Don't the selection effects overthrow the whole analysis? Garment workers who drop everything to make for America are entrepreneurial and comparing them to the median American is silly, because they've been selected from the tail of their home country's risk distribution. There's no inspirational story here, because populations aren't going to up and change their risk levels.
In fact, it's possible (likely?) that America already has a right-shifted risk distribution compared to the home country. Sitting as the median American, this seems identical to telling me to be more like 'those guys in Silicon Valley', but it doesn't explain why I have to do that now, when it wasn't required before. Perhaps the story there is lethargy, but comparing the 50th risk percentile American to the 99th percentile Bangladeshi doesn't seem like the way to show it.
The point is that yeah the selection effects are the cause here, but asking the average American to be, on the margin, more risk tolerant and less complacent, is entirely possible and has high returns for them. Immigrants show that moving in that direction is both possible and lucrative. So comparing them is kind of like trying to light a fire under them, and also show that the American dream is still possible if you change your behaviour.
Immigrants aren't really proof this is possible though.
(1) We don't have evidence that they *changed* their risk tolerance over time. If theirs was innate, we can't use it to say Americans should change, because we haven't shown such change can take place.
(2) Maybe (and I think this is likely) some people are more agential than others, making them more capable of drastic change. Immigrants are selected for this, in addition to risk tolerance.
Well this gets back to my philosophy. If someone can do something and another person says they can’t, my prior that they are just riding off excuses is like 95%. Saying that risk tolerance is simply innate and thereby absolving natives of any blame seems wrong to me. Add to that the diminishing mobility over time that’s been shown in the data above, (and probably diminishing risk tolerance) and it seems like something that can indeed be changed. Especially because of the point I made with new technologies smoothing over the risky bumps of economic mobility.
Cursory digging into risk tolerance does seem to suggest it is responsive to structural factors in the economy and that it tends not to change much within a given person's life. It also doesn't seem to be declining over the time period in the Chetty data.
So I'm down to blame Americans, but I'd not call it a collective moral failure--the best explanation is collective political failure. Chetty finds putting the same people in different neighbourhoods drastically changes mobility, which doesn't comport with an individual laziness account; but much of what makes neighbourhoods different is rooted in political decisions.
Another example is growth rates: we used to have higher growth across the economy, meaning that those with the same risk tolerance as today would expect higher returns in the past, making it easier to catch their parents, financially-speaking. We then entered a low-growth political era, and mobility declined. This is coherent without stipulating population level changes in risk tolerance.
Sorry in the above comment I meant geographic mobility. That has gone down for natives precipitously. I would think both of us would find it highly intuitive that this trend would cause lower economic mobility, but add to that the close link to your point about chetty. Less geographic mobility over time means less new neighbors. So, if both of accept the causal link between geographic mobility and economic mobility, the question then turns to why geographic mobility has gone down so much, even though technology makes it easier then ever to move. I’m at work right now so I can’t research the answer but the first thing that comes to mind is that Americans have become more complacent and risk averse. But you say risk aversion hasn’t changed over time? How do we resolve this.
Moving seems more costly now. Housing prices are up, especially in high cross-class opportunity urban areas; two earners need to find new jobs instead of one; and the opportunity gains to children might be externalities that movers don't know how to price in to their calculations.
One nice thing I remember about the Chetty research is that it wasn't defeatist. There were a number of ideas about what had caused the decline in mobility, including a decline in cross-class friendships. This in turn seems driven by the way our neighbourhoods have developed. Relocation vouchers might improve this, but the cross-class relationships in a given city are hard to get a read-on prior to moving if you don't know where to look or what to ask. Another path is increasing membership in third places, like churches and clubs, since the Chetty research plays nicely with the Putnam research.
Don't the selection effects overthrow the whole analysis? Garment workers who drop everything to make for America are entrepreneurial and comparing them to the median American is silly, because they've been selected from the tail of their home country's risk distribution. There's no inspirational story here, because populations aren't going to up and change their risk levels.
In fact, it's possible (likely?) that America already has a right-shifted risk distribution compared to the home country. Sitting as the median American, this seems identical to telling me to be more like 'those guys in Silicon Valley', but it doesn't explain why I have to do that now, when it wasn't required before. Perhaps the story there is lethargy, but comparing the 50th risk percentile American to the 99th percentile Bangladeshi doesn't seem like the way to show it.
The point is that yeah the selection effects are the cause here, but asking the average American to be, on the margin, more risk tolerant and less complacent, is entirely possible and has high returns for them. Immigrants show that moving in that direction is both possible and lucrative. So comparing them is kind of like trying to light a fire under them, and also show that the American dream is still possible if you change your behaviour.
Immigrants aren't really proof this is possible though.
(1) We don't have evidence that they *changed* their risk tolerance over time. If theirs was innate, we can't use it to say Americans should change, because we haven't shown such change can take place.
(2) Maybe (and I think this is likely) some people are more agential than others, making them more capable of drastic change. Immigrants are selected for this, in addition to risk tolerance.
Well this gets back to my philosophy. If someone can do something and another person says they can’t, my prior that they are just riding off excuses is like 95%. Saying that risk tolerance is simply innate and thereby absolving natives of any blame seems wrong to me. Add to that the diminishing mobility over time that’s been shown in the data above, (and probably diminishing risk tolerance) and it seems like something that can indeed be changed. Especially because of the point I made with new technologies smoothing over the risky bumps of economic mobility.
Cursory digging into risk tolerance does seem to suggest it is responsive to structural factors in the economy and that it tends not to change much within a given person's life. It also doesn't seem to be declining over the time period in the Chetty data.
So I'm down to blame Americans, but I'd not call it a collective moral failure--the best explanation is collective political failure. Chetty finds putting the same people in different neighbourhoods drastically changes mobility, which doesn't comport with an individual laziness account; but much of what makes neighbourhoods different is rooted in political decisions.
Another example is growth rates: we used to have higher growth across the economy, meaning that those with the same risk tolerance as today would expect higher returns in the past, making it easier to catch their parents, financially-speaking. We then entered a low-growth political era, and mobility declined. This is coherent without stipulating population level changes in risk tolerance.
Sorry in the above comment I meant geographic mobility. That has gone down for natives precipitously. I would think both of us would find it highly intuitive that this trend would cause lower economic mobility, but add to that the close link to your point about chetty. Less geographic mobility over time means less new neighbors. So, if both of accept the causal link between geographic mobility and economic mobility, the question then turns to why geographic mobility has gone down so much, even though technology makes it easier then ever to move. I’m at work right now so I can’t research the answer but the first thing that comes to mind is that Americans have become more complacent and risk averse. But you say risk aversion hasn’t changed over time? How do we resolve this.
Moving seems more costly now. Housing prices are up, especially in high cross-class opportunity urban areas; two earners need to find new jobs instead of one; and the opportunity gains to children might be externalities that movers don't know how to price in to their calculations.
One nice thing I remember about the Chetty research is that it wasn't defeatist. There were a number of ideas about what had caused the decline in mobility, including a decline in cross-class friendships. This in turn seems driven by the way our neighbourhoods have developed. Relocation vouchers might improve this, but the cross-class relationships in a given city are hard to get a read-on prior to moving if you don't know where to look or what to ask. Another path is increasing membership in third places, like churches and clubs, since the Chetty research plays nicely with the Putnam research.