Outlast Trump,” from Time Magazine. Here’s the article’s précis:

“These intellectuals are committed to a new economic nationalism … They’re looking past Trump … to assert a fundamental truth: whatever you think of him, Donald Trump has shown a major failing in the way America’s political parties have been serving their constituents. The future of Trump’s revolution may depend on whether this young group can help fix the economy.”

Finally, here’s a trio of offerings that invoke environmental economics — the impact  of the global ecology on global economics being another archeconomics topic. The first is a scientific study published last week that predicted significant environmental degradation within a surprisingly short time. Second is an article about the study that wants to know “Why We Keep Ignoring Even the Most Dire Climate Change Warnings.” Third is last week’s announcement that the winner of this year’s Nobel Prize in Economics is an environmental economist.

Some or all of those titles should satisfy if you’re in the mood for some arch- reading.

Next time, we’ll return to plain old economics, with a look at how the low income social strata is faring in all the dust-up over rentiers and economic inequality, robotcs and machine learning, and the sagging paycheck going to human labor.

The Great Gatsby Lawyer

How okay are we, really, with the right of everyone (a) to make as much money as they want, and (b) to spend it any way they like? If we would limit (a) or (b) or both, then how and why?

Consider for a moment what your (a) and (b) responses have been to the upward mobility stories we’ve looked at so far:  Richard Reeves, Matthew Stewart, Steven Brill. Travie McCoy. David Boies, Eric and I. Now consider this story from an article in Above the Law:

“[P]ersonal injury attorney Thomas J. Henry threw a lavish bash to celebrate his son, Thomas Henry Jr.’s, 18th birthday. And the price tag for the Gatsby-mixed-with-burlesque-themed fête? A cool $4 million.

“To rack up such a hefty bill, the event had lots of performers which included showgirls, aerial performers, art installations, and contortionists (oh my!). Plus, there were musical performances and celebrity guests.

“And don’t think the over-the-top party was the only gift the birthday boy received:

“The star of the party, who sat on a throne-like chair when he wasn’t dancing, was given a fully loaded blue Ferrari, an IWC Portugieser Tourbillion watch and a custom-made painting from Alec Monopoly.

“Henry’s work as a trial attorney is obviously pretty lucrative. The big payouts he’s been able to secure for his clients have made him a member of the Multi-Million Dollar Advocates Forum.[1]

“Henry is known for throwing giant parties. Just last year, he spent $6 million for his daughter’s quinceañera. I guess we know which one is really daddy’s favorite.”

The writer telegraphs her attitude about the story with the article’s tone and with the understated lead line, “this seems extreme.” Apparently she would cast a vote for limitations on (b). When I’ve shared the story with friends, the response is usually stronger than “this seems extreme.”

I wonder why. Maybe it’s because this looks like a case of conspicuous consumption, which never goes down well. Economist/ sociologist Thorstein Veblen coined the term in his 1889 book, The Theory of the Leisure Class, to describe how the newly prosperous middle class were buying things to communicate their move up the social ladder. The neighbors were rarely impressed — that is, until they made their own purchases, and then the game turned into keeping up with Joneses.

The conspicuous consumption shoe might fit here:  Mr. Henry’s website tells a bit of his upward mobility story — German immigrant, raised on a farm in Kansas, etc. Or maybe there’s something going on here that transcends his personal story. In that regard, the term “affluenza” comes to mind.

“The term “affluenza” was popularized in the late 1990s by Jessie O’Neill, the granddaughter of a past president of General Motors, when she wrote the book “The Golden Ghetto: The Psychology of Affluence.” It’s since been used to describe a condition in which children — generally from richer families — have a sense of entitlement, are irresponsible, make excuses for poor behavior, and sometimes dabble in drugs and alcohol.”

From an article by Fox News. See also these descriptions from CNN and New York Magazine.

Definitions of the term come loaded with their own biases, judgments, and assumptions. This is from Merriam-Webster:

Affluenza: the unhealthy and unwelcome psychological and social effects of affluence regarded especially as a widespread societal problem: such as

feelings of guilt, lack of motivation, and social isolation experienced by wealthy people

extreme materialism and consumerism associated with the pursuit of wealth and success and resulting in a life of chronic dissatisfaction, debt, overwork, stress, and impaired relationships

And this is from the popular PBS series that came out shortly after The Golden Ghetto:

Af-flu-en-za n. 1. The bloated, sluggish and unfulfilled feeling that results from efforts to keep up with the Joneses. 2. An epidemic of stress, overwork, waste and indebtedness caused by dogged pursuit of the American Dream. 3. An unsustainable addiction to economic growth.

Affluenza teenAffluenza made quite a splash in the estate planning world where I practiced, spawning a slew of books, CLE presentations, and new approaches to legal counseling and document design. Affluenza went mainstream in 2014 with the highly-publicized trial of Ethan Couch, the “Affluenza Teen,” when a judge reduced his sentence on four counts of intoxicated manslaughter and two counts of intoxicated assault after an expert witness testified that his wealthy upbringing had left him so psychologically impaired that he didn’t know right from wrong.

For a great number of my clients, that their kids might catch affluenza was their worst nightmare.[2] Their fear suggests this consensus to Thomas Henry’s partying habits:

(a) it’s okay to make all the money you want,

(b) but it’s not okay if you use your money to make your kids a danger to themselves and to others.

I wonder — would it temper our rush to categorize and judge Mr. Henry if we knew his philanthropic history and philosophy? This is from his website:

“Mr. Henry’s overall philosophy is that helping others when you have the good fortune of being successful is not an elective decision but a mandatory decision. People who achieve success have a duty to help others.”

That statement closely mirrors the beliefs of Robber Baron Andrew Carnegie. We’ll look at that next time, along with the perceptions of other 0.01 percenters about the social responsibilities of wealth.

[1] The Forum’s website says that “fewer than 1% of U.S. lawyers are members,” which appropriately signals Thomas Henry’s position in the economic strata.

[2] I used to tell my clients that if I had a dime for every time a client said, “I don’t want my money to ruin my kids,” I would have been a rich man. That was hyperbole, of course:  a dime each time wouldn’t have made me rich. On the other hand, a million dollars each time might have made me a billionaire. A billion is a BIG number.

Rebel Without A Cause

Continuing with David Graeber’s analysis of Eric’s job experience from last time:

“What drove Eric crazy was the fact that there was simply no way he could construe his job as serving any sort of purpose.

“To get a sense of what was really happening here, let us imagine a second history major–we can refer to him as anti-Eric — a young man of a professional background but placed in exactly the same situation. How might anti-Eric have behaved differently?

“Well, likely as not, he would have played along with the charade. Instead of using phony business trips to practice forms of self-annihilation, anti-Eric would have used them to accumulate social capital, connections that would eventually allow him to move on to better things. He would have treated the job as a stepping-stone, and this very project of professional advancement would have given him a sense of purpose.

“But such attitudes and dispositions don’t come naturally. Children from professional backgrounds are taught to think like that from an early age. Eric, who had not been trained to act and think this way, couldn’t bring himself to do it.”

James-Dean-Rebel-Without-A-Cause-Movie-PosterLike Eric, I couldn’t bring myself to do it either — although it was not so much that I couldn’t, it was more a case of not knowing how. I was bright enough, had a knack for the all-important “likeability factor” with clients and colleagues, and worked with lots of clients and other professionals who were members of the Red Velvet Rope Club. But like Eric, I remained on the outside looking in, and I spent a lot of time feeling envious of others who fit in so easily. Those dynamics dogged the early years of my law career. In time, a general sense of inadequacy became depression, which I compensated for by nursing a rebel-without-a-cause attitude.

My experience didn’t have to be that way. Consider, for example, the story of super-lawyer David Boies. Like Eric and me, Boies was also born to working class parents and grew up in a farming community, but that’s where the resemblance ends. Chrystia Freeland introduces him this way in her book Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else (2012):

“As the world economy grows, and as the super-elite, in particular, get richer, the superstars who work for the super-rich can charge super fees.

“Consider the 2009 legal showdown between Hank Greenberg and AIG, the insurance giant he had built. It was a high-stakes battle, as AIG accused Greenberg, through his privately-held company, Starr International, of misappropriating $4.3 billion worth of assets. For his defense, Greenberg hired David Boies. With his trademark slightly ratty Lands’ End suits (ordered a dozen at a time by his office online), his Midwestern background, his proud affection for Middle American pastimes like craps, and his severe dyslexia (he didn’t learn how to read until he was in the third grade), Boies comes across as neither a superstar or a member of the super-elite. He is both.

“Boies and his eponymous firm earned a reputed $100 million for the nine-month job of defending Greenberg. That was one of the richest fees earned in a single litigation. Yet, for Greenberg, it was a terrific deal. When you have $4.3 billion at risk, $100 million — only 2.3 percent of the total — just isn’t that much money. Further sweetening the transaction was the judge’s eventual ruling that AIG, then nearly 80 percent owned by the U.S. government, was liable for up to $150 million of Greenberg’s legal fees, but he didn’t know that when he retained Boies.”

What did Boies have that Eric and I didn’t?

Well, um, would you like the short list or the long?

Boies is no doubt one of those exceptionally gifted and ambitious people who works hard enough to get lucky. I suspect his plutocrat switch was first activated when his family moved to California while he was in high school, and from there was exponentially supercharged by a series of textbook upwardly mobile experiences:  a liberal arts education at Northwestern, a law degree from Yale, an LLM from NYU, joining the Cravath firm and eventually becoming a partner before leaving to found his own firm.

That’s impressive enough, but there’s more to his story:  somehow along the way he was transformed into the kind of person who belongs — in his case, not just to the 9.9% club, but to the 0.1 %. Yes, his human capital was substantial, but it was his personal transformation that enabled him to capitalize (I use that term advisedly) on the opportunities granted only by social capital.

And now, if the 9.9 percenters we heard from a couple weeks back are correct, the pathway he followed is even more statistically rare (if that’s even possible) than when he travelled it — in part because of an economic principle that’s at least as old as the Bible.

We’ll talk about that next time.

Eric and Kevin’s Most Excellent Career Adventures

thermos

 

lunch bucket

 

David Graeber’s book Bullshit Jobs is loaded with real-life job stories that meet his definition of “a form of employment that is so completely pointless, unnecessary, or pernicious that even the employee cannot justify its existence even though the employee feels obliged to pretend that this is not the case.” One of those stories rang a bell:  turns out that “Eric” and I had the same job. The details are different, but our experiences involved the same issues of social capital and upward mobility.

Eric grew up in a working class neighborhood, left to attend a major British university, graduated with a history major, landed in a Big 4 accounting firm training program, and took a corporate position that looked like an express elevator to the executive suite. But then the job turned out to be… well, nothing. No one would tell him what to do. He showed up day after day in his new business clothes and tried to look busy while trying in vain to solve the mystery of why he had nothing to do. He tried to quit a couple times, only to be rewarded with raises, and the money was hard to pass up. Frustration gave way to boredom, boredom to depression, and depression to deception. Soon he and his mates at the pub back home hatched a plan to use his generous expense account to travel. gamble, and drink.

In time, Eric learned that his position was the result of a political standoff:  one of the higher-ups had the clout to fund a pet project that the responsible mid-level managers disagreed with, so they colluded to make sure it would never happen. Since Eric had been hired to coordinate internal communication on the project, keeping him in the dark was essential. Eventually he managed to quit, kick his gambling and drinking habits, and take a shot at the artistic career he had envisioned in college.

My story isn’t quite so… um, colorful… but the themes are similar. I also came from a strong “work with your hands” ethic and was in the first generation of my family to go to college, where I joined the children of lawyers, neurosurgeons, professors, diplomats, and other upper echelon white collar professionals from all 50 states and several foreign countries, At the first meeting of my freshmen advisory group, my new classmates talked about books, authors, and academic disciplines I’d never heard of. When I tackled my first class assignment, I had to look up 15 words in the first two pages. And on it went. Altogether, my college career was mostly an exercise in cluelessness. But I was smart and ambitious, and did better than I deserved.

Fast forward nine years, and that’s me again, this time signing on with a boutique corporate law firm as a newly minted MBA/JD. I got there by building a lot of personal human capital, but my steel thermos and metal lunch bucket upbringing was still so ingrained that a few weeks after getting hired I asked a senior associate why nobody ever took morning and afternoon coffee breaks. He looked puzzled, and finally said, “Well… we don’t really take breaks.” Or vacations, evenings, weekends, or holidays, as it turned out.

A couple years later I hired on with a Big 4 accounting firm as a corporate finance consultant. My first assignment was my Eric-equivalent job:  I was assigned to a team of accountants tasked with creating a new chart of accounts for a multinational corporation and its subsidiaries. Never mind that the job had nothing to do with corporate finance…. Plus there were two other little problems:  I didn’t know what a chart of accounts was, and at our first client meeting a key corporate manager announced that he thought the project was ridiculous and intended to oppose it. Undaunted, the other members of the consulting team got to work. Everybody seemed to know what to do, but nobody would tell me, and in the meantime our opponent in management gained a following.

As a result, I spent months away from home every week, trying to look busy. I piled up the frequent flyer miles and enjoyed the 5-star accommodations and meals, but fell into a deep depression .When I told the managing partner about it, he observed that, “Maybe this job isn’t a good fit for you.” He suggested I leave in two months, which happened to be when our consulting contract was due for a renewal. Looking back, I suspect my actual role on the team was “warm body.”

Graeber says that, at first blush, Eric’s story sounds like yet one more bright, idealistic liberal arts grad getting a real-world comeuppance:

“Eric was a young man form a working-class background.. fresh out of college and full of expectations, suddenly confronted with a jolting introduction to the “real world.”

“One could perhaps conclude that Eric’s problem was not just that he hadn’t been sufficiently prepared for the pointlessness of the modern workplace. He had passed through the old educational system … This led to false expectations and an initial shock of disillusionment that he could not overcome.”

Sounds like my story, too, but then Graeber takes his analysis in a different direction:  “To a large degree,” he say, “this is really a story about social class.” Which brings us back to the issues of upward mobility and social capital we’ve been looking. We’ll talk more about those next time.

In the meantime, I can’t resist a Dogbert episode:

Dilbert

The End of Horatio Alger

“I know perfectly well that men in a race run at unequal rates of speed. I don’t want the prize given to the man who is not fast enough to win it on his merits, but I want them to start fair.”

Teddy Roosevelt

horatio algerIn economic terms, a fair start is about equal opportunity. There’s no more enduring version of that particular ideal than the rags-to-riches story codified into the American Dream by Horatio Alger, Jr. during the Gilded Age of Andrew Mellon, John D. Rockefeller, Cornelius Vanderbilt, Andrew Carnegie, and the rest of the 19th Century Robber Barons. If they can do it, so can the rest of us, given enough vision, determination, hard work, and moral virtue — that was Alger’s message. And according to Roughrider Teddy and politicians like him, government’s job is to guarantee equal opportunity for all, then get out of the way and let the race to riches begin.

These days, however. it seems as though the notion of a fair start is a thing of the past — so says Richard V. Reeves in his book Dream Hoarders, which we looked at briefly last time. Reeves begins by confessing that his disenchantment over the demise of the Horatio Alger ideal will no doubt seem disingenuous because he didn’t grow up American and is now a member of the Red Velvet Rope Club himself:

As a Brookings senior fellow and a resident of an affluent neighborhood in Montgomery County, Maryland, just outside of DC, I am, after all, writing about my own class.

I am British by birth, but I have lived in the United States since 2012 and became a citizen in late 2016. (Also, I was born on the Fourth of July.) There are lots of reasons I have made America my home. But one of them is the American ideal of opportunity. I always hated the walls created by social class distinctions in the United Kingdom. The American ideal of a classless society is, to me, a deeply attractive one. It has been disheartening to learn that the class structure of my new homeland is, if anything, more rigid than the one I left behind and especially so at the top.

My new country was founded on anti-hereditary principles. But while the inheritance of titles or positions remains forbidden, the persistence of class status across generations in the United States is very strong. Too strong, in fact, for a society that prides itself on social mobility.”

Reeves also wrote a Brookings Institute monograph called Saving Horatio Alger: Equality, Opportunity, and the American Dream, in which he said the following:

Vivid stories of those who overcome the obstacles of poverty to achieve success are all the more impressive because they are so much the exceptions to the rule. Contrary to the Horatio Alger myth, social mobility rates in the United States are lower than in most of Europe. There are forces at work in America now — forces related not just to income and wealth but also to family structure and education – that put the country at risk of creating an ossified, self-perpetuating class structure, with disastrous implications for opportunity and, by extension, for the very idea of America.

The moral claim that each individual has the right to succeed is implicit in our “creed,” the Declaration of Independence, when it proclaims “All men are created equal.”

There is a simple formula here — equality plus independence adds up to the promise of upward mobility — which creates an appealing image: the nation’s social, political, and economic landscape as a vast, level playing field upon which all individuals can exercise their freedom to succeed.

Many countries support the idea of meritocracy, but only in America is equality of opportunity a virtual national religion, reconciling individual liberty — the freedom to get ahead and “make something of yourself” — with societal equality. It is a philosophy of egalitarian individualism. The measure of American equality is not the income gap between the poor and the rich, but the chance to trade places.

The problem is not that the United States is failing to live up to European egalitarian principles, which use income as a measure of equality. It is that America is failing to live up to American egalitarian principles, measured by the promise of equal opportunity for all, the idea that every child born into poverty can rise to the top.

There’s a lot of data to back up what Reeves is saying. See, e.g., this study from Stanford, which included these findings:

  • Parents often expect that their kids will have a good shot at making more money than they ever did.
  • But young people entering the workforce today are far less likely to earn more than their parents when compared to children born two generations before them, according to a new study by Stanford researchers.
  • A new study co-authored by Stanford economist Raj Chetty describes an economic portrait of the fading American Dream; growing inequality appears to be the main cause for the steady decline

Reeves and Stanford’s researchers aren’t the only ones who feel that way. We’ll hear from a couple others next time.