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> someone with 1 million dollars is astronomically more likely to make another million dollars than someone with 100 dollars, even if the two people are otherwi

> someone with 1 million dollars is astronomically more likely to make another million dollars than someone with 100 dollars, even if the two people are otherwise identical I'm not sure this is correct, at least not on average. Take two average persons, give one of them a million dollar, then watch what their net income is the next 10 years. I'd bet that the one you gave a million dollars will have used up a large part of it thus having a huge net loss while the one you didn't give anything will still be roughly at zero. Edit: This study shows that people significantly reduce their income after winning the lottery, suggesting that there is a negative correlation between wealth and earnings given that everything else is the same. https://www.nber.org/papers/w21762.pdf https://www.nber.org/papers/w21762.pdf

sokoloff 7y ago
That suggests to me only a negative correlation between wealth and income among people who achieve wealth via the lottery. I don’t see any reason to think this same linkage holds for those with a propensity to make money from entrepreneurial or investing activity.
bumby 7y ago
The book "The Meritocracy Trap" points out that inter-generationally this isn't true. More money helps fund better training which leads to elite networking/training (elite colleges, for example) which leads to well-paying, high status jobs and the cycle continues. Granted, it's not just money alone, but the major theme of the book is that high income from labor (rather than inherited wealth) is a positive feedback loop passed along generational lines and concentrated among the upper quintile of incomes
- username90 7y ago
  I'm from Sweden were the things you are talking about doesn't apply, getting into our best colleges isn't particularly hard and private schools you have to pay for are almost non-existent. Yet there are still a significant gap in how much people earn, and kids from rich families still do much better in school and college than kids from poor families.
  - bumby 7y ago
    Fair enough. At least here in the States, Scandinavian countries are often portrayed as more equitable on relative terms. Do you know how Sweden's inequality compares to the U.S. quantitatively? The training for schooling outlined in the book is often independent of the school structure (e.g., tutoring, test prep etc.). The upper echelons didn't think it was uncommon to spend $100k per student on this extra training. The authors point was that training works and that the rich have more advantages to educating and training their kids
    - xyzzyz 7y ago
      > Do you know how Sweden's inequality compares to the U.S. quantitatively? By the Gini coefficient, the inequality is much lower, but the social mobility rate is about the same. http://faculty.econ.ucdavis.edu/faculty/gclark/The%20Son%20Also%20Rises/Sweden%202014.pdf http://faculty.econ.ucdavis.edu/faculty/gclark/The%20Son%20A...
pflenker 7y ago
I think you might be missing the point a bit. This is not about two people being otherwise equal, and one being given a million dollars. The point is that someone who has a million dollars is in a position where it will be easier for him to make another million dollars, or at least it's more likely for him to be in that kind of position than for someone who does not have a million dollars.
vannevar 7y ago
I'm not sure this is correct, at least not on average. I assure you it is true. It is not true only if there is a negative value to capital (ie, capital essentially destroys itself). That's what you seem to be saying with your link, but that link looks at only a narrow segment of people (lottery winners) and even then, appears to merely be observing that winners subsequently have less labor income, not less overall income. Which intuitively seems reasonable---winners would be more likely to take early retirement. The idea that, all else being equal, having money means your income will go down is absurd on its face.

sokoloff 7y ago

That suggests to me only a negative correlation between wealth and income among people who achieve wealth via the lottery. I don’t see any reason to think this same linkage holds for those with a propensity to make money from entrepreneurial or investing activity.

bumby 7y ago

The book "The Meritocracy Trap" points out that inter-generationally this isn't true. More money helps fund better training which leads to elite networking/training (elite colleges, for example) which leads to well-paying, high status jobs and the cycle continues. Granted, it's not just money alone, but the major theme of the book is that high income from labor (rather than inherited wealth) is a positive feedback loop passed along generational lines and concentrated among the upper quintile of incomes

username90 7y ago
I'm from Sweden were the things you are talking about doesn't apply, getting into our best colleges isn't particularly hard and private schools you have to pay for are almost non-existent. Yet there are still a significant gap in how much people earn, and kids from rich families still do much better in school and college than kids from poor families.
- bumby 7y ago
  Fair enough. At least here in the States, Scandinavian countries are often portrayed as more equitable on relative terms. Do you know how Sweden's inequality compares to the U.S. quantitatively? The training for schooling outlined in the book is often independent of the school structure (e.g., tutoring, test prep etc.). The upper echelons didn't think it was uncommon to spend $100k per student on this extra training. The authors point was that training works and that the rich have more advantages to educating and training their kids
  - xyzzyz 7y ago
    > Do you know how Sweden's inequality compares to the U.S. quantitatively? By the Gini coefficient, the inequality is much lower, but the social mobility rate is about the same. http://faculty.econ.ucdavis.edu/faculty/gclark/The%20Son%20Also%20Rises/Sweden%202014.pdf http://faculty.econ.ucdavis.edu/faculty/gclark/The%20Son%20A...

pflenker 7y ago

I think you might be missing the point a bit. This is not about two people being otherwise equal, and one being given a million dollars. The point is that someone who has a million dollars is in a position where it will be easier for him to make another million dollars, or at least it's more likely for him to be in that kind of position than for someone who does not have a million dollars.

vannevar 7y ago

I'm not sure this is correct, at least not on average. I assure you it is true. It is not true only if there is a negative value to capital (ie, capital essentially destroys itself). That's what you seem to be saying with your link, but that link looks at only a narrow segment of people (lottery winners) and even then, appears to merely be observing that winners subsequently have less labor income, not less overall income. Which intuitively seems reasonable---winners would be more likely to take early retirement. The idea that, all else being equal, having money means your income will go down is absurd on its face.