There was a lot more push back on this Greg Mankiw post than I expected. I had kind of assumed, naively, that we had accepted that income was fairly heritable.

Mike Konczal pushes pretty hard

There’s nothing in the education of economists, which is training in a subset of engineering math techniques known as ‘convex optimization’, that prepares one for the biological sciences. Is there an economics class lab that compares to organic chemistry lab? I know economics people and I know bio/chem/biophysics people, and the techniques and research are way different. Now if economists approached their research into genetics in a manner that was “here’s an interesting thing…” as opposed to “here we have clearly solved for genetic influence…”, humbler conclusions, that would be one thing. But it tends to be of the “fighting out the door” manner.

I don’t think economists are completely out of there depth on this one. Economic theory depends heavily on optimization but on a day-to-day basis most economists work with data sets. Moreover, they work with data sets involving human beings and the problem of isolating effects on rational beings.  This is exactly the skill set that might be helpful in determining what factors effect income.

In addition, I don’t think anyone is arguing that this one study shows that income is heritable. We have a number of studies. Not only adoption studies but twin studies as well. All of them show at least a reasonable influence of genetics on income.

What made this study remarkable is that we had a randomized treatment. That means that the selection effects involved in adoption – effects that economists are used to having to worry about – are controlled. That is, certain people might select certain infants. Or, more likely wealthier people will have wider options available to them.

In general we might expect parents to desire healthier, heavy birth weight babies. Wealthy families may be more likely to get these babies. And we know that low birth weight correlates with developmental problems that could impair income.

Thus if we simply look at general adoption data we may see adopted income correlated with family income, not because high family income produces high adopted income but because the characteristics that make someone high income also make them more likely to be selected into a high income family.

All that being said there are some interesting things to point out. For example, if we take Mike’s suggestion of the 30+ subsample we still get a much stronger correlation in biological children.

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We also have a couple of bias issues

First, lying. This is a survey and people lie. Do we have any reason to think lying might bias the results. I think so. We might expect two big sources of lying bias. One, people with higher incomes may have higher incomes in part because they value the status that higher incomes provide. This means they may have a greater incentive to lie about their children’s income. This would tend to produce a stronger correlation between parent and child income in both birth and adopted children.

Two, parents may be reluctant to admit that one child has a much lower income than the other child, especially if they are close in age. This would tend to bring the slope of the curves closer together than would otherwise be the case.

Second, confusion about income classifications. Parents may not realize what their kids actual income is. We can imagine a low income parent thinking, “200K is rich and my child isn’t rich” and thus scoring their kid lower. On the higher income scale an opposite effect might prevail. This would tend increase the correlation.

Lastly, I sense, perhaps incorrectly, a certain fear among left leaning bloggers that heritability of income will undermine their efforts at a progressive tax system. That seems exactly backwards to me. If we ever get to the point where income differences are almost all genetic then that’s a very strong argument for redistribution.

Redistribution would have little economic effect since your genes are fixed and it would be compensating people for something that is completely beyond their control.

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