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The Rich Are Different: They're Luckier (How the left argues for higher taxes on the wealthy)
The New Republic ^ | 04/04/2011 | Jonathan Chait

Posted on 04/04/2011 7:40:12 AM PDT by SeekAndFind

This long attack on the unfairness of progressive taxation from the Hoover Institution by Kip Hagopian usefully embodies a lot of right-wing delusions about income inequality. It argues that a person's income is determined by three things:

America’s free enterprise system provides an environment in which the substantial majority of its citizens can realize their fullest earnings potential. Within that environment, individual economic outcomes are the product of a combination of three elements: aptitude, work effort, and choice of occupation.

Aptitude. For the purposes of this essay, aptitude is broadly defined as the capacity to produce, or to earn income. For the most part, it comes from circumstances of birth and is distributed unequally. Aptitude may be derived from innate talents (cognitive, musical, artistic, athletic, etc.) or physical attributes (appearance, dexterity, possession of senses, etc.). Or it may be acquired from lessons learned from parents and other life experiences. Aptitude emanating from circumstances of birth (either innate or acquired) can be significantly enhanced by individual effort applied to strengthening one’s skills (see “Work Effort” below). Aptitude is measured from low to high in accordance with the monetary value placed on it in the marketplace. This is a measure of earning power and is not in any way an indication of an individual’s intrinsic worth as a human being. For most people aptitude is the most significant determinant of income. But it has to be understood as capacity; aptitude does not produce income until it is combined with individual effort.

Work effort. For any given level of aptitude and occupation, work effort plays the decisive role in determining income, and in many cases may result in persons with lower aptitudes earning more than their higher-aptitude peers. For the purposes of this essay, the term “work effort” includes not only the number of hours worked, but also the intensity of the effort applied during those hours. As noted above, it also includes work effort applied to strengthening one’s skills.

At every level of aptitude and in every profession, whether the pay is in salary or hourly wages, there are workers who outperform their peers in each hour worked. They do this by performing tasks more quickly; focusing on the tasks more intently; finding and completing additional tasks that need to be done; and using some of their leisure time practicing or training to become more skilled.

These people get more raises, larger bonuses, and more promotions than their peers. Thus, greater work effort can produce higher income whether the person is paid by the hour or earns a salary.

In addition to producing higher income in its own right, work effort applied to strengthening one’s skill — resulting in “learned” or “enhanced” aptitude — can make a substantial contribution toward increasing income. The “rough” carpenter who spends nights and weekends developing the skills necessary to qualify as a more highly valued “finish” carpenter will move up the wage scale by doing so. Professional athletes, musicians, singers, and other performers can enhance their innate aptitudes substantially through extensive practice, and a great many are renowned for having done so. A classic example is Hall-of-Famer Jerry Rice, who is generally recognized as the best wide receiver in nfl history. He was one of the highest paid players in pro football for twenty years, an achievement largely credited to his intense practice and workout regimen. Perhaps the most effective way of enhancing aptitude is through increased study in school. Whether it is grade school, high school, vocational school or college, for any particular tier of aptitude, those who study the most almost always get the best grades, matriculate to the best colleges, and secure the best jobs.

Choice of occupation. Choice of occupation is also important in determining income. Had Bill Gates decided to finish Harvard and become a high school math teacher, he almost certainly would have been successful, but he would not have become a multi-billionaire.

Earned income is determined by a mix of the three factors described above, and the relative contribution of each varies by individual.

This is obviously written to minimize the role of luck. It acknowledges that Bill Gates made more money by choosing to become a software mogul than by choosing t be a high school math teacher. But, of course, Gates (as he has acknowledged) benefited enormously not just from his family situation but from the timing of his birth, which put him in the work force at a moment when computing technology was set to explode. If he had been born a decade or two earlier, he probably would have been an anonymous lab geek if he had followed his mathematical inclinations, or perhaps the owner of a successful grocery store chain if he had pursued his entrepreneurial instincts.

What's more, it is demonstrably not the case that income levels simply reflect aptitude and effort. Now, obviously being from a richer family affords all sorts of advantages, including physical, emotional, and cultural development. But factor all that out of the equation and assume that it's just fair for all those things to translate into higher academic performance and higher earnings.

Even assuming that, there are massive advantages inherent simply in being born rich (and disadvantages in being poor.) My favorite example, simply because it's so dramatic, is that a child born into the lowest-earning quintile who manages to attain a college degree is less likely to be in the highest-earning quintile than a child born into the top quintile who does not attain a college degree. This is all the more remarkable when you consider that making it to, and through, college is far harder for poor kids than rich kids even at a given level of aptitude. (Two thirds of the kids with average math scores and low-income parents do not attend college, while almost two-thirds of high-income kids with average math scores do.)

How would Hagopian explain this? The lower-income kids managed to beat the odds by graduating from college, yet they make less money than the rich kids who beat the odds in the other direction by not going to college. By any measure, the former group has more aptitude and greater work ethic. Now, clearly right-wingers in general, and wealthy right-wingers in particular, like to think aptitude and effort and choices determine how much money you make. (Hagopian is the co-founder of a venture capital and private equity firm.) You see this from Greg Mankiw, Arthur Brooks, and on and on. The right-wing worldview is based on a moral premise about the relationship between merit and wealth that is demonstrably false.


TOPICS: Business/Economy; Society
KEYWORDS: lucky; rich; taxes; wealthy

1 posted on 04/04/2011 7:40:19 AM PDT by SeekAndFind
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To: SeekAndFind

Wall Street wisdom: “it’s better to be lucky than right.”


2 posted on 04/04/2011 7:45:40 AM PDT by the invisib1e hand (You is what you am.)
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To: the invisib1e hand

“The harder I work, the luckier I get.” - Samuel Goldwyn


3 posted on 04/04/2011 7:48:32 AM PDT by dfwgator
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To: SeekAndFind
What's wrong with being lucky? I have no desire to let some "leveler" decide how much of someone's income was due only to luck, and tax that away.

I suspect Bill Gates would have done well no matter when he was born. Opportunities are always available. Spotting them involves a lot more than luck. Moreover, most of them are disguised as hard work, which discourages a lot of people from pursuing them.

Finally, the fact that someone's parents were wealthy may say something about which end of the gene pool he came from, the deep or the shallow end. It shouldn't be written off as an unfair advantage.

4 posted on 04/04/2011 7:56:08 AM PDT by JoeFromSidney (New book: RESISTANCE TO TYRANNY. A primer on armed revolt. Available form Amazon.)
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To: JoeFromSidney

Liberals are those lazy, uselss people who like to demand acceptance for their choices in life (which usually leave them skill-less and unable to support themselves and their families the way hard-working, honest people do it)while admonishing people who made smarter, wiser choices.


5 posted on 04/04/2011 8:01:57 AM PDT by MissEdie (America went to the polls on 11-4-08 and all we got was a socialist thug and a dottering old fool.)
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To: SeekAndFind
Those who 'feel' that luck is the real mover behind someone's success (or failure) have a lot of company for that brand of misery.

A better analysis comes from Calvin Coolidge:

Nothing in this world can take the place of persistence.
Talent will not; nothing is more common than unsuccessful people with talent.
Genius will not; unrewarded genius is almost a proverb.
Education will not; the world is full of educated derelicts.
Persistence and determination alone are omnipotent.
The slogan ‘press on’ has solved and always will solve the problems of the human race.”
-- Calvin Coolidge

6 posted on 04/04/2011 8:05:32 AM PDT by GBA (Those who die with the most liberty...Win! Ever Vigilance: For the children.)
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To: SeekAndFind

Jonathan Chait, a doctor's son.

Chait is married to Robin Chait, an education-policy analyst at the liberal Center for American Progress think tank.

He wrote the "Case for Bush Hatred", in which he defended his dislike not only of Bush's policies but also his personality and mannerisms

7 posted on 04/04/2011 8:07:11 AM PDT by kcvl
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To: kcvl

If you go to the actual webpage, you will see prominently shown on the top left, a picture of PARIS HILTON.

They want us to believe that America’s wealthy is disproportionately made up of Paris Hiltons.

*THAT* is the stereotype the left wants to attack when they argue for government confiscation of money from the “wealthy”.


8 posted on 04/04/2011 8:16:04 AM PDT by SeekAndFind
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To: SeekAndFind

Equality of opportunity does not mean equality of results. Or as Jimmy Carter said, “Life is unfair.”


9 posted on 04/04/2011 8:16:42 AM PDT by kabar
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To: dfwgator

What a loser calls luck, a winner calls hard work.


10 posted on 04/04/2011 8:20:03 AM PDT by mountn man (The pleasure you get from life, is equal to the attitude you put into it.)
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To: dfwgator
The best I ever heard!

Luck is when opportunity meets preparedness.

 

11 posted on 04/04/2011 8:21:30 AM PDT by BillM
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To: SeekAndFind
The right-wing worldview is based on a moral premise about the relationship between merit and wealth that is demonstrably false.

Demonstrably untrue.

I'm about as right-wing on this subject as anyone, and I fully recognize the factor of luck as a major factor in success.

Most of us have known people who worked hard and did everything right and never really made it, and others who quite literally lucked out and got rich.

Quite obviously success is a mix of factors, and I don't know anybody who claims otherwise.

The author is claiming that since success isn't ONLY the result of merit, it must therefore be entirely the result of luck. How silly.

The classic straw man argument.The lower-income kids managed to beat the odds by graduating from college, yet they make less money than the rich kids who beat the odds in the other direction by not going to college. By any measure, the former group has more aptitude and greater work ethic.

Another idiotic argument. It assumes there is no difference between these kids except the income of their parents. Among some I might propose are work habits and contacts acquired thru their parents, and in particular the indisputable fact that IQ is somewhere between 50% and 75% heritable. Despite our distaste for the subject, children of rich parents have on average a considerably higher IQ than children of poor parents. This was not nearly so much the case in the past, but as our society increasingly approximates a meritocracy it becomes more and more so.

12 posted on 04/04/2011 8:22:07 AM PDT by Sherman Logan
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To: SeekAndFind
"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed"

I'll be the first to admit that my eyes aren't what they used to be but I'll be darned if I can see the small print after, "Pursuit of happiness" that indicates that if one is successful they will then assume more portion of responsibility for debt than those who weren't as successful in their pursuits. Oh! That's right, there wasn't supposed to be any debt, was there? Additionally, I fail to see where it says that any of the aforementioned equals, in their pursuit of happiness, would be responsible for carrying the dead weight of those who have decided they're not interested in pursuing anything other than other people's money. Someone should remake Bill and Ted's Excellent Adventure and have the founding father's slap everyone they encounter, call them ingrates and start a revolution to take the Country away from the obviously undeserving population.

13 posted on 04/04/2011 8:41:32 AM PDT by liberalh8ter
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To: SeekAndFind

Who is John Galt?


14 posted on 04/04/2011 8:45:17 AM PDT by Noumenon ("How do we know when the Government is like that guy with the van and the handcuffs?" --Henry Bowman)
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To: SeekAndFind

And some people have do nothing jobs that promote failure...

Robin Chait (his wife)
Associate Director for Teacher Quality

Robin Chait is the Associate Director for Teacher Quality at American Progress, where she focuses on teacher and principal quality and effectiveness, particularly as they affect disadvantaged students. In this position, Chait writes columns and papers, develops legislative proposals, and plans panel discussions and meetings.

Chait also served as a program analyst in the U.S. Department of Education’s Planning and Evaluation Service, where she designed and managed evaluations of federal education programs and wrote sections of the congressionally mandated National Assessment of Title I reports and other Department of Education-issued reports.


15 posted on 04/04/2011 8:49:35 AM PDT by kcvl
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To: SeekAndFind

The difference between rich and poor people isn’t luck. It’s in the preparation put into place to take advantage of opportunities and the insight to take advantage of those opportunities.

One guy spends his childhood and early adulthood building relationships and a strong skill set. Another guy spends his childhood and early adulthood playing video games and smoking pot. Which one is more likely to become rich? Why should we punish the first guy for his work?


16 posted on 04/04/2011 8:49:38 AM PDT by walterandrews
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To: SeekAndFind

10,000 hours of practice.
If you put in that much effort, you’ll get good and success will follow.
If you don’t, you won’t and it won’t.

Bill Gates put in his 10,000 hours early, and at a time when that kind of practice was hard to come by.
So did the Beatles, Tiger Woods, Steve Jobs (his salary is $1), and any number of other “rich” people.
Unless you’ve put in your 10,000 hours - hard earnest hours - don’t whine about someone else making more than you.

Read “Outliers”.


17 posted on 04/04/2011 8:54:00 AM PDT by ctdonath2 (Great children's books - http://www.UsborneBooksGA.com)
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To: SeekAndFind

I am guessing Jonathan doesn’t make as much as he thinks he is worth.


18 posted on 04/04/2011 8:55:54 AM PDT by razorback-bert (Some days it's not worth chewing through the straps.)
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To: SeekAndFind

Spineless and pseudo-intellectual milque toast attempts to justify the theft of the possessions of others with a lot of florid verbal gymnastics.

Lenin did it better; he just stole what he wanted and never bothered to apologize.


19 posted on 04/04/2011 9:55:43 AM PDT by Jack Hammer
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To: Jack Hammer
Lenin did it better; he just stole what he wanted and never bothered to apologize.

Then shot the rich. Because the Bolsheviks understood that if you just took from the rich and gave it to the poor, the rich would get it all back....so shooting them takes care of that problem.

20 posted on 04/04/2011 9:57:20 AM PDT by dfwgator
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To: dfwgator

That completes the secret to success.


21 posted on 04/04/2011 11:00:14 AM PDT by the invisib1e hand (You is what you am.)
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To: dfwgator
“The harder I work, the luckier I get.” - Samuel Goldwyn

Gary Player always said "The more I practice, the luckier I get".

22 posted on 04/04/2011 11:17:00 AM PDT by numberonepal (Yes We Cain! Cain is able.)
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