Feeling lucky? – Econ Rib

• My placement at the University of Washington was in the Department of Sociology. In the fall of my senior year, I ran into a friend from the School of Social Work in the hallway of my building…she just happened to mention that there was a job opening in the School of Social Work, and maybe she might be interested in me…on a whim. So I decided to apply…I received an offer in March of that year and accepted it. Two weeks later, the university announced that it would close the sociology department and lay off all junior faculty…If I hadn’t met my friend in the hallway and she hadn’t mentioned the job offer as an afterthought, I’d have been wrong. Before I knew it, I would have lost my job and looked for a similar position elsewhere…

• —Mark Robert Rank, random elements, p. 133

MArk Rank puts a lot of effort into researching household income, combing through large panel surveys that follow households over time and conducting interviews where people tell their stories. . These experiences convinced him that we should pay more attention to the role that luck plays in people’s lives.

Fortunately, two much better known authors, Cass Sunstein and Nate Silver, have also recently published new books related to the topic of luck and its effects. Their existence is probably random element (TRF) will reach a large audience.

In fact, books rarely sell more than a few hundred copies. Neither authors nor publishers have much control over what ends up on the bestseller list. There’s a lot of luck involved.

Rank points out that attempts to assassinate leaders, whether successful or unsuccessful, have changed history. A classic example of the latter is the assassination of the Archduke of Austria in 1914, which lit the fuse for World War I. Fortunately, the emergence of the TRF was followed by another example of the assassination phenomenon. A young man tried to assassinate Donald Trump at a campaign rally. Trump happened to turn his head at just the right time and only suffered a bruised ear.

In my opinion, it is very difficult to find a completely satisfactory definition of luck. The rank reads:

• …Chance events are random with respect to the individuals affected. In other words, the person experiencing the event could very well be someone else. p. 18

This is already problematic. It describes the following persons: It was He was shot and killed during an election rally. However, there is no mention of Mr. Trump himself, in that it cannot simply be said that the assassination attempt targeted anyone else.

Probability theory has the law of large numbers, which states that if an event is repeated enough times, the average outcome becomes more predictable. Mr. Rank does not mention this law, but he makes the point clearly. He explains this using major professional sports as an example.

• The more times a team can score, the less important luck becomes. In the NBA, individual teams may score 40 to 50 times during a game, whereas in professional soccer and hockey, teams only score once or twice. p. 71

Rank pays particular attention to the incidence of poverty.

• My life course research shows that by the time they reach adulthood, 75 percent of Americans will experience at least one year of poverty or near-poverty. The reason this percentage is so high is because many unexpected and unfortunate events can happen to people over a period of 40 or 50 years. p. 137-138

What I would like to emphasize here is that annual income is significantly different from lifetime income. This is easily overlooked. For example, I often read that the homeownership rate in America hovers around 60%. But people go back and forth between renting and owning. In a previous book, Rank and his co-authors showed that nearly 90 percent of Americans will buy a home by the time they turn 55.

When I was in graduate school, I lived in poverty in terms of annual income, but in terms of lifetime income, I was by no means poor. I believe that everyone interested in public policy, including the ranks, should put more emphasis on it. lifetime income and less yearly income.

Turning to public policy, Rank noted that liberals are more likely than conservatives to believe that luck is a factor in determining people’s income and social status. I agree, and have actually argued that people would disagree less about politics if everyone held the same views about the relative roles of effort and luck in different outcomes.

In his chapter on public policy, Rank focuses on annual income rather than lifetime income.

• Perhaps the easiest way to provide an effective safety net is through what is known as a guaranteed minimum income (GMI).

• …For individuals or families below a certain income level, the government would provide the amount necessary to bring them up to the minimum standard. p. 193

Although he quotes milton friedmanRank misstates Friedman’s idea of ​​a negative income tax. As Rank notes, if you can only get close to a guaranteed minimum income, there is no incentive to work. Instead, Friedman suggests that households could enjoy negative income taxes if they fall below the minimum income level. rate, It is not a full subsidy to reach the threshold.

Mr. Rank argues that America’s safety net is inadequate, but in my opinion this needs to be elaborated on. We already have unemployment insurance, which addresses some of the risks that people face. We have Medicare, which addresses another source of potential financial stress.

Most of all, Mr. Rank does not seriously consider the implications of examining lifetime earnings. Changes in people’s income over their lifetime mean they have the opportunity to save and self-insure during good times to maintain their standard of living during bad times. What strikes me is that his research suggests that for most people, self-insurance is enough to get them through a bad year.

We should have compassion for the most vulnerable lifetime Income potential. For many people with uneven annual incomes, we should encourage them to self-insure. Government aid could be converted into a mandatory savings program rather than a program with eligibility based on annual income.

Mr. Rank’s policy orientation points in the direction of a more generous welfare state. But I think his findings on year-to-year changes in income point in a different direction.