SOMETIMES, willing something to happen actually works. If you are young and want to make lots of money when you grow up, you are actually much more likely to end up richer than those of your peers with a more relaxed attitude to wealth. The first prerequisite to becoming rich is to want to become rich (and no, I’m not claiming it always works, sadly).
As one of America’s most interesting economists, Bryan Caplan of George Mason University, points out, the data is fascinating. Daniel Kahneman’s Thinking, Fast and Slow highlights how childhood goals and ambitions matter. A study he reports asked 12,000 people to fill in a survey when they were 17-18 years old, stating on a four-point scale how much emphasis they put on being well-off in monetary terms when they grew up. Two decades later, the researchers surveyed the same people again to find out how much money they were now making.
Take, for example, those who became medical professionals. Each extra point ticked in the four-point scale 19 years earlier was associated with an extra annual salary of $14,000 – those who ticked the lowest box when they were young earned far, far less than those who ticked the highest preference. Similarly striking findings could be found in other groups and other professions.
There are two conclusions to draw from this. First, as Greg Mankiw, the Harvard economist, points out, the fact that people have different preferences towards wealth – some want to be rich, others don’t – weakens the case for government-imposed redistribution. Some inequalities are chosen (though obviously plenty are not) so why should they be forcibly reversed? This point is also made by Benjamin Lockwood and Matthew Weinzierl of Harvard in a new paper.
Second, this of course doesn’t condone the status quo. Many youngsters feel they will never succeed, which becomes self-fulfilling. Youth unemployment is a catastrophe. There are huge injustices in our society: a welfare state that traps people in poverty; a state education system that fails the poor; flawed economic policies that reduce growth and opportunities. It is absolutely essential that education be improved in the UK to maximise the life chances – and therefore the possible range of choices – available to the poor. Social mobility needs to increase; sink schools are a scandal. But nevertheless the world is not as hopeless a place as some believe; free will and self-determination clearly do matter. You should follow your dreams.
Intriguing. M&G’s Jim Leaviss calculates that in real terms the UK government has taken £270bn out of the North Sea in tax revenues. But unlike in Norway, where the Statens pensjonsfond, now worth around £330bn, was the recipient of all of Norway’s oil-related taxes, short-termist UK politicians squandered all the money on current spending. With the oil now gradually running out, it seems to me that backers of Scottish independence are deluding themselves if they think they would be able to maintain their hideously bloated welfare state if they were to go it alone.
Thanks to all of you who wrote in about high speed rail. The overwhelming majority of emails and tweets were against HS2. As promised in yesterday’s column, we have reprinted a selection on p19 in our Forum section.
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