Free Markets 101: The Landscape of American Opportunity

Free Markets 101: The Landscape of American Opportunity

One of the most common themes in American politics is the emphasis on preserving or restoring our role as a land of opportunity. Across the political spectrum, there is a general sense that the intergenerational promise of upward mobility is becoming harder and harder to keep.

For those on the political right, common explanations for falling opportunity and upward mobility include the expansion of the welfare state, increased anti-growth regulations such as overly burdensome regulations and minimum wage laws, and other political challenges to free enterprise over the last fifty years.

For those on the political left, a far different set of explanations is offered, including a sharp increase in wealth concentration, along with a reduction in federal government spending (“investment” in their parlance) on education, job training, and other purported drivers of mobility.

Reviewing the validity and empirical credibility of each of these explanations, I am skeptical of any arguments predicated on a falsehood. It is a longstanding myth that there has been a systematic decrease in government spending on education or that the United States’ level of education spending is abnormally low in the developed world. Quite the opposite is true. But I do not wish to simply rehash these arguments here.

Instead, I think it is useful to review and discuss insights from the most recent evidence on mobility and opportunity in America. We can learn a lot by reviewing some of the research from Harvard economist Raj Chetty and his team, which are one of the leading groups in the country addressing these questions.

The first important finding in their research is that mobility is not the same across all groups in the U.S., even among minority groups. In fact, Hispanic Americans show high levels of upward income mobility, nearly equal to White Americans, while the same is not true for Black and Native Americans. This suggests that a “one size fits all” approach to improving rates of upward mobility is neither desirable nor sufficient.

Another fascinating discovery is that the income gap between Black and White Americans is entirely driven by differences in men’s, not women’s, outcomes. This startling fact is simultaneously heartening and a cause for sadness, for while we can celebrate the advances of Black women in America, this suggests that the plight of Black men in America is even direr than is often realized. This fact again drives home the importance of nuance in both diagnosing and proposing solutions to falling income mobility.

One final finding should provide a great deal of hope to all Americans who would like to see greater opportunity and income for all of their countrymen.  Chetty’s team found that these disparate outcomes are not pre-ordained, despite decades of policy failure suggesting otherwise. For example, if Black boys move to better neighborhoods (e.g. those with lower poverty rates, lower levels of racial bias, and a higher incidence of fathers in the home), they have significantly better life outcomes. And the positive impact on their lives is not limited to higher incomes only.  Moving to a better neighborhood also leads to lower levels of incarceration in later life.

Let me reiterate here that I am not discussing or debating proposed solutions in this column, but am simply working to ensure that we all operate from the same set of facts. If we fail to offer sound and accurate diagnoses for the problems we face, we cannot hope to treat our country’s illnesses with a reasonable chance of success. Considered in their entirety, these findings suggest that falling levels of income mobility are not immutable.  The complexity of the issues involved, and the real variations in life experiences for different American communities, demand that we approach this problem with humility and nuance, qualities not often associated with the political class.

Damon Dunn writes the regular “Free Markets 101” column for “Right by the Bay”.  He is a successful real estate developer, investor and businessman, former collegiate and pro football player, and was a Hoover Institution fellow from 2011-13.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.