The Great Gatsby Curve: A great distraction

Every so often an academic finding gets into the political bloodstream. A leading example is “The Great Gatsby Curve,” describing an inverse relationship between income inequality and intergenerational mobility. Born in 2011, the Curve has attracted plaudits and opprobrium in almost equal measure. Over the next couple of weeks, Social Mobility Memos is airing opinions from both sides of the argument (see previous posts here).

The real problem with the Great Gatsby Curve is not that it is wrong (although as Scott Winship and Aparna Mathur suggest, it probably is). It is that it has stood in the way of what otherwise could be a truly bipartisan conversation about economic mobility.

Most of the Scandinavian countries compared with the United States in the original curve have populations about the size of the Washington metro area. And as Raj Chetty’s analyses of US cities show, different mobility patterns inside the US are much more meaningful and intriguing than shaky international comparisons.

Encouraging inequality obsessions

The bigger problem with the Gatsby Curve, however, is that it encourages many on the left to focus endlessly on income inequality, “the 1%,” and Wall Street. That takes attention away from the underlying causes of income immobility and impedes potential bipartisan progress on solutions.

A year before the Gatsby Curve was coined in 2012, New York Times columnist David Brooks warned that many people were looking at “the wrong inequality.” Brooks pointed out that the real inequality to worry about is the growing stark social divide between the lives of households that go to college and those who do not. The former exhibit patterns of marriage, parenting, social involvement, savings and a work culture that is traditional and fosters upward mobility. The latter exhibit social and economic patterns that discourage mobility. More recently, the work of Charles Murray, Robert Putnam and others shows that for households in the bottom quintiles, the combination of cultural norms, incarceration, the breakdown of schools and civic institutions, and structural changes in the economy, results in growing gaps in income and assets.

Towards real bipartisan solutions

We should focus on addressing these underlying causes, as many in both parties want to do, rather than let the Gatsby Curve inequality narrative steer us into another partisan redistribution debate that will do nothing to address high school dropouts, pitiful savings rates, and the problem of children parenting children.

Fortunately there are some promising signs. A liberal-conservative coalition is gathering steam to reduce incarceration. A bipartisan effort secured the passage of legislation to allow novel ways to replace lotteries with savings among low-income households. Developments in higher education, and policies to encourage them, could open up inexpensive new ways for low-income youngsters to get the skills they need in the new economy. Meanwhile, interesting ideas are coming from some on the left to address family stability and the economy in ways that could appeal to the right—though it is not yet clear whether these inclusive ideas or Gatsby inequality will characterize the Democrats’ case in 2016. On the other side of the spectrum a group of “reform conservatives” have been willing to explore ideas that could lead to left-right dialog on mobility.

These are the kinds of serious discussions that will lead to real progress on economic mobility. The Gatsby Curve, by contrast, is like an eye-catching bumper sticker—simplistic and distracting for policy drivers.