Raj Chetty's Non Sequitur (on income inequaliry)

By David Henderson.

"Stanford economics professor Raj Chetty, who studies income inequality, has put out on the web a rich array of PowerPoints and videos as part of his Equality of Opportunity project. I haven't looked at them all yet--the sheer number of PowerPoints and videos is daunting.

But I did look at the first few slides in his Lecture 1 and the first few minutes of his YouTube video where he discusses these slides.

In them, there's an important non sequitur and a narrow definition of success.

Take a look at the PowerPoint for Lecture 1, slides 4 and 5. Slide 4 gives the probability of a child born to parents (and it's probably more accurate, although he doesn't say it, to use the singular form, "parent") in the bottom fifth of the income distribution making it to the top fifth. It's "only" 7.5 percent. The probability in my native Canada, by contrast, is a much-higher 13.5%. On slide 4, he says incorrectly, although, admittedly this usage has become common, that "Chances of achieving the 'American Dream' are almost two times higher in Canada than in the U.S." What he means of course, is that they are almost two times as high. They're actually 80 percent higher.

But everyone's used to that usage and that's not my main criticism.

Here's my main criticism: In the very next slide, his first statement is:

Central policy question: why are children's chances of escaping poverty so low in America?

See the problem? His slides showing nothing about a child's chance of escaping poverty in America. His slides, rather, show that a child has a 7.5% chance of making it to the top fifth, which is a multiple of the number that would get the child out of poverty.

Because the percent of households in poverty in the United States is typically about 13 to 14 percent, simply being in the top third of the bottom fifth would mean you are not poor. And being in the second fifth from the bottom would definitely mean you are not poor.

Wondering if I might see him make this point in the YouTube video, I went to that video and saw that he makes the same non sequitur: he treats the data as if he has shown the odds of an American child escaping poverty.

He also has a strange definition of success. At about the 2:50 point, he asks what we can do, policy-wise, to raise a poor child's chance of "succeeding." It's clear from context that to Raj Chetty, "succeeding" means making it into the top fifth. Yet I would wager that many, many children born to poor families in America would be thrilled to make it into the middle class. What's middle class? If we take the word "middle" seriously, it should mean the middle quintile plus, at most, the 2nd and 4th quintiles. I would wager also, that Chetty's data would show that well over half--and probably something like 70%--of children born into the lowest quintile make it into the next 4 quintiles."