We can’t eliminate luck completely, but our life opportunities should not be determined lucky or unlucky accidents of birth. One surprising way to reduce that … is to use luck on purpose. (More)

Getting Lucky, Part III: Buffering Luck (Non-Cynical Saturday)

This week Morning Feature explores luck and its role in success. Thursday we began with what Warren Buffett calls “the ovarian lottery,” the luck of one’s birth, and how that shapes life opportunities. Yesterday we saw that conservatives view luck very differently, if not as divine blessing than at least as a personal virtue. Today we conclude by considering when and how policy should buffer the effects of luck.

“The brain suffers poverty”

As we saw Thursday, being born into poverty is an unlucky break that can have lifelong implications. Neuroanthropologist Daniel Lende reviewed the research on how poverty affects brain function, and his survey concludes with an important insight:

The brain is not anatomy alone. Taking the combination of neuroscience and anthropology seriously means that social environments, in all their complexity, become as important as any brain part. Still, anthropology does need to go through an unsettling shift in our understanding of inequality, given the central role that development and neural function do play in what poverty is and means for people. In anthropology, often social forces become the privileged way we understand social suffering. Neuroanthropology challenges that view. The embodiment that runs through the brain – this sociobiological embedding of our experiences and our social relations – is indeed a core cause, a central hub, around which inequality is created. The embodied brain is not just a fundamental place of suffering, it is a fundamental cause of social suffering. The way our brains work, their openness to social causation and biological embedding; the way the dynamics of the stress system can meet the dynamics of the social system – these mean that suffering from poverty is not reducible to social theory alone. People suffer through their embodied brains, through despair and toxic stress and destructive behavior. The brain suffers poverty. We can build research that examines how and why neuroanthropological dynamics play a role in social suffering, the reproduction and impact of inequality, and the disparities in health and well-being that children experience by growing in unequal conditions.

It’s important to note that, unlike conservative Harvard economist Greg Mankiw, Dr. Lende does not argue that poverty is caused by genetic deficiencies. Rather, poverty has biological effects that combine with societal influences to create self-reinforcing feedback loops of “despair and toxic stress and destructive behavior.”

“You have to reduce the demand for government”

Clearly, addressing poverty is a key element in buffering the caprice of luck, and entrepreneur Nick Hanauer offers one solution in a must-read article in this month’s POLITICO Magazine:

So why not talk about a different kind of New Deal for the American people, one that could appeal to the right as well as left—to libertarians as well as liberals? First, I’d ask my Republican friends to get real about reducing the size of government. Yes, yes and yes, you guys are all correct: The federal government is too big in some ways. But no way can you cut government substantially, not the way things are now. Ronald Reagan and George W. Bush each had eight years to do it, and they failed miserably.

Republicans and Democrats in Congress can’t shrink government with wishful thinking. The only way to slash government for real is to go back to basic economic principles: You have to reduce the demand for government. If people are getting $15 an hour or more, they don’t need food stamps. They don’t need rent assistance. They don’t need you and me to pay for their medical care. If the consumer middle class is back, buying and shopping, then it stands to reason you won’t need as large a welfare state. And at the same time, revenues from payroll and sales taxes would rise, reducing the deficit.

Hanauer’s proposed $15/hour minimum wage would help to ensure that no full-time worker would live in poverty, and no full-time worker should. But what about those who can’t work full-time … because they’re raising very young children, or still in high school or college, or working in unpaid internships to gain experience, or and retraining for a new career, or disabled, or retired?

“Elegant in its simplicity”

We currently address those issues through a variety of federal, state, and local programs that we collectively call the “social safety net.” A $15/hour minimum wage would reduce the demand for those programs, but it wouldn’t eliminate that demand entirely. And while Hanauer is correct that most data suggest raising the minimum wage would have only a slight impact on job availability, those data were based on smaller increases than he proposes.

Another idea is the Basic Income Guarantee, or BIG, that we discussed last December. As Rich Smith explained at Daily Finance:

First, everyone gets $11,500, tax-free – from the unemployed kid just out of high school to the multibillionaire Jeff Bezos tinkering on his rocketship out in the desert between boardroom meetings at Amazon.com.

Second, anyone who needs more than $11,500 is welcome to get a job and work for it. Everyone pays a flat 35 percent income tax on their wages, so that, for example:

  • If you have no job, you can just scrape by on $11,500 a year.
  • If you earn $50,000 a year, you end up with (65% x $50,000 = $32,500) + $11,500 = $44,000. (The mathematically inclined will notice that that’s an effective 12 percent tax rate for the average American earner.)
  • And Mr. Bezos, who took home a $1.68 million paycheck last year, gets to keep $1,092,000 of that, plus his BIG payment of $11,500 – so $1.1 million and change.

Third – there is no third. While the system could be tweaked by cutting spending here, adding national health insurance or free education there, or raising the taxes somewhere else, the basic idea of BIG is elegant in its simplicity.

Smith notes that pilot projects of BIG have had surprising results:

Trial runs of BIG conducted in the decade between 1968 and 1979 saw an average 9 percent reduction in total hours worked by people in the program, but with wide variations. For example, in one experiment, husbands with families to support worked only 1 percent less with BIG than without – despite having their basic income needs covered by the government. Overall, the “biggest” reduction in work hours under BIG was found among mothers, both single and married, as they cut back hours at the office by between 7 percent and [?]percent to spend more time at home raising the kids. Across all trial groups, fathers were found to work only 6 percent less.

Crucially, [Basic Income Guarantee author Allan Sheahan] notes that “none of the researchers found evidence of people who simply stopped working so that they could live off” of BIG.

Either BIG or Hanauer’s proposed $15/hour minimum wage – which he concedes would reduce CEO and investors’ share of business income – would also reduce inequality … and a recent National Bureau of Economic Research report found that rising inequality increased the stakes of the “birth lottery.”

“Embrace the crapshoot”

But poverty is not the only element of the “birth lottery.” Last year Bank of America paid a $2 million settlement for discriminating against black job candidates, and the gender gap is well-documented despite claims to the contrary. After reviewing 50 years of research on bias and discrimination, Anthony Greenwald and Thomas Pettigrew concluded the problem is more often In-Group favoritism, rather than hostility toward Others. Greenwald explained their findings to the University of Washington’s Doree Armstrong:

“We can produce discrimination without having any intent to discriminate or any dislike for those who end up being disadvantaged by our behavior,” said University of Washington psychologist Tony Greenwald, who co-authored the review with Thomas Pettigrew of the University of California, Santa Cruz.

Greenwald and Pettigrew reviewed experiments and survey methods from published scientific research on discrimination from the last five decades. They were surprised to find that the discrimination observed in those studies occurred much more often as helping rather than harming someone. But they also found that most researchers defined discrimination as based on negative attitudes and hostility, only rarely treating favoritism as a component of discrimination.

Studies show that In-Group favoritism isn’t limited to In-Group members. In 2012, Corinne Moss-Racusin and her team found that, after reviewing application materials for a laboratory manager position, both men and women faculty members gave higher ratings to packets submitted under male names than to identical packets submitted under female names.

How can human resources teams and schools buffer the lucky breaks of In-Group favoritism? One surprising idea is more luck. More specifically, take interviews – where In-Group favoritism is most influential – out of the process. If there is one job or school opening and five applicants with broadly equal qualifications … write their names on slips of paper, put them in the proverbial hat … and draw one.

Washington D.C. already uses lottery admissions for some schools, as do The School at Columbia University in New York City, and Ball State University’s Burris Laboratory School. And The Atlantic’s Rob Goodman proposed a similar system for university admissions:

Admissions offices have reported that many rejected and admitted applicants are “indistinguishable.” For a substantial part of the applicant pool, officers are making essentially random decisions about who gets an acceptance letter. Promoting a narrative that the college admissions process consistently finds the very best and the very brightest, and concealing the inherent chance involved in evaluating these virtually identical candidates, is both wrong and harmful.

So here’s an idea: Embrace the crapshoot. Reform the admissions process to include lotteries. Admissions officers are already making random decisions about indistinguishable candidates; why not just put those candidates into a lottery and let chance decide?

If that seems unfair, consider that a random draw from a pool of qualified candidates eliminates the unfairness of human bias based on lucky or unlucky accidents of birth.

We can’t eliminate luck from our society, nor should we. But neither should so many life opportunities be dominated by “the ovarian lottery” … and we can and should use policy to reduce the stakes of that lottery. Otherwise, we’re just telling ourselves stories to explain why the luckiest are the best. That’s not meritocracy. It’s aristocracy by another name.

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Happy Saturday!