Globally Rational

The spirit of the American Dream is dying and I think we should save it… maybe even try to spread it around the world (read the first paragraph of this article if you don’t know what the American Dream is).

The traditional American success story is, by no means, extinct. But the more I look around, the more I see people who are satisfied with the status quo. Most of the young people I know have no specific aspirations or plans; instead, they find ways to restructure their life goals according to what seems convenient. I rarely meet people who even have the intention, whether it is realized or not, to provide a better life for their children than what their parents provided for them. And this is the reason why our national growth is deteriorating and the world is laughing at our economy.

Those who know me will be surprised that the last paragraph included phrases like “I rarely meet people” and “most of the young people I know.” So, I’ll cite some hard numbers like I usually do; they come from this report:

• If you’re born into a family whose income is right in the middle quintile ($42k - $54k), you’re more likely to move to a lower quintile (39.5%) than you are to move to a higher quintile (36.5%). Basically, that means that about 63.5% of Americans don’t end up moving up to the next quintile (based on the definition of “quintile”, that number should be much less than 60% in a growing economy… if it’s over 60%, then it’s a bad sign).
• If you live in the US, you’re less likely to break free from your parent’s socioeconomic status than you would be if you lived in France, Germany, Sweden, Canada, Finland, Norway, or Denmark. Among all high-income countries, only the UK has less intergenerational mobility.
• Since 1990, an increasing number of households has been experiencing downward mobility. That number should be decreasing, not increasing.

Take a look at the summary of the report to see more details. My hypothesis is that this happens because in the last few years, we’ve been teaching our kids that “everybody is special” and that “I’ll be proud of you no matter what you do,” so they never get the motivation to accomplish much; the same is not true in most other countries. This is reminiscent of Steven Levitt’s study, which I read about in his best-selling book Freakonomics, whose finding was that the legalization of abortion led to the sudden decrease in crime 20 years later (since the low-income single-parent children, which are more likely to become criminals, were never born).

I’d like to see a study that supports or refutes my hypothesis. Until then, I think that we should consider the fact that it might be healthy for us to occasionally challenge our kids to succeed (even if there are disappointments along the journey) instead of assuring them that it’s okay to fail.

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