Author: philg

Unlike most books on Big Picture economics, which might be interesting to the average person but useful only to legislators and central bankers, The Son Also Rises: Surnames and the History of Social Mobility has important life lessons for most people.

As noted in my previous posting regarding this book, Clark says that we middle-aged folks shouldn’t infer too much from the age at which our parents die. If they die young we shouldn’t spend like drug dealers and save only enough for a burial plot. If they are healthy 90-somethings we shouldn’t be saving intensively because we can in fact plan to live only three additional years beyond our conditional-only-on-our-own-age life expectancy.

What about parenting? I ran into a friend the other day at Trader Joe’s. She and her husband live in Cambridge and send their kids to an elite private elementary school so that they won’t end up in Massachusetts’s most expensively funded public school system (in which I was a volunteer tutor, an experience that I describe as “I taught third grade math… to 11th graders”). Another parent at the school asked her if she was taking the children to after-school math and music programs. She replied that she was just letting them play at home with the golden retrievers and the other parent said “So you’ve given up on them getting into Ivy League colleges.” The Son Also Rises would have been useful in this situation, with a complete chapter on “Escaping Downward Mobility.” Here are some excerpts:

For a long period, from at least 1880 to 1980, the rich and socially successful sharply limited their fertility. Their fewer children would thus each inherit more parental assets and gain a larger share of parental time and resources, than the abundant children of the poor. Yet despite a willingness to spend big in terms of time and treasure, we know that the law of social mobility exercised an inexorable pull , drawing families toward the mean.

There is strong persistence of status, but those at the top of the social hierarchy in societies such as the United Kingdom , the United States, and Sweden will inevitably see their children, on average, move down. Further, the rate of regression downward to the mean is the same for the upper echelons of society, despite their considerable investments in their children, as is the rate of upward mobility for the lower echelons, even the ones who don’t bother to turn up for the PTA meetings.

The empirical evidence that middle- and upper-class parents can significantly boost their children’s human capital and economic outcomes through expenditure on children is weak, …

This is all consistent with the idea that once parental inputs to children reach a certain basic level, which does not include Baby Einstein toys, playing Mozart to babies in the womb, or sending them to the Dalton School, parents can do nothing to improve outcomes for children. Beyond this point, social outcomes are potentially all in the genes, determined at the point of conception … [emphasis added]

In Selfish Reasons to Have More Kids, Caplan points out correctly that upper-class parents pointlessly invest too much time in the rearing of their children. In his view, genetics is what matters, so you might as well have more children, invest less in each, and enjoy being a parent more.

Or she could have just rammed the other mom with her SUV…

Should you try to work extra hard to make more money because it will help your children? Clark cites the studies of adopted children whose future income was not influenced by parental income (i.e., growing up in a McMansion because your parents enjoyed sufficient cashflow does not make you more likely to have enough income to afford a McMansion). Clark also looks at a study of the children of winners of an 1832 land lottery in the state of Georgia. Each parcel of land was worth as much as the median wealth in Georgia circa 1850, equivalent to roughly $150,000 today. How did the children of the winners do?

They were no more literate than the children of losers. Their occupational status was no higher. Their own children in 1880 (the grandchildren of the 1832 winners) were again no more literate. Worse, they were significantly less likely to be enrolled in school than the grandchildren of the losers. … Wealth is not statistically higher for lottery winners’ children…

Clark also reviews a study of Cherokee Indians who, starting in 1998, received substantial boosts to their income from casino profits. For children who had not been living in poverty, “there was no measurable change in any educational outcomes, including high school graduation rates…” This was despite the fact that a child who graduated high school would immediately become eligible for his or her own $4,000-per-year payment.

The same chapter in The Son Also Rises summarizes a study of a Norwegian county that became wealthier as a result of an oil boom compared to other Norwegian children: “The income gains in Rogaland had no effect on the years of education achieved by children there.”

[Note that the these studies may explain an apparent paradox that we uncovered in interviewing divorce litigators nationwide. They told us that the more child support that a child was yielding for a plaintiff, the worse the child turned out as a young adult. Due to the never-final nature of custody and child support litigation, attorneys inadvertently followed children longitudinally to age 18 or 23, depending on the state. None of the children were in poverty because at least one parent had enough income to be worth suing. Children in jurisdictions where the maximum child support obtainable was reasonably close to the cost of adding a child to a home (about $4300 per year, according to UCLA prof Bill Comanor) did better than children in jurisdictions where the winner parent could live very comfortably off the child. Example maxima for a single child are $4,000 per year (Sweden), $8,000 per year (Denmark), $13,000 per year (Nevada), $20-25,000 per year (Minnesota, Texas, North Dakota), $71,000 per year (Utah), $infinity (California, Massachusetts, Wisconsin). Foreign readers: in the U.S. there is no requirement or expectation that child support dollars received by a parent be spent on the child; since the early 1990s by federal law the child of a one-night encounter will yield the same revenue as a child of a marriage.]

What if you’re not married yet? Backed up with a lot of charts and data Clark says the same thing that an Indian or Chinese grandmother would say: “look at the whole family”. Did you just meet someone who is smart and successful? Clark gives you the green light if their parents, grandparents, aunts, uncles, et al., are also smart and successful. If the relatives are “low status,” however, the person you just met likely was simply lucky and your mutual children cannot count on that luck. Here’s a more thorough explanation:

Is there anything that this book can say to people who want the best possible income, wealth, education, and health outcomes for their children? The one scientific contribution we can make is to point out that with the appropriate choice of mates, a family can avoid downward mobility forever. The chapters above emphasize that one of the things that slows social mobility is the assortative nature of marriage. People in all societies tend to marry others of similar social status.

But no matter how assortative mating may become, downward mobility will continue. For downward mobility is driven by the fact that people typically select mates who resemble them on the basis of observed social characteristics— their achieved education, income, occupational status, wealth, height, weight, and health. 8 This is their social phenotype, the sum of their observed characteristics. However, as we have seen above, we can usefully think of individuals as also having a social genotype, or underlying social status. Their social genotype produces the observed phenotype, but with random components in each dimension. This means that the people currently occupying the upper tails of the distribution of education, wealth, and occupational prestige tend to include disproportionately the lucky, the ones who benefited from happy accidents. Systematically, at the top, the phenotype is better than the genotype. Symmetrically, concentrated at the bottom are people who have experienced bad luck and unhappy accidents. There, the social genotype is much better than the observed phenotype. The curse of the elite is that they are surrounded by imposters, possibly including themselves , and thus the marriage market for the upper classes is full of prospects likely to underperform as carriers of a lineage. In contrast, the bottom of the marriage market is full of potential overperformers. Bad luck dominates, rather than bad social genotypes. So outcomes for the next generation tend to be better.

If the way to produce children of the highest possible social phenotype is to find a partner of the highest possible social genotype, the path is clear for those whose aim in life is to produce the highest-achieving progeny possible. To discover the likely underlying social genotype of your potential partner, you need to observe not just their characteristics but also the characteristics of all their relatives. What is the social phenotype of their siblings and their parents? And what is the observed status of their grandparents and cousins? The point here is not that any of these relatives will contribute anything directly to the social and economic success of your child. As far as can be observed, they will not. But the social status of the relatives indicates the likely underlying social status of your potential mate. This social genotype, rather than the observed social phenotype, is what your children will inherit. …

a recent study in Japan examined the effects of the educational attainment of grandparents, aunts, and uncles on both sides of a family on children’s probability of going to university. Controlling for the parents’ education, there was a positive correlation between the education level of all four sets of relatives and the child’s probability of attending university.

Clark, writing from Davis, California rather than Los Angeles or San Francisco, did not reflect on the fact that marriage is not a prerequisite for reproduction, that seeking a mate via marriage is genetically irrational, and that, in most U.S. states, having children in a stable marriage is economically irrational. As explained below, a higher status mate can typically be found for a one-night encounter than for a marriage and, holding the number of children constant, state law makes tapping the income of multiple reproductive partners more lucrative than tapping the income of just one.

Here’s an excerpt from our own book:

“Women who want to make money from the system aren’t getting married anymore,” said one lawyer. “The key is recognizing that it is a lot easier to rent a rich guy for one night, especially if he has had a few drinks, than it is to get a rich guy to agree to marriage.” Another disadvantage of marriage, from a plaintiff’s perspective, is that it prevents what attorneys call “forum shopping.” A plaintiff who is married in Texas is stuck with Texas law and $20,000 per year in child support for a single child. A plaintiff who isn’t married and who has a good understanding of the Uniform Interstate Family Support Act (UIFSA) may be able to sue a Texas defendant under California, Massachusetts, New York, or Wisconsin law and collect millions of dollars. [A factor for jurisdiction under UIFSA is “the nonresident engaged in sexual intercourse in the state and ‘the child may have been conceived by that act of intercourse’,” which can make a weekend trip to Boston or Los Angeles pay substantial long-term dividends.]

Suppose that a woman is one of the “people who want the best possible income, wealth, education, and health outcomes for their children” about whom Clark writes. What the attorney above

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A group of protesters shut down Interstate 93 in Boston yesterday (New England Cable News) by chaining themselves to 1200-lb. barrels filled with concrete. This was right in the middle of the morning rush hour and yet many local friends were unaware of the multi-hour traffic stoppage.

From this we can conclude that a massive traffic jam preventing people in Eastern Massachusetts from getting to work is so common that it is not newsworthy!

The theme of the protest was “Black Lives Matter,” which, again judging by the lack of news coverage and public awareness of the event, is not true for the average Bostonian. And it also seems to be an uncommon belief nationally, to judge from the coverage of the global jihad last week. A variety of people around the world died in the name of Islam. The white Christians at Charlie Hebdo received a lot of press coverage. The Parisian Jews who died in the immediate aftermath received about 1/1000th as much ink. The black Nigerian victims of Boko Haram received about 1/1000th as much ink as did the Parisian Jews (perhaps less, if adjusted for body count).

Separately, if highway shutdowns become more common I wonder when the government will start investigating to what extent the helicopter industry is funding the protesters. Certainly yesterday was a great advertisement for Boston Medflight (background: Guidestar says that this non-profit org has roughly $25 million in annual revenue and that Suzanne Wedel, the CEO, is paid about $250,000 per year), though this story says that the weather at the time was not conducive to flying.

Related:

• cartoon regarding press coverage of Ebola

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The Son Also Rises: Surnames and the History of Social Mobility gets my vote for the most important economics book of the 21st Century (supplanting A Farewell to Alms, by the same author).

Gregory Clark, an economist at the University of California, Davis, shows that social mobility is much slower than we’ve been led to believe. Our focus on the correlation between parent income and child income misses a lot of other important stuff. Making $300,000 per year as a doctor is not the same as making $300,000 per year selling subprime mortgages. What might lead one to want to look carefully?

… the twenty-seven adult great-great grandchildren of Charles Darwin , born on average nearly 150 years after Darwin, are still a surprisingly distinguished cohort. Eleven are notable enough to have Wikipedia pages, or the like, such as Times obituaries , devoted to them. They include six university professors, four authors, a painter, three medical doctors, a well-known conservationist, and a film director (now also an organic farmer).

Instead of working from readily available data, a trap into which most academics fall, Clark figured out that dusty old registers of who was a doctor, who was a university student, who was a member of parliament, etc. could be used to track the success of families over centuries. To what extent does your great-grandfather being a physician predict your likelihood of being a physician? To a surprising extent in stable class-stratified England. How about in the United States, land of personal reinvention? To roughly the same extent. How about in Sweden, where every conceivable government program to reduce inequality has been implemented? To roughly the same extent.

On the flip-side, what if your extended family has had a history of low educational attainment, low income, and low social status? Chances are so will you. If by a combination of hard work and luck you’ve managed to achieve much more than your ancestors, unless you are able to mate with a person from a historically high-status family, your children are statistically likely to be more like your parents, aunts, and uncles than they are to be like you.

Every family will eventually regress to the mean, but it may take hundreds of years, not the handful of generations that the correlation between parent income and child income would suggest.

As you can see from some of the Amazon reviews, Clark upsets a lot of American readers by suggesting a genetic basis for “social competence”. This is not news in Asian cultures, however, as far as I know. “The family is more important than the individual,” is common advice given in India when a son or daughter is reaching the age of marriage. Where the Indians and Chinese have millennia of experience, though, Clark has data to back up his conclusions.

But some groups within a society resist regression to the mean, you might object. There are some groups that are persistently successful or persistent unsuccessful. Clark correlates this tendency to have higher correlation from generation to generation with lower rates of intermarriage (“marital endogamy”). Coptic Christians, for example, were a disproportionately high status group following the Arab conquest of Egypt. The low-status Coptics couldn’t afford to pay the higher tax rates on non-Muslims so they converted to Islam. According to Clark, Copts have maintained their high status within Egypt for nearly 1400 years and tend to occupy high-status occupations even here in the U.S., e.g., they are 13 times more likely to be medical doctors than average (compare to 4-5X for Jews and Asians).

Perhaps the hardest section for a parent to accept is that the home environment created by the parent is more or less irrelevant to a child’s success. Clark cites the most important studies on the correlation between adopted children and their adoptive parents. There is virtually no correlation for intelligence, income, the tendency to attend four years of college, etc. These things are highly correlated, of course, for the typical parent and child but the studies suggest that is only because the typical parent and child have genetics in common. As a parent and a teacher I find it almost impossible to accept these research results and the logical conclusions that follow. At a minimum, if an average child were adopted by Tiger Mom (my review of that book; a blog posting on the NYT review), wouldn’t the resulting adult end up with the useful skill of being able to play the piano or violin? And this video makes me think that my work as a helicopter instructor has not been in vain.

Clark’s book came out at roughly the same time as the English-language version of Thomas Piketty’s Capital. Thus I think that it is accidental that The Son Also Risesprovides probably the best refutation of Piketty’s thesis:

The lineage of Charles Darwin is a nice illustration of how large the families of the middle and upper classes could be in preindustrial England. He descended from a line of successful and prosperous forebears. His great-grandfather Robert Darwin (1682– 1754) produced seven children, all of whom survived to adulthood. His grandfather Erasmus (1731– 1802) produced fifteen children (born to two wives and two mistresses), twelve of whom survived to adulthood. His father, Robert Waring (1766 –1848), produced six children, all of whom survived to adulthood.

In a social environment where all these children had to be privately educated, dowries needed to be provided for daughters, and estates were divided among children at death, human-capital theory would predict that the heedless fecundity of the English social elites of these years would lead to rapid downward social mobility . The lower classes of preindustrial society, producing only modestly more than two surviving children per family on average, would be able to concentrate resources on the care and education of their offspring and see them rise rapidly on the social ladder. …

But we see no signs that social mobility rates in England slowed as the upper -class groups produced fewer children. Instead, as chapter 5 shows, the intergenerational correlation of status remained constant for education and wealth. By implication, human-capital effects on social mobility must be modest. Status is strongly inherited within families mainly through genetic or cultural transmission, or both.

We can simplify this by considering the case of a rich family with 20 children and a rich family with 1 child. If Piketty is right the rich family that has just 1 child should have substantially wealthier descendants than the equivalently rich family with 20 children. The data show instead that those 20 children were able to become wealthy on their own account almost as easily as the only child who inherited everything. (Clark’s data are not affected by primogeniture inheritance customs because he looks at all descendants with the same surname.)

Note that the studies of adopted children also refute Piketty. If being reared in a relatively wealthy family didn’t make the adoptees wealthy then family wealth can’t be the main determinant of life success (admittedly the stats are thin for children adopted into the crazy rich families that are Piketty’s primary focus).

I’ll write more about how to apply Clark’s new work to everyday life, but here’s a preview:

But in fact the correlation of longevity between individual parents and children is very low. For the people dying in England in the period 1858– 2012 with the rare surnames used in chapter 4 , we can measure the correlation of longevity between fathers and sons for more than four thousand sons surviving to at least age 21. That correlation is only 0.13. If we take the average of both parents’ ages at death, that correlation increases to 0.26. But it is still low. 9 In reality, your age at death is not strongly predictable from your parents’ age at death. All those saving more for retirement simply because both their parents are fit, healthy, and in their nineties should stop immediately. Your expected additional longevity relative to the average is only three years.

In the meantime elite university admissions offices have either come to the same conclusions as Clark or they are responsible for the persistence that he sees. Universities such as Harvard and Yale preferentially admit the children, grandchildren, siblings, etc. of graduates. This could be because they recognize that a family that was successful in the past is likely to be successful in the future. Or it could be that a Harvard or Yale degree is enough to guarantee success (albeit a lower income than a California prison guard) and, by giving preference to “legacies,” the elite universities are the institutions that are creating the persistence in status and success that Clark attributes to genetics.

Related:

• The Son Also Rises: Policy Implications
• The Son Also Rises: Tips for Optimizing Your Life
• Clark’s summary of part of the book in the New York Times (attracted 581 comments, mostly hostile to the idea that it is difficult to escape our genetics, e.g., “This is completely illogical and I can’t believe the NYT published this irresponsible and pernicious argument for a genetic component to success.”; “This is the most absurd article I have ever read in the New York Times.”; “This is one of those articles one reads and does not know where to begin to take it apart, because it is so colossally stupid, and the day is so short.”; “The very fact that the author does not even mention gender casts the whole thing in doubt.”)
• Economist review of the book

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Back in 2003 I predicted that the Chinese would, starting sometime between 2013 and 2023, export to the U.S. a basic four-door sedan at a low cost (June 2003 posting). Chinese-owned Volvo has announced that it will be the first company to bring a Chinese-made car to the U.S., but it will be a luxurious Volvo S60L (Bloomberg). The Swedish-made S60 costs over $30,000 so presumably the Chinese-made version won’t be cheaper than an average car.

Let’s look at some of the other failed prophecies in that old posting, just for humility’s sake.

I cited GM’s pension costs as a risk to the company. Wrong. GM was able to stick the U.S. taxpayer with those costs! (Though the shareholders were wiped out (Forbes).)

I said “If George W. had only declared war on urban traffic congestion instead of Iraq!” and proceeded to list some basic infrastructure that could have been paid for with the money I thought that we would spend on that Iraq war. Ridiculously wrong again. The Iraq war ended up costing so much that the things that I proposed wouldn’t have consumed 1 percent of the total. My statement is equivalent to “I wish I hadn’t bought an aircraft carrier complete with a hangar full of fighter jets because then I could have gone to Target to buy a T-shirt.”

A reader sarcastically commented “I suppose that you’re assuming oil is going to be $35 a barrel ten years from now.” Little did he know how close right that assumption, had I actually made it, would be! Bloomberg says a barrel of crude is $45, almost exactly the inflation-adjusted value of 35 2003 dollars.

Daihatsu is working toward a reasonably nice $5000 car (Reuters), but with production in Japan rather than in China.

Ford, Google, and some other companies are promising self-driving cars by 2020. So just before my prediction period runs out in 2023 the real market in the U.S. will be for $50,000 cars that are on the road 24×7 in some sort of Uber-Squared-type service.

Let me say that I have a great track record in making predictions, except regarding the future.

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A couple of articles on impoverished academics:

• “This college instructor has a Master’s degree — and she’s still living in poverty”
• “The Rise of the Hyper Educated Poor”

Adding some weight to what a (PhD professor) Sinophile friend says is an old Chinese saying: “Poor as a professor; dumb as a PhD.”

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If Chris Christie is truly one of the better candidates the Republicans can put forward I am going to predict a Democrat wins the 2016 Presidential election (nytimes story on a speech). New Jersey is the second most expensively governed state in the U.S., collecting 12.27 percent of residents’ income compared to a national average of 9.8 percent (Tax Foundation). As New Jersey is a very wealthy state and they spend far more than they collect (e.g., by running up massive pension fund deficits) this means that they spend a crazy high number of dollars per capita. What do taxpayers get for their dollars? Based on my visits to a cousin’s house over the years, I don’t think that they get more than we residents of Massachusetts, with our 10.28 percent tax burden (Tax Foundation). Are the streets of Newark paved with hidden gold?

New Jersey has had some economic success, of course, but this seems to be due to its proximity to New York City and Philadelphia, not due to political or management magic worked by Governor Christie. His claim for consideration as President based on the continued prosperity of a state right next to the cash fountains of Wall Street reminds me of Mitt Romney claiming to be a business genius because he bought companies using leverage during one of the biggest stock market booms in U.S. history. (previous posting)

What do New Jersey-based readers says? Is there something special about Christie that national voters should know?

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Mercedes USA is moving from New Jersey to Georgia (nytimes). I’m wondering if this means some of the 1,000 employees affected by the move will sue or be sued for divorce. A plaintiff might find it far more profitable to sue for divorce under New Jersey law than under Georgia law and might prefer the sole custody arrangements that are more typical in New Jersey compared to Atlanta. Here are some of the differences:

• child support in New Jersey can be collected until a child turns 22 (until “emancipation” which our interviewee said was “usually just a four-year college education”); in Georgia child support is cut off at age 18
• a judge in New Jersey can order the defendant to pay for college; a judge in Georgia does not have that power
• child support in New Jersey is governed by guidelines up to $187,200 per year of a defendant’s after-tax income [resulting in a cash flow of $29,692 per year for a single child; compare to about $50,000 per year in Massachusetts or $55,250 per year in Manhattan] and above that is limited only by a judge’s generosity; child support in Georgia is capped at $26,832 per year (tax-free), based on $360,000 per year in parental income
• our interviewees estimated that, for a given length of marriage, alimony was likely to last longer in New Jersey compared to Georgia, though in both cases might be roughly one third the difference in pre-tax income
• a custody lawsuit in New Jersey is likely to end with the mother obtaining sole custody of any children (every-other-weekend visitation with the father); a custody lawsuit in Metro Atlanta is likely to end, especially if both parents work, with a 50/50 parenting time schedule (though our interviewee said that rural Georgia was more traditional and therefore more like New Jersey)
• a plaintiff in New Jersey with a lower income than the defendant can get the defendant ordered to pay the legal fees on both sides of the case (our interviewee estimated a minimum of $300,000 in total fees, including psychologist expert witnesses, for a custody lawsuit); in Georgia generally each litigant has to pay for his or her own lawyer

This seems like an interesting sociology research project. At a minimum these seem like good questions:

1. do employees and spouses research these differences in law prior to the move?
2. are lawsuits more prevalent shortly before a move or immediately after?
3. (to make sure that the answer to 2 is about the differences in law instead of the move) to what extent is there an increased number of lawsuits around the time of a corporate move when divorce laws are nearly the same in the two jurisdictions?

[Separately, why would Mercedes want to move? Tax Foundation says New Jersey has the 49th worst business environment in the nation. To run state and local government the state collects 12.27 percent of residents’ income, the second highest percentage in the U.S. (after New York). Georgia, on the other hand, manages to run state and local government with 8.84 percent of residents’ income, slightly below the national average, though its business environment ranks #32 out of 50. And the New York Times article shows the benefits of being a big rich company in the U.S., with both New Jersey and Georgia offering Mercedes-Benz massive hand-outs that an employer of 10 workers could not obtain, even scaled proportionately.]

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Sheryl Sandberg, co-author of the bestseller Lean In, co-wrote an article for the New York Times called “Speaking While Female”. She says that women get interrupted more at meetings than do men and proposes to add Band-Aids to the process such as hiring quotas for women in management, “no-interruption” policies, or “Obama-style meetings” in which no men were permitted to speak. This reminds me of General Motors taking feeble little steps toward solving their ignition key problems rather than putting keyless ignition systems in all of their cars.

Contrast to Jeff Bezos, founder of Amazon. As noted in my review of The Everything Store, Bezos reengineered meetings at Amazon so that, for the most critical part, neither men nor women would be speaking. People were required to bring their ideas to meetings in written prose form and people would spend the first 15 minutes reading. (Perhaps after that there would be a chance for the interruptions of which Sandberg complains to occur, but by that point ideas were all out there on the table and tied to an author.)

If there are corporate processes where women aren’t being treated equally maybe the first question to ask is “Should we even be engaging in this process?”

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It is January in Boston, which means that it is a great time to try to learn SQL while Mindy the Crippler tries to bite your toes off. Our hands-on intensive all-day-every-day course this year will be January 26-28. If you have any programming background at all but want to know how to use the relational database management system (RDBMS), this is your big chance. See the course page for more details on how to apply for admission (spaces are limited). Note that this is a for-credit course for Department of Electrical Engineering and Computer Science undergraduates but it can be audited at no charge and without being registered as a student (January at MIT is a flexible month).

Separately, if you are an experienced SQL developer and would like to volunteer as a teacher, please contact us! It has been a rewarding experience in the past and it is only three days of pain and suffering.

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Folks:

The Federal government is seeking public comments on some tweaks to the “Title IV-D” child support regulations. (Click on “submit a formal comment” at top right.)

Background: U.S. regulations regarding child support are a hybrid of federal and state law. In theory everything is up to the individual states. In practice, federal regulations tell states that they have to develop “child support guidelines” based on “economic data on the cost of raising children.” As explained in this video from Joe Sorge, producer of the Divorce Corp. movie, the Feds give states financial incentives to designate one parent as “primary” and one as “secondary” and to maximize the amount of child support ordered and then collected. (So if two parents earn the same $100k/year, a state would lose money by awarding a 50/50 schedule to the children (since, in most states, no child support would be paid from one of these equal earners to the other).) In some ways the strangest part is that each of the 50 states plus D.C. is instructed to develop its own guidelines. So every four years consultants get hired 51 times and government workers get paid to meet in 51 separate places to discuss the same federal Census/USDA “economic data on the cost of raising children.” Unsurprisingly they then come to such wildly different conclusions that a child’s cash value can double or triple with a one-mile trip across a state line. It gets further complicated by the fact that some states cap child support while others offer unlimited cash if you can sue a co-parent with a high enough income. Under a strict guideline calculation, for example, a child conceived and living in Connecticut would have roughly 2.7X the cash value if conceived and living 200′ over the border into Massachusetts (what if the parents had sex in Massachusetts but one lives in Connecticut? Then there is litigation over where to have litigation.)

This isn’t up for discussion but as citizens we might want to ask ourselves why we don’t have a system like in most other countries where the cash profit potential for being a parent is determined on a nationwide basis. Why are states having to pay consultants and employees every four years to do something that the USDA is already doing? (note that UCLA professor William Comanor says they’re doing it wrong, though of course Comanor and the USDA economists are much closer to agreeing than a lot of the state committees) Why are states trying to work with federal data that they don’t understand as well as the federal employees who gathered the data?

As an example of what happens when a state hires its own economists, Kansas is instructive. From our book:

Child support guidelines in Kansas are unusually precise. The state hired a pair of economists to develop a formula based on the USDA analysis of expenditures by Americans on children (see the Methodology chapter for a discussion of UCLA Professor of Economics Bill Comanor’s alternative approach). From this starting point, the economists built a formula that that uses 10 digits of precision. E.g., support for a single child if combined gross monthly income is over $15,500 is 2.795182393 times income raised to the 0.689838232 power. This is a declining exponential function that results in a lower percentage of income being ordered for child support as the total amount of income increases. I.e., unlike California, Kansas recognizes that if a person earning $1 million spends 10 percent of his or her income on a child, it does not follow that a person earning $1 billion would spend the same 10 percent ($100 million per year on one child!).

… one has to wonder about the rationale for establishing a formula with 10 digits of precision. That means that a person entitled to, for example, $2,795,182,393 ($2.8 billion) in child support over 18 years would be entitled to this exact number, not $2,795,182,392 or $2,795,182,394. For a person who was going to collect roughly $27,951 in annual child support, the formula would be precise to roughly 1/1,000th of a penny (and thus necessarily the last three digits would be rounded off). The economists who put forward this 10-digit constant note in their report that it is based on estimates from the USDA. And that the USDA estimates themselves are based on a Census Bureau survey of 21,000 households (out of about 125 million households total). As Kansas contains less than 10 percent of the U.S. population, presumably the survey in Kansas was only about 2,000 households. From this data set the state put forward a child support formula with more digits of precision than the world’s physicists, after more than 100 years of experimentation, have been able to assign to the gravitational constant. The Census Bureau itself says that, in the best case of everyone surveyed giving them perfect and precise answers to questions such as “How much did you spend on food last week?”, their numbers contain errors of at least 1 part in 100. Their statisticians note further than they have no way of estimating “nonsampling error” that is due to people giving them incorrect information. [emphasis added]

It is tough to think of a better illustration of a way to shrink an economy through government regulation than to have bureaucrats in 51 jurisdictions doing stuff like this in parallel.

So… if you have an opinion on the laws that affect 17 million children in the U.S., visit Joe Sorge’s site and then click through to the Federal Register to comment.

My own comment, for reference

I am part of a team of five authors that has researched divorce laws and customs in the 51 jurisdictions nationwide. For our forthcoming book we have interviewed roughly 100 divorce litigations nationwide as well as in nearly 10 foreign jurisdictions. We have also interviewed research psychologists, retired judges, and legislators.

We found that the U.S. was unique worldwide. We seem to be the only country where simultaneously (1) obtaining custody of a child can produce more cash than going to college and working at the average college graduate wage and (2) custody of a child is up for grabs and therefore open to litigation. In other countries either the maximum child support obtainable will cover only basic expenses, e.g., $2,000 to $8,000 per year in Scandinavia, or there are strong presumptions regarding how a custody dispute will be resolved, e.g., “mom always wins” or “children’s time split 50/50.” The result is that, as a society, we expose our children to far more custody litigation than any other country in the world. In addition to the psychic toll, this costs us close to $50 billion in cash every year and consumes additional public resources for investigating litigation-motivated claims that a custody defendant is a molester, prosecuting and imprisoning parents who don’t pay child support ordered, etc.

Consider two doctors in Chicago with two children and each having an after-tax income of just over $200,000 per year. Illinois generally favors the selection of a “primary parent” but, with two working parents, a time split of 60/40 or 55/45. Both parents will have to dedicate rooms for these children so the difference in actual cost at 55-percent time versus 45-percent time will be minimal. But the Illinois child support guidelines will result in the loser parent being ordered to pay the winner parent roughly $1 million. The difference between being the winner and loser is therefore roughly $2 million in after-tax wealth over an 18-year period. Illinois thus turns children who are fortunate (each parent has enough income to support both children comfortably) into children who are unfortunate (the parents accept the state’s invitation to wage a scorched-earth custody battle, each trying to be the winner with slightly more parenting time and $2 million in extra cash).

Based on our interviews, the more profitable child support is, above the roughly $4300 per year that UCLA economist William Comanor has found to what middle class parents actually spend on a real world child or the roughly $9,000 per year that the USDA says should cover the costs in a theoretical world, the more litigation occurs. Attorneys report that, compared to in jurisdictions where child support is capped at a modest sum, parents are much more likely to engage in aggressive litigation to obtain the $40,000 per year (tax-free) at the top of the Massachusetts guidelines for a single child, the $72,000 per year at the top of the Utah guidelines, or the potentially millions of dollars in annual child support available in California. (Note that “top of the guidelines” is not a limit; depending on the state, it may be merely a starting point when a high-income defendant is sued.) Attorneys in all of the states where children are profitable told us about parental savings being completely drained for litigation regarding the extent to which one parent would own a cash-producing asset (i.e., a child).

The attorneys’ perspective is backed up by research, e.g., Maya Rossin-Slater and Miriam Wust’s “Parental Responses to Child Support Obligations: Causal Evidence from Administrative Data.” Here’s how we summarized their work:

[the authors] found that what a mother might have gained financially from child support, the child lost in terms of reduced contact with and effort from the father: “mothers, who have substantial say in custody decisions [in Denmark], have the opposite incentive to refuse to share custody and instead receive the higher payment [for child support, compared to shared custody]. … fathers may treat financial transfers as substitutes for other forms of non-pecuniary investments and contact with children, which would also lead to a negative relationship between child support obligations and father-child co-residence.” The economists found that “an increase in the father’s obligation may lead to less attachment to his existing children and more time available to invest in new offspring.” (See the “Divorce Litigation” chapter for our interviewees’ perspective on how the main opposed interests in a divorce lawsuit are the plaintiff parent and the children, not the plaintiff and adult defendant.) The researchers also found that fathers who were ordered to pay more child support were more likely to have new children, thus diluting the time and energy available to prior children, and that fathers who were ordered to pay more child support reduced their working hours due to “market distortions generated by the ‘tax-like’ nature of child support mandates.” Mothers who received more child support cash for existing children were motivated to have additional children, either with or without a live-in partner: “mothers receiving higher child support payments for current children may expect higher transfers for future children if they separate again.” Note that this research was done with data from Denmark, where child support is tax-deductible and capped at $8,000 per year. The effects that they observed would presumably be larger in the U.S. where child support payments are not tax-deductible and can be $25-100,000 per year.

The incentives are simplest to understand in a state such as Wisconsin, where custody of one child entitles the winner to 17 percent of the loser parent’s pre-tax income (about 33 percent of after-tax income). This means that the person who has a one-night sexual encounter with a surgeon will have one third of a surgeon’s spending power. If that person has a second child with a different surgeon, as predicted by the Danish study above, he or she will now have two thirds of a surgeon’s spending power. If the child support recipient then has a third child with a third surgeon, he or she will have the same spending power as a surgeon. Politicians tell Americans to study STEM subjects and work hard in college, but a thoughtful child support plaintiff can enjoy a comparable spending power without ever attending college, working, or paying income tax.

Similarly, while politicians tell Americans to settle down and form stable families, the child support system provides financial incentives to do the opposite. Having three

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