By the way: I’m doing book tour appearances in Chicago this week to promote my anthology Noticing: dinner on Thursday evening September 26th downtown and a speaking event on Friday night September 27th on Chicago’s north lakefront.
Mr. Chetty is an economics professor at Harvard and the director of Opportunity Insights.
At the start of her debate with Donald Trump, Kamala Harris spoke about building an “opportunity economy.” What does that mean, and how can we create one?
I’ve been studying the science of economic opportunity for many years with my Harvard-based group, Opportunity Insights. We’ve analyzed all sorts of data, from anonymized tax returns to school-district databases and the social networks of hundreds of millions of Americans.
I’ve been studying what Harvard’s brilliant data maestro Raj Chetty could be doing better ever since the day he began publishing his findings based on confidential federal documents, such as your IRS 1040 returns.
An opportunity economy prioritizes equality of opportunity rather than equality of outcomes. In such an economy, we all have the chance to achieve our potential, even if some people ultimately end up earning more than others. Right now, opportunity is not equally distributed in America: People’s chances of achieving success vary widely depending upon their parents’ income, racial background and ZIP code.
While views about income redistribution using taxes are divided, equality of opportunity is a principle that appeals to Americans across the political spectrum. Most people agree that it’s unfair if your fate is determined by the family you happen to be born into or where you grow up.
But equality of opportunity is not just about fairness; it’s also about increasing economic growth and innovation. By giving everyone a chance to succeed, we better harness our talents to fill critical work force shortages, make new discoveries and start new businesses.
This is why an opportunity economy has real political promise as a unifying goal for Americans.
Ms. Harris has begun to sketch out a federal program for this kind of economy. To help fill out her plan, and for voters curious to hear more about what it might mean, this is what we’ve learned about how to make this vision a reality for many Americans.
A successful opportunity economy is built around three core themes. First, start in childhood. Research has shown that the roots of opportunity start at birth.
Or up to 8 months and 29 days before birth. But not a moment sooner!
Children who grow up in thriving environments — with good health and nutrition, high-quality education and housing, stable families and positive social influences — are much better positioned to achieve success later in life.
Every extra year of exposure to a better environment during childhood improves outcomes later in life. By the time people start working, it is much harder to change trajectories. It’s like starting to exercise to improve your health after you retire — it can still help, but it’s more effective to start earlier.
Second, focus on communities, not individuals, as the unit of change. Children’s chances of rising out of poverty vary dramatically across places. In some parts of America — such as Boston and Brownsville, Tex. — opportunity is plentiful, with many children from low-income families rising to the middle class and beyond when they grow up. In others, including Atlanta and Philadelphia, children from low-income families tend to remain in poverty throughout their lives.
In other words, try not to be born into an African-American family.
Economic mobility varies substantially even within cities. When children move to better neighborhoods, especially earlier in childhood, their outcomes improve significantly, even if their own parents’ financial status remains unchanged.
Chetty’s best piece of advice is one he’d get cancelled for if he was explicit about it: Black mothers with sons, move to a white exurb with no black youth gangs ASAP!
Likewise, when conditions in a community improve — for example, if the fraction of parents working in an area increases — children do better, even if nothing changes in their own families.
Try to predict where the next technological boom will be, like fracking in North Dakota in 2010. If you get really good at predicting booms and busts, you won’t even have to live in North Dakota, you can open a hedge fund in Greenwich, CT.
… A local example of making opportunity an explicit focus is the city of Charlotte, N.C., which in a 2014 research report ranked 50th of the 50 largest cities in America in kids’ chances of rising out of poverty. When that data came out, the city responded by bringing together business leaders, nonprofits and government to form a commission tasked with creating opportunity. It produced numerous investments in childhood programs and changes in local policies and hiring practices, which have in part contributed to a turnaround. Charlotte is now among the cities in which economic mobility is rising most quickly in America — demonstrating that opportunity can change.
Imagine a similar focus on creating an opportunity economy, but nationally. It could transform the lives of so many Americans and serve as a unifying platform that will propel growth and progress for us all.
Except that Chetty’s Charlotte example is obviously bogus, as I pointed out this summer:
Will the mainstream media ever wake up to the Harvard economist's significant (if boring) methodological shortcomings?
Steve Sailer
Jul 26, 2024
∙ Paid
… Chetty’s data from 2011-12 hated Charlotte, North Carolina, which ranked dead last among major metro areas in social/economic upward mobility since the 1990s.
What was Charlotte doing wrong? Was there something in the water?
Civic leaders in Charlotte were dumbfounded by Chetty’s discovery and vowed to Do Things. By 2017 they were Starting Programs.
Today, Chetty published a new paper extending his data collection up through 2019, and he’s now looking at 57 million people born from 1978 through 1992. (Chetty’s awesome databases do not have the usual social science problems with adequate sample sizes because he uses almost the entire universe.)
I’ll be looking over his data in depth, but one of his topline findings is that Charlotte has much improved in upward mobility since they first got the bad news from Chetty a decade ago. …
Chetty’s goal was to discover local solutions for how to augment economic growth among children. But Chetty didn’t publish anything until the youngest people in his new study (those born in 1992) were age 21 in 2013, and Charlotte’s big initiatives came in 2017. Did those 2017 initiatives fix the long-term problems of Charlotte’s 25 year olds by the time they were 27 in 2019?
Really?
Why did Charlotte fare so poorly in Chetty’s previous study comparing Mecklenburg County’s 2nd generation incomes in 2011-2012 to its 1st generation incomes in the 1990s?
This brings up the the slightly boring issue that much of the trouble with Chetty’s results are not due to political bias but to the fact that, while he solved a remarkable number of methodological issues in his project, he didn’t solve all of them.
One major remaining problem is that he hasn’t figured out how to deal with temporary local booms and busts. This generates bogus Findings for not very numerate journalists to obsess over.
Why, for example, did the Dakotas do so well in his 2011-2012 measurement of income relative to the 1990s?
Was it due to their superior long term culture?
Perhaps.
But another reason is the development of fracking technology in the early 21st Century set off an unexpected but spectacular oil and gas boom in North Dakota.
Chetty’s entire project is based on his assumption that there are long term differences between localities that affect economic equality over the generations. I’m sure there are, and I’d like to know what they are. So I strongly appreciate Chetty’s efforts.
But I’m also aware that there is inevitably a huge amount of statistical noise affecting his results.
For example, it’s simple to explain why Charlotte looked worst in Chetty’s assessment of 2011-2012 incomes (even though virtually nobody else noticed it): Charlotte got absolutely hammered by the 2008 housing crash.
Around the turn of the century, Charlotte was one of the retail banking-mortgage hubs of the U.S. Local bank Wachovia had grown to be one of the four largest in the country by 2008. But then it suddenly failed and the government brokered its acquisition by Wells Fargo.
Similarly, home construction had been a big business in the Carolinas when the housing bubble burst.
Other local industries included hardwood lumbering and furniture manufacture. The latter was damaged by deindustrialization and both were hurt by the Great Recession.
Also, the Carolinas benefited from the golf boom of the 1990s.
Here’s the Charlotte metro area’s unemployment rate:
As I wrote in 2015 about why the Carolinas did so badly under Chetty’s methodology:
An extremely curious aspect of Chetty’s list is that many of the supposedly Worst Places in America to Raise Children had fast-growing populations between 2000 and 2010, often due to a mix of black, Hispanic, and white newcomers pouring in. For example, the third most economically depressing county according to Chetty, behind only two Indian reservations, was Forsyth County, North Carolina, whose county seat is Winston-Salem. Yet, Forsyth’s population has grown 19% since 2000, much of that black and Latino newcomers.
If Forsyth County, and the Carolinas in general according to Chetty’s results, are such hellholes, why did so many families move there? What does Chetty know that all these families didn’t know?
Well, he knows what happened in 2008. Chetty’s hindsight is 20-20.
Let’s look at the whitest county among his Worst 25, Horry County, South Carolina, which is on the Atlantic just south of the North Carolina state line. We modern Americans can think more objectively about relatively white places like this Golf Capital of the World. Horry is home to the immense Myrtle Beach resort that features at least 91 golf courses on its Grand Strand. Despite Chetty’s assertion of its awfulness, Horry has grown 52 percent in population since 2000.
So, what was it about Myrtle Beach that made it bad for the next generation? Does golf undermine the moral fiber of youth?
Nah. The example of Myrtle Beach’s ups and downs just makes clear a recurrent problem with Chetty’s methodology: even though he’s claiming to find long-term verities about how best to organize communities, his findings are extremely susceptible to temporary local booms and busts. Chetty’s 1996-2000 baseline era represented a historic golf resort construction boom in Horry County, with unemployment dropping as low as 2.5 percent in 1998-99. In contrast, Chetty’s 2011-2012 measurement era was part of the collapse of golf course construction, with unemployment never dropping below 10 percent in Horry County from 2009-2013.
Not surprisingly, Myrtle Beach’s endless growth and low cost of living brought in large numbers of people in the 1990s for construction and tourism jobs. They did well in 1996-2000, but their kids wound up getting the fuzzy end of the lollipop in 2011-2012. But, lately, rich Chinese looking to buy American golf courses to launder their ill-gotten gains have discovered Myrtle Beach, so the future looks brighter than the recent past.
Golf has been doing mildly better since covid four years ago made its form of outdoor recreation fashionable again.
What will the future bring?
Don’t ask me. If I knew I’d be rich.
To sum up, blue collar Americans were doing well building golf condos in Myrtle Beach in the 1990s. But then golf went out of fashion, so the construction boom collapsed. But now Myrtle Beach is coming back because Chinese Communist Party white-collar criminals are really getting into golf.
In other words, one of Chetty’s big lessons is that if you are a blue collar worker, you should move to a county that will be booming a decade and a half from now for reasons you can”t possibly anticipate. …
While Chetty’s lack of insight into his results is in part due to his not wanting his fabulous career to be cancelled by the Woke, his more basic problems such as this are less due to political bias than to the fact that he hasn’t yet fully solved all the myriad technical challenges he’s taken on. He shouldn’t be ashamed of this, but the prestige press should remind him of his shortcomings.
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I always think how consistent these finding are with Judith Rich Harris' group socialization hypotheses. The notion that is the hard to measure variance that exists in the community and peer groups that make the biggest difference to human outcomes (after genetics of course).
Greenwich, Connecticut is in CT, not CN!
Signed, a CT resident
I always think how consistent these finding are with Judith Rich Harris' group socialization hypotheses. The notion that is the hard to measure variance that exists in the community and peer groups that make the biggest difference to human outcomes (after genetics of course).