Discussing challenges related to social mobility, Raj Chetty, the William A. Ackman Professor of Public Economics at Harvard University, delivered the Presidential Lecture on April 27 at the Charles B. Wang Center. The event was held in conjunction with the Gujavarty Seminar on Leadership and Values and the Mattoo Center for India Studies.
Stony Brook University President Maurie McInnis introduced Chetty and informed the crowd that this was Chetty’s return to campus, as he spent time at Stony Brook as a young child when his father was a visiting professor in the Department of Economics in the late 1980s.
Chetty is the author of a now famous revolutionary research study that created a social mobility index to measure intergenerational mobility. The study ranked Stony Brook among the top 10 colleges and universities in the nation whose students begin college at the bottom fifth of income distribution and then go on to earn in the top one-fifth of income distribution.
Addressing an engaged crowd, Chetty began his talk by emphasizing the importance of Stony Brook, a campus that plays a key role in providing pathways to the American dream for many people. In order to make the American dream realistic, Chetty said, we must focus on how we can make changes in our own communities and our own institutions to increase economic opportunity.
Chetty’s research group uses data to determine what percent of the population achieves the American dream by measuring the fraction of children who go on to earn more than their parents by measuring income in their mid-30s for parents and children and adjusting for inflation.
“In the mid-1900s, it was a virtual guarantee that you were going to achieve the American dream of moving up relative to your parents,” Chetty said. “But if you look at what has happened over time, you can see that there’s been a dramatic decline of the American dream such that children born in the middle of the 1980s are turning 30 around now, when we’re measuring their incomes as adults. It’s become essentially a 50/50 shot, a coin flip, as to whether you’re going to achieve the American dream.”
It is this trend that serves as the basis for much of Chetty’s research, focused on what is causing the fading of the American dream and how we can restore the American dream moving forward. His research group uses the tools of modern “big data” to help better understand important economic and social policy questions, and to “go beyond the national picture to disaggregate the data in much finer ways to understand the determinants of mobility and what kinds of changes we might want to make from a policy perspective to make improvements to expand opportunity going forward.”
One of his research group’s most recent studies uses data from Facebook to measure the degree of interaction between people with different income levels, and found that if a low-income person has many higher-income friends on Facebook, it is an incredibly strong predictor of economic mobility. Economic mobility is heavily driven by the environment that children grow up in from birth to roughly ages 20-22, and for low-income families, in large part driven by access to higher-income families to have the opportunity to forge these important friendships.
Access to higher education is another key touch point for increasing economic mobility. “If you happen to be born to parents in the top 1% of the income distribution, there is virtually a 100% chance you will go to college in the U.S. If you happen to be born to parents at the bottom of the income distribution, there is only a 30% chance you’re going to go to college,” Chetty said.
In terms of social mobility, the decision is more than just whether or not to go to college, but where to go to college. While some elite, highly selective private colleges show a large portion of low-income students who achieve the American dream, the same schools enroll only a very small number of low-income students. Stony Brook, conversely, has a significantly more diverse student body with nearly 20% of students coming from the bottom 20% income level, and the fraction of low-income students who reached the top 20% income level is not drastically different from elite, highly selective private colleges.
Chetty discussed the impact of increasing opportunity to improve welfare for society in general. His group looked at patterns of innovation in the U.S. by studying information from patent records to look at who became an inventor in America, and plotting the probability of becoming an inventor that is having a patent versus parent income. The group found that children born to rich parents are far more likely to become an inventor in America than if you happen to be born to lower income parents, and the consequence of that is a phenomenon they dubbed ‘lost Einsteins.’
“We estimate based on this analysis, that if women, kids from underrepresented minority backgrounds, and low-income families were to invent at the same rate as high income white men currently do, we would have four times as many inventors in America as we currently do,” he said. “That would also tremendously benefit all the rest of us with new drugs, new discoveries, and new technologies that could potentially improve human welfare quite a bit.”
“I’m hopeful that we’re going to have more to say on what colleges can do to increase diversity and have greater impacts on economic mobility, what kinds of changes we can make in the elementary education system, in neighborhoods and so on,” Chetty concluded. “And I am hopeful that there will be a receptive audience and policymakers, leaders of institutions and so forth to take that information and make changes going forward.”
— Beth Squire