Glenn Loury’s scintillating autobiography, Late Admissions: Confessions of a Black Conservative, shares his epic life story with brutal honesty.
Loury vividly describes his struggle to rise from the South Side of Chicago and difficult family circumstances to the lofty status of a tenured Harvard University economics professor.
He unflinchingly shares the ugliness of his addiction to crack cocaine and infidelity that nearly cost him his life, his freedom, and his second marriage and relationships with his children.
And he candidly discusses his motives that led him to abandon his role as a prominent Black conservative for the warm embrace of mainstream, left-wing Black leadership before swinging back to oppose its counterproductive agenda.
The book is an excellent read, but one point – Loury’s description of his brilliance as an economic theoretician – overstates his case and at least somewhat misses the mark.
On pages 137-139, Loury emphasizes the economics profession’s reverence for his 1980 article “Intergenerational Transfers and the Distribution of Earnings.”
This article, he asserts, shows that “The development of a child’s human potential is constrained by the economic resources available to the child’s family”—and supports “the redistribution of income from rich to poor families.”
Loury’s article has plenty of theory and mathematics, but no data.
This should not be a surprise. Reams of data – as well as solid economic theory – reject Loury’s assertion.
For example, immigrants generally arrive in this country with less wealth than native-born Americans. Yet decades of anecdotal evidence remind us that children of poor immigrants, perhaps particularly famously East Asians and Jews, have moved up the economic ladder with dizzying speed.
In 1989, The Economic Consequences of Immigration by my late father, the economist Julian Simon, reported that immigrants’ children have a higher labor-force participation rate and a “higher propensity to start new businesses” – and that economist Barry Chiswick had found that 1970 Census data show that “men with a foreign-born parent have 15 percent higher earnings.”
The evidence about immigrants’ children, moreover, is consistent with earlier work by economics Nobel Prize winner Gary Becker and Simon’s theory expounded in his 1987 book, Effort, Opportunity, and Wealth”: Effort both increases with the size of the potential gain and is inversely proportional to wealth. In other words, a person with less wealth will exert more effort to achieve the same gain than a person with more wealth – and will exert yet more effort for a greater gain.
Unlike Loury, Simon supports his theory with data.
“The data make especially clear that poorer people will expend more time and effort to increase their economic position than will rich people.”
Studies of Russian, Indian, Irish, Israeli, and American families show “more work by the parents and by individual children” in families with more children and thus less wealth per person.
More generally, Simon notes, “in addition to their bad side, income inequalities have advantages because they imply both lower wealth and higher opportunity for some individuals or groups than would the same total amount of income divided equally.”
Contrary to Loury’s theory that redistribution reduces inequality and increases upward mobility, Simon cites evidence that redistribution is counterproductive: “negative income tax [transfer payment] experiments” that have shown “that there is a significant reduction in annual hours worked by the recipients of payments.”
Simon’s work yet again reiterates a critical point: Instead of revering an economic theory that is unsupported by data and that counsels governmental-social engineering, view the theory with skepticism – and challenge it with data from other sources.
