Saturday, December 6, 2014

Economic mobility and American Exceptionalism

A recent article by the economic historian Gregory Clark argues that economic mobility in the U.S. is far from ideal. Of course, Clark is not the first to write about economic mobility, but his historical comparisons help convey the ideas to his readers about how mobile American society is relative to other societies in the past and present. I like this style of economic history: in some ways it is similar to Piketty's recent work which makes sweeping but compelling claims about the future of our economic system. Quoting Keynes, it is the type of great economics which studies "the present in the light of the past for the purposes of the future."

When reading Clark, I was reminded of Joseph Ferrie's research on the history of economic mobility in the U.S. He used linked census data to study intergenerational occupational mobility in the late-19th and early-20th century. He groups occupations into four categories to make his comparisons with post-WWII studies of mobility using Current Population Survey data.

Ferrie separates out mobility into two ideas: prevalence and association. Prevalence measures the ratio of, say, white collar to farm workers across generations. Association compares the odds that the son of a white collar worker becomes white collar to the odds that the sone of a farmer becomes white collar. Using both measures, Ferrie finds that occupational mobility rates were higher in the late-19th century than in the 20th century. In other words, Clark's argument is blown a little out of proportion: while the American Dream may not be easily realized today, it was relatively more easily realized in the late-19th century.

What about late-19th century mobility relative to Britain? Ferrie is referring here to the "American Exceptionalists", a group of social scientists beginning with Tocqueville and Marx, and later Werner Sombart, who argued that the lack of a socialist politics and class consciousness in the U.S. is due to Americans' obsession with "moving up the ladder" and other materialist concerns, as well as geographic mobility (to the frontier - more on that later). Ferrie does indeed find that mobility was higher in the U.S.; for example, 51.3% of British sons of unskilled fathers were able to move up the ladder, while 81.4% of American sons were able to do so, between 1850 and 1880. So, again, Clark's argument is blown a little more out of proportion: the American dream was real in the late-19th century and likely attracted people from other countries seeking a better life.

The causal story is much less clear: what was it about American society that made workers so mobile? One one level, it's a Kuznets-style story of the transition out of agriculture to industry which is capturing some of the mobility findings. Other explanations include the rise of public education and geographic mobility. The emphasis on geographic mobility and the "frontier" more generally has a long history in American scholarship. The frontier would serve as a safety-valve for urban growth and the growth of a "dependent class". Ferrie finds that Americans who moved were twice as mobile as those who didn't, suggesting that geographical mobility is an important part of the story.

It would be interesting to link this work up with recent discussions of the role of inequality through the so-called "Gatsby curve". To wit: is our modern capitalist system preventing economic mobility through a failure to effectively spread the wealth around? And to what extent did that same mechanism operate in the 19th century? Obviously many things have changed since then, including institutions and the role of the state. Still, it could be an interesting additional factor to consider.