Plain English with Derek Thompson - What’s the Secret of Success in America? This Economist Has Answers.

Episode Date: August 23, 2022

The economist Raj Chetty has spent much of the last decade trying to answer a very big question: What happened to the American Dream? In 1940, a child born into the average American household had a 92 percent chance of making more money than his or her parents. But in the last half century, something has gone wrong. A child born in 1980 had just a 50 percent chance of surpassing her parents’ income. So, in 40 years, earning more than your parents went from being a near certainty to no better than a coin flip. Marshaling enormous data sets in extremely creative ways, Chetty has shown that our chances of moving up in the world are exquisitely sensitive to where we grow up. In some cities, like Minneapolis, the American Dream seems to be very much alive. In other places, the poor are trapped in poverty for generations. So, the trillion-dollar question here is: If some neighborhoods in America are like Miracle-Gro for opportunity, what are the active ingredients? What makes a place special? In today's episode, Chetty gives listeners a new vocabulary to think about success and inequality in America, with ideas like "father presence," "friending bias," and "Lost Einsteins." If you’d like to see a literal map of American inequality built with Chetty’s data, I would encourage you for this episode alone to go multi-media and visit www.socialcapital.org to see how your neighborhood fares as an engine of upward mobility. That way, you’ll have a fuller sense of where the American Dream is dying—and what we have to do to bring it back. If you have questions, observations, or ideas for future episodes, email us at [e-mail]. You can find us on TikTok at www.tiktok.com/@plainenglish_ Host: Derek Thompson Guest: Raj Chetty Producer: Devon Manze Learn more about your ad choices. Visit podcastchoices.com/adchoices

I'm Matt Bellany, founding partner of Puck News, and I'm covering the inside conversation about money and power in Hollywood. With my new show, The Town, I'm going to take you inside Hollywood with exclusive insight on what people in show business are actually talking about. Multiple times a week, I'll talk to some of the smartest people I know, journalists, insiders, all of whom can break down the hottest topics in entertainment to tell you what's really going on. Listen now. Today, we're talking about what is probably my favorite subject in all of economics. It's what economists call upward mobility and what most people call the American dream. The phrase, the American dream, was invented during the Great Depression in a 1931 book by James Truslow Adams. He defined it as, quote, that dream of a land in which life should be better and richer and fuller for everyone.

But more concretely, it was the idea that America's children should expect to do better than their parents, provided that they work hard. In the decades after Truslow Adams coined this term, the American dream became an honest-to-God reality. In 1940, a child born into the average American household had a 92% chance of making more money than his or her parents. But in the last half century, something has gone curiously wrong. A child born in the 1980s has just a 50% chance of surpassing her parents' income.

So think about that. In 40 years, between the 1940s and 1980s, earning more than your parents went from being a near certainty to no better than a coin flip. It's as if the American dream went from being this widespread reality to essentially a lottery. How did this happen? The economist Roz Chetty has spent much of the last decade trying to answer that question. In a series of blockbuster papers, he and his team have painted an extraordinary picture of what I've come to think of as the geography of success in America. With enormous data sets being used in extremely creative ways, he's shown that our chances of moving up in the world are exquisitely sensitive to where we grow up and where we live. in some parts of the country, like say Minneapolis,

the American dream seems to be very much alive. Upward mobility is strong. But in other parts of the country, the poor are trapped in poverty for generations and generations. So the trillion-dollar question here is, why? If some neighborhoods in America are like miracle growth for opportunity, what are the active ingredients? What makes a place special?

And when we know what makes a place special, when we know the active ingredients of success, how do we spread them nationwide? Today's guest is Raj Chetty. My goal for this show is to give listeners a new vocabulary to think about success and inequality in America. You'll hear about ideas like father presence,

friending bias, lost Einstein's. And if you'd like to see a literal map of American inequality that's built with Chetty's data, I would encourage you for this episode only to go multimedia. Visit socialcapital.org to see how your neighborhood fares as an engine of upward mobility. And that way, I think you'll have a fuller sense of where the American dream is dying and what we have to do to bring it back. I'm Derek Thompson.

This is plain English. Professor Raj Chetty, welcome to the podcast. Thanks for having me, Derek. I'd like to start with a personal question. Tell me how you grew up and how you became an economist. Yeah, so my path to economics, I think, starts actually with my parents' path to coming to the United States. So my parents grew up in small villages in South India and the state called Tamil Nadu. In relatively low-income families, large families, at that time, people had many kids. And what they would typically choose to do is educate one of the kids because they didn't have money to send everybody to

high school or to college and so on. And it so happened that in my parents' families, my dad was the one who got a chance to get a higher education. And my mom, particularly unusually at that time, because it was unusual for women to do higher education, it so happened that a college opened right near her house in the town she was growing up in. And that gave her an opportunity to go to college, which was unheard of for women at that time, especially to go away from their home. And she went down to become the first doctor, first female doctor from our community in South India. And so building off of that, my parents came to the United States. My dad got a chance to come to UW Madison to do a PhD. And he ended up doing a PhD. He started out thinking about operations,

research and statistics, and ended up doing work in econometrics. And so I grew up in a family with my mom being a physician, researcher, and my dad being a researcher in statistics and econometrics and had some of that exposure from early childhood, thinking about social issues a lot. Growing up in India until I was nine years old, my parents went back to India because they wanted to raise their kids there, and then coming to the U.S. when I was nine, seeing the incredible contrast between the two countries,

seeing the contrast between the opportunities I happen to have and my cousins had, whose parents hadn't gotten those opportunities to get a higher education, and starting to wonder, you know, how does this all add up? why do I happen to have this chance to say go to Harvard, which is where I went to college, and others don't, and how can you create better opportunities for everyone?

And that's how I got interested in these questions. Your story offers such an appropriate jumping off point for the rest of this discussion, because it raises such interesting questions about life and success. Like, where does upward mobility come from? Where does opportunity live? How can moving between two places change the course of a person's life? I want to get into your research because it's just so unbelievably interesting and it gets to this

really profound question of the American dream and the state of the American dream. So one of the first papers that you published in this suite of research on upward mobility was about children who changed cities. What did you find in that paper that you published with Nathan Hendren? Yeah, so in some of our early work, we began by using large data sets, anonymized tax returns covering millions of Americans to look at how where you grew up might affect your prospects of achieving the American dream moving up in the income distribution. And so we started by looking at a set of kids who were born in the early 1980s, essentially all kids born in America in the early

1980s. We mapped them back to where they grew up. And we asked if we took a set of kids who started out in low-income families, families making, say, around $30,000 a year, where would these kids end up on average themselves if we track them forward, 30 years and measured their incomes when they're around 30 or 35 years old. And what we found is that in some places, like much of the center of the country, places like Dubuque, Iowa, parts of North Dakota, kids who grew up in low-income families had great chances of rising up. Many of them were earning $45,000, $50,000 a year on average well beyond where their parents were a generation ago. But then there were other parts of the country, much of the southeast, cities like Charlotte and Atlanta, cities like

Detroit, where kids who grew up in families with the exact same levels of income starting out, ended up in very different situations on average. On average, in some cases, having lower levels of income than their parents did a generation ago, despite the fact that there's been an enormous amount of economic growth in the U.S. over the past 30 years. And so that was the first jumping off point for a lot of what I've been thinking about over the past few years, which is that children's chances for rising up really vary a lot across places within the United States. And that first piece of research was so interesting to me, I think, for two reasons. Number one, it was published with this beautiful map that was color-coded so people could

zoom in on their zip code, on their neighborhood, and say, is my neighborhood a place where the American dream lives or a place where the American dream is struggling and falling behind? But that leads to the second point, which is that there is no one American dream. There is no one upward mobility rate for the entire country. Instead, you have this extraordinary constellation of neighborhoods, some of which have the upward mobility of the most successful countries in the world when it comes to this sort of thing, like Denmark, and others in which upward mobility was basically utterly stalled. So when I look at this, I see an optimistic story and a pessimistic one. The optimistic story is that opportunity exists.

Families can move to a different city and completely change the opportunity of their children. But the dark side to that is that it suggests that talent in America is widespread, but opportunity itself is unevenly distributed. And so you have to either win the lottery by being born into a place like Dubuque or Salt Lake City or move to where lottery winners already exist. Tell me a little bit about this aspect of it that you found, that children who move, especially when they're young, tend to benefit from those moves by moving into places that have higher upward mobility. Yeah, that's right, Derek. So, you know, once we saw this basic pattern that there's this real tremendous variation in rates of upward mobility across different places. And I should note,

it's not just across neighborhoods, right? As you put it, there's the constellation of rates of upward mobility across different types of subgroups as well. So black Americans versus white Americans, Native Americans, Asian folks, you know, even within a given neighborhood, you see tremendously different opportunities for different folks. And so, you know, I think exactly as you said, is the American dream alive? Well, the answer to that question depends greatly, not just on where you grew up, but, you know, the color of your skin and what type of family you were born into and so forth. And so motivated by that variation, you know, naturally the next question for us is, what is causing that? Is it just about different types of people living in different places or

is it something that's actually different about what one place is doing relative to another? And so one first step to starting to understand that was to look at families that move between neighborhoods. And the idea is, if I look at kids who, let's say, were randomly placed in one neighborhood versus another, would I see very different outcomes for them? And if I did, then that would suggest that, you know, the environment in which you grow up really matters quite a bit. Now, what we did in practice was a series of studies where we basically tracked millions of families that moved across different neighborhoods in America. And what we found in a nutshell was that the earlier you moved to a place where we see high levels of upward mobility, a place like Dubuque

or within New York City, a place like Queens, as opposed to the Bronx, where we see much higher rates of upward mobility in Queens relative to Bronx, we find that every extra year that you spend growing up in one of these high opportunity places, the better your outcomes look as an adult, the higher your level of earnings, the higher the likelihood you go to college, the lower the chance you have a teenage birth, the lower the chance you have a teenage birth, the lower the chance you're incarcerated. So on a spectrum of outcomes you might care about, you find what we call dosage effects. Every extra year spent in one of these favorable environments seems to systematically improve kids' outcomes in the long run. It's really interesting because I don't want to make

this entirely a conversation about parenting, but there's a separate and parallel debate about how much does parenting matter. It's very difficult to prove that lots of things that parents obsess about, like, you know, playing Mozart to their children when they're 18 months old, actually have any effect on lifetime earnings or likelihood of working or likelihood of, you know, participating in crime. But one thing that we do know is that where parents move their children, where parents decide to live and raise their children, does have extraordinary effects on their lifetime earnings, on their likelihood of working, on their likelihood of committing crimes. And so your paper was not explicitly about that. In no way was your paper.

a parenting paper, but it's interesting to think of the ways that it intersects with the parenting research about how maybe the most important decision that you can make for your child after your child has been born and the genetics are already baked into that individual are where you move the child. Before we move on, just any comment you want to make on the degree to which your research, which is about the American dream, intersects with the concept of parenting and how to parent. Yeah, Derek, I'm glad you brought that up because sometimes people frame this as sort of debate between, is family and parenting important or is it about neighborhoods? And I don't see it as an either or, as your question sort of illustrates. Part of the choice that parents make is where to

live, which of course encompasses where your kids go to school, who their friends end up being, and lots of other things that can shape kids' life outcomes. I also think there's good reason to believe that various other parenting decisions, but while each individual one, do you put your child in music lessons or not, you know, it might be difficult to discern the particular impact of that. But surely overall, and I think there's good evidence of this from things like adoption studies where we see kids who end up in one family environment versus other, overall these things matter quite a bit. And so I don't see these as an either or. You can, you know, both try to figure out how you improve parenting. You can also think about how you

improve neighborhood environments, which may not, and I'm sure we'll come to this in more detail, you know, it's not just about moving to a different place. It might also be about figuring out how you improve the environment in a given place once we understand the mechanisms through which neighborhoods are mattering. And so my takeaway in the context of parenting is, yes, this is one of many important decisions parents can make. I think parenting is incredibly important, perhaps even more important than the neighborhoods at some level. But from a policy perspective, I think it's much harder to figure out how you change parenting in a way that I think it's at least easier. I'm not saying it's easy, but you can think of some ways that you might change environmental conditions outside

the family. You can change things like schools. You can have people move to different neighborhoods through affordable housing programs and so forth. I don't want to spend too much time on having you describe exactly what these maps look like. If someone wants to see the map, I would strongly encourage them to Google it. But just give me a little flavor. So I know that for example, in Salt Lake City, a child growing up in the poorest fifth of homes has about an 11% chance of reaching the top fifth. That's relatively high for the U.S. In Milwaukee, however, the odds are less than half that. So what can you say broadly about the regions or cities in America that seem to thrive when it comes to upward mobility versus the places that are not

thriving? Yeah. So, Derek, I'd certainly encourage anyone who's interested to just look up the Opportunity Atlas where you can literally type in your address and look at the statistics that I'm about to describe, you know, in your zip code area by area across the U.S. At a broad level, here's the picture I keep in my mind. So first, there's broad variation across the United States where the rural Midwest tends to have very high rates of upward mobility. Parts of the coast, the northeast and the west coast have pretty high rates of upward mobility. There are cities like Salt Lake City, much of Utah has high levels of upward mobility. And then you have very low levels of upward mobility in places like the southeast,

in much of the industrial Midwest, the urban centers, and the Midwest, and so on. There are other salient things that you'll see in the map. For instance, Native American reservations pop out as having very low rates of upward mobility, which will be no surprise to folks who know about the chronic persistence of poverty on reservations. Now, what I think is maybe even more important than that national picture is if you imagine zooming in and looking at the map now within your city, within New York City, within Seattle, within Cleveland, what is striking is that the amount of variation in upward mobility you're going to see is almost the same as what you see across cities at the national level.

And what that teaches us is that this is not about broad differences across states or even cities in terms of labor markets or the types of jobs people have or things like that. No, it's actually about, you know, you live in one part of New York and I live two, two miles down the street in another part of New York. And we see that kids growing just a few blocks apart, growing up a few blocks apart, have systematically different outcomes on average. And so the roots of economic opportunity really appear to be hyper-local as opposed to driven by broad regional factors. So the trillion-dollar question here that I imagine a lot of people who are not familiar with your work or they're just buzzing and at the edge of their seat to be like, well, tell me why do some

places nurture success more than others. And the way that I think about this is almost like microclimates. Like if you talk to a farmer, especially if they're dealing with a delicate crop, like a certain grape, they'll say, you know, the grape grows very differently if you plant it on the north side of this mountain or the south side of the hill because of soil quality or sunlight exposure or wind. And what your research tells us is that the same is true not only of regions and cities, but of neighborhoods, that there are distinct microclimates that change people. opportunity to grow. Except whereas with farming, we've had literally thousands of years to study agriculture and understand the ingredients of what makes a good microclimate for a particular

crop, we've only had a few decades of experience to understand what makes a good microclimate, so to speak, for social mobility. So before we start to answer this trillion-dollar question, because you have some answers to it, is that an okay summary of your approach, this sort of microclimate metaphor? I think it's a great analogy. I would embellish it in some ways by drawing a distinction between the social factors that affect economic mobility and the kind of physical or agricultural factors that affect productivity in the context of crops, right? So I think when we look at different neighborhoods, it's not that we literally think there's some physical aspect to one side of the hill versus the other side of the hill that's helping kids do better, unlike.

with crops. Here, I think it's more about the neighborhood is a place where lots of things come together that affect kids' outcomes, like schools vary across neighborhoods, the people you're interacting with, you know, maybe the types of jobs that people are doing in that area, the socioeconomic composition of the neighborhood and so forth. And so one of the things that makes this tricky, Derek, and I think is sort of illustrated by your analogy, setting aside climate change, you might think that things like agricultural productivity are relatively stable over time. Whereas with neighborhoods, at some level, the whole point of our research is not just to figure out how to help people move from place A to place B, but how you actually increase

opportunity, how you change the soil, if you will, in a given place. And that, I think, is feasible because it's not literally about the soil. It's about what is going on more broadly in that place that's affecting kids' outcomes. That's great. So let's talk about the soil so we could think about how to change it. In your very latest paper that was released this year, you identified what you said might be the single most important ingredient that you've identified in all of your work on this subject. And it has to do, interestingly enough, with friendship. So tell me about this most recent finding. Yeah. So just as a bit of context for how we got to friendship, so over the years, once we put out this granular data on the opportunity appellus on how

economic mobility varies across places, you know, naturally lots of people were interested in the trillion-dollar question, what is driving this variation? And we and many other social scientists, folks in the policy space, began to explore various different predictors of these differences. So, you know, look at things like poverty rates, the share of two-parent families in an area, the quality of schools in an area, access to higher education, urban versus rural factors, you know, lots of things like that. And people documented many strong relationships, places with higher levels of poverty tend to have lower levels of upward mobility. Places with more inequality tend to have lower levels of upward mobility.

More racially segregated neighborhoods are places where it's harder to rise up. But there was always a sense that we hadn't fully captured the picture. You could tell that we were getting at parts of it with all these variables, but there was something left to be explained. And a number of people pointed out to me over the years, and from introspection, going back to my own personal story, I had the sense that ideas of social capital, who you're connected to, who you're influenced by might be important.

Certainly when I think about my own family's experience, my parents can point to a couple of people who they happen to meet who brought them to the United States or this college that opened and somebody suggested to my mom's dad that it would be really good idea for her to go to college. And so social scientists have been thinking about the idea of social capital for 100 years. going back to long literature and sociology, brought to the public, I think, largely by my colleague Bob Putnam in a famous book, Bowling Alone, in a series of subsequent books about social capital and how it's deteriorated in the United States and how it might matter for lots of outcomes. And so when I started to think about social capital, you know, a lot of our team's approach is to think, how can we quantitatively precisely define these concepts that might matter for society? how can we measure them systematically, often using the tools of big data,

and how can we then take that to understand if and how these things might matter and how they can be changed. And so what we did in this most recent work on friendships and social capital is teamed up with Facebook to use their data, obviously large-scale data on how people are interacting, to get what I think are the most precise and granular measures to date of social interaction. And in particular, we focus on a measure that we can. call economic connectedness, the extent to which low and high income folks are interacting with each other in a given place. Think of it as basically a measure of cross-class interaction. And that turns out to be one of the strongest predictors of economic mobility to date.

If you grow up in a place where low and high-income folks are interacting more, you as a person growing up in the low-income family are much more likely to rise up in the next generation. And what's really interesting about this is that there's a dark side to it that you call friending bias. Tell me a little bit about what friending bias is. Yeah. So what we see in the data is that there's a lot of variation across places in the extent to which low and high income people are interacting. There's some places where if you look at the lower income folks on Facebook, they have many high income friends. There are other places where it's just like disconnected across class lines. So what is driving that variation? They're really two sorts of. sources. One is what we call exposure, which is just the simple idea that if low and high income folks go to different schools, attend different churches, live in different neighborhoods, they're not going to be friends with each other, right? You're presumably not going to be friends with people you never meet. And so a lack of exposure can contribute to social disconnection

across class lines. But there's a second force, which we introduce and focus on in this paper, that we call friending bias, which is the idea that even if you and I go to the same school, even if you and I live across the street from each other, we still might not interact with each other because we might go our own separate ways and hang out with people who look like us and spend time with people who have similar interests or similar backgrounds and so forth. And so what we ask in this study is, given that this type of social disconnection seems to matter in a predictive sense for economic mobility, suppose we would, want to figure out how to increase connection across class lines, either because we care about

increasing economic mobility or because we just want to have a society that's more connected, which can obviously be useful for lots of things, from social unrest to political considerations and so forth. We might want to have a more connected society. And so what we sought to do is quantify how much of the social disconnection between low and high income folks is coming from a lack of exposure versus this friending bias, the idea that even when we have people in the same room, they're not friends with each other. And with the Facebook data, we can figure out where friendships were made and essentially figure out what fraction of the social disconnection is due to these two forces. And what we end up finding is that about half of the social disconnection in America between

low and high income folks is coming from a lack of exposure. The fact that there's a lot of segregation, We go to different schools, we live in different places and so on. But the remaining half is explained by friending bias. And so what that means is even if we were to manage to perfectly integrate every neighborhood, every college, every school, every recreational group, and so on, we would still have half of the social disconnection between low and high income folks left in the United States. And so what that shows us is it's very important to think about how we address friending bias, just like a lot of us have been thinking about how to address a lack of exposure through changes

and zoning policies, affordable housing, school vouchers, and things like that. It's so interesting to think that there is only so much that we can do exclusively by focusing on policies like zoning, that there's something else that's cultural that has to be overcome in order to score highly on this economic interconnectedness value that you're looking at. I want to pull in education here because there's something that you're capturing with friendships. It's very subtle and interesting. according to your research, the highest-income Americans make eight times more of their friends from college than the lowest-income Americans. Low-income Americans are much more likely to make friends

from their neighborhood. So let's look at college for a second. I think a lot of people, a lot of optimists about America's education system, regard higher education as our engine of opportunity. That's the cliche. The colleges are an engine of opportunity. And clearly some of them are. But you found in one of your papers that the most elite schools that are the most successful of being engines of opportunity in terms of launching people into the top 1%, the top 0.1%, have very, very few poor students. You found that the most prestigious schools, we're talking Harvard, Yale, Stanford, MIT, a child from the richest 1% of families is 77 times more likely to attend

than a child from a family in the poorest quintile. There are more kids in these schools from the top 1% than the bottom 60%. At a big picture level, what does this tell us about the state of elite education in America? Yeah, so, Derek, you know, in parallel to our work on neighborhoods and economic opportunity, which we focused on to this point, you can also look at how economic mobility varies across colleges. And as you note with those statistics, what you find is a very stark picture where there are are some colleges in America where you see kids from low-income families having terrific outcomes. So kids from low-income families who happen to attend places like Harvard or Duke or the University

of Chicago or other elite private colleges, they have terrific outcomes on average. So that looks great in terms of the idea that those colleges might provide a pathway to upward mobility. The problem is that what matters for your contribution to upward mobility is not just how well those kids do conditional on getting there, but how many of those kids there are to begin with. And on that front, I think the U.S. higher education system unfortunately suffers a great deal because a lot of the colleges that are launching people into the part of the income distribution. And it's not just about money. I should emphasize, right, these are often positions of influence. These are people who are, you know, the leading politicians, business leaders, scientists and so forth, shaping society in various ways. You know, those colleges that are creating that class in society, tend to have very, very few kids from low-income families. And you quoted the statistics. You know, you're far more likely to attend a college like Harvard,

despite the many efforts Harvard has made to expand financial aid and do outreach and so forth. Even after all of that, kids from high-income families are far more likely to attend Harvard and other similar colleges than kids from lower-income families. And so what that creates is, I think, actually the converse of what we would ideally hope for our higher education system, which is that it creates, it's an engine of upward mobility.

It could actually turn out to be an engine of stratification because if you only have the richest kids attending the colleges that provide those pathways to those top jobs and lower-income kids are attending colleges that don't give you that kind of access, then you end up kind of calcifying society where if your parents happen to be wealthy, then you have access to a set of opportunities

that are going to make you wealthy in the next generation. We're just going to kind of persist along like that, and that's going to put the American dream out of reach for many kids. I remember when I read that paper viewers the first time, it made me think that America's most prestigious schools are kind of like factories working below half capacity. They have the potential to transform thousands, millions of lives, thanks to their resources, their peers, their networks, their teachers.

But because they aren't taking in more low-income students, they're not actually doing the work of being these miracles of upward mobility that they're often given credit for. At the same time, it's important to say that the vast majority of Americans are not going to Harvard and MIT and Yale, and there are a lot of mid-tier public institutions. You mentioned in the papers, State University of New York at Stony Brook, California State University in Los Angeles, Pace University also in New York, that do seem to be pretty successful at bringing in teenagers and students who are middle class and lower middle class and graduating them into the upper echelons or at least the middle upper echelons of American

society. Do we know, do we have a sense of what those schools are doing right? Or at this point, do we simply know they're doing something right and we should probably try to figure it out later? Yeah, I mean, I think Derek, that's basically where we are in terms of the frontier of understanding. how this all works, that it's exactly these mid-tier public institutions, and I want to stress mid-tier, right? Initially, when we started doing this work, I had the intuition that maybe it would be the state flagships, places like University of Michigan, Ann Arbor, UC Berkeley, you know, the big public schools that lots of folks associate with good outcomes, that would deliver the highest levels of upward mobility. And that's not actually the case because many of those colleges have very few

low-income kids as well, even though they are public institutions. They have terrific outcomes, but they don't serve that many low-income kids. So it's something about these mid-tier public institutions that are both serving many low-income kids and having pretty good outcomes. Now, I don't think we quite know exactly what they're doing. I should also note that some of this is probably about selection. The types of kids who are attending a place like CUNY or State University of New York, Stony Brook, are different. from immigrant families, they are from different types of backgrounds who might have succeeded, even if they had attended other colleges. So that's certainly part of the picture. But our sense is

there is an important value added of these institutions. And we haven't quite figured out yet what it is, but that's definitely something our team and others are focused on understanding in the years to come. So we've talked about friendship. We've talked about economic interconnectedness. We've talked a little bit about the role that colleges can play as well. Another significant variable that you've identified in your research is something called father presence. One of the best predictors for high opportunity places or neighborhoods seems to be the number of intact families. And that seems obvious at first because a second parent means more income or more stability. But what's so interesting about your finding is that upward mobility

was most strongly correlated with two parent families in the neighborhood, not necessarily in the home. I'm not sure, to be honest, that I fully understand. understand what's going on here. So tell me what you think you understand about father presence and the role that plays in upward mobility. Yeah. So first, what is the empirical finding here? So this turns out, I think, to be particularly important, the context of understanding racial disparities. As I briefly mentioned earlier, black kids, for example, and black boys in particular, have much lower chances of rising up in the income distribution than white boys. That's a very clear pattern we find in the data. And so why do I mention that in the

context of father presence, you know, we started to then think about, well, what is it about the types of neighborhoods, the handful of neighborhoods where we see black boys having pretty good outcomes, a place like Silver Spring, Maryland, for example. And one of the predictors that comes out clearly is that black boys who grow up in neighborhoods where they're more black fathers present, and black fathers specifically, not white fathers. Black boys who grow up in those kinds of neighborhoods have better chances of rising up. So what might be going on? One possibility is that this is about things like role model effects

or changes in aspirations. You know, when you see a set of folks from your own community, people who you can relate to, you can see yourself in their shoes, working in jobs that are stable, providing a career pathway, they may have gone to college and so forth, you start thinking about things differently, relative to growing up in an environment where everyone you've seen has been had contact with the criminal justice system and has been incarcerated and, you know, that set of pathways looks very different

than what you might otherwise have been exposed to. And so in a way, this connects back to me to the recent work on friending bias and social capital, where my sense is the way in which those things might matter is by shaping kids' aspirations, by giving them information about opportunities they might not otherwise have thought of by connecting them to different types of folks. It's all about how the social environment going beyond the family might shape what is happening within the family itself, which then affects the child growing up in that family. There's the anthropological study, which I don't know if it's apocryphal, but the idea that I think they initially did it with monkeys, that monkeys are the average of the five monkeys closest

to them. And by equivalency, we are the average of the five people closest to us. how do we talk, how do we think, what music do we like, what sports do we like, what are our hobbies? Well, look at the five people that are closest to us, and we are the aggregate exposure effect of their influences. It connects to the friendship study, but I think it also connects to one of my favorite papers of years that we haven't yet mentioned, which is the Lost Einstein's paper. So talking about role modeling and aspirations, you found that children from rich families are much more likely to become inventors than children from poor families, even if you hold a measure of talent constant, even if the children from poor families are scoring just as highly on math and

science test. And you call these lost opportunities are lost Einstein's, these thousands, maybe millions of children who are brilliant but poor and as a result don't invent as much as they're similarly smart or not as smart rich peers. And more specifically, and this is what I think is so interesting, you found that growing up around patent holders, even as specific as patent holders for like radio amplifiers or like submarine technology, seems to make children more likely to become inventors in amplifiers and submarine technology.

So tell me a little bit about the lost Einstein paper and what you think was most important from that one. Yeah, so you summarized it very well. And so, you know, what we did there is linked data on the universe of patent records in the U.S., which are publicly available. to information from tax returns to basically look at who becomes an inventor in America. Why is this interesting to look at? Well, innovation and science is one path to upward mobility for

those kids. But importantly, from a social point of view, most economists think of it as the key driver of economic growth. So when we have more inventors, more people inventing new drugs, new technologies, that makes everybody in society better off, right? And so when, if we have a situation where there are lots of kids from certain backgrounds who could become inventors, but they're not, that not only limits their own prospects, but it's actually lost potential, lost Einstein's that end up affecting all of us and put us in a worse position as society as a whole. And so what we did in that studies tried to understand what it is

that's making kids from higher income backgrounds, much more likely to invent than others. And we found that exposure seems quite important, growing up around scientists, growing up around in mentors, seems quite important. And as you noted, Derek, it's not just about generally growing up in a place like Silicon Valley or Austin, Texas, or something like that. It seems to influence exactly the type of innovation you do. And what matters is not just overall levels of innovation in your area, but whether people of your type, of your gender, of your race are in mentors. So we find, for instance, that if women grow up around more female in

mentors in a particular field, they're much more likely to go on to have a patent in that field. But if they grow up around men and men taking exactly that same field, it has essentially no impact at all. So once again, and was this type of evidence that got me interested in studying social capital and friending bias more systematically in the recent Facebook work, once again, this points to the view that were influenced by those we're around in very specific ways, and that shapes our aspirations, shapes what we end up doing. And often kids from lower income backgrounds, kids from underrepresented minority backgrounds, end up probably not having any of those exposures that might show them paths through which they could be very successful as well.

So in reviewing what could possibly make for the ideal microclimate, for upward mobility, we have cross-class friendships being a really important factor. We have father presence being a really important factor. We see that there are some schools that are incredibly special in terms of their ability to move students into the top 20 or even top 1% of total earners. And then finally, we have this exposure effect with the entrepreneurial and scientific community that young children and even teenagers can be inspired to follow in the footsteps of inventors and scientists, maybe even economists, anthropologists that they happen to live around. So let's conclude with thinking about what we can do about this. It seems to me, and maybe this is my horrific

oversimplification, that there's sort of two ways you can go about fixing the problem. You can make it easier for people born in places that are bad for upward mobility, to move to places that are good for upward mobility, and hope that cumulative exposure, the dosing effect, as you mentioned, will over time make them more likely to benefit from that economic microclimate. Or we can change the that those young people are growing up in. And obviously it's not an either or we should try to do both, make it easier for people to move and improve these individual neighborhoods. Tell me a little bit about what you and opportunity insights,

your organization, are trying to do to fix this. How do you take economic conclusions and apply them to the real world? Yeah. So I think you laid out very well what I see is the two different approaches in the context of place-based policies to improve. economic opportunity. One is to give people access to higher opportunity neighborhoods. So we are doing work on the ground, for instance, in collaboration with housing authorities across the country to help folks who are getting housing vouchers from the federal government

move to higher opportunity neighborhoods. As a bit of context, the U.S. government spends about $45 billion per year on various affordable housing programs, the largest component of which are housing choice vouchers, which give families rental assistance to find more stable housing, in better neighborhoods and so forth. What we find in our data is somewhat surprisingly, despite receiving that assistance, most families still currently live in relatively high poverty, low-opportunity neighborhoods that may not have the best schools, that may not give you the type of cross-class interactions that seem relevant and so forth.

And so we, as an illustration of how I think you can take these data and really try to make a change on the ground, we teamed up with the Seattle and King County Housing Authorities to conduct a pilot study that we call creating moves to opportunity. that basically gave families assistance if they wanted to to move to a higher opportunity place, a counselor who would help identify units that might work for your family, talk with landlords on your behalf, give you a little bit of financial assistance to pay a security deposit or an application fee. And what we found is just that eliminating those few small barriers that families sometimes face

in finding housing in a different neighborhood can have a profound impact on where families choose to live, running this as a randomized trial, we found that the fraction of families who moved to high opportunity areas jumped from 15% in the control group that didn't receive those additional services to nearly 60% in the treatment group. And so what that shows is we can make relatively straightforward changes to policy that can dramatically amplify the impacts of existing programs without much greater expense to the federal government. So in light of that evidence, HUD, the Housing and Urban Development Agency of the federal government, is now spending about $75 million to replicate what we did in Seattle and nine other cities across the country.

And there's a bill working its way through Congress with bipartisan sponsorship to potentially expand the housing voucher program by $5 billion per year and perhaps give many kids access to better neighborhoods where their prospects might improve. So that's an illustration of the type of thing we can do to, in a sense, reduce segregation in America, give people choices about where live, not force anyone to move, not displace people, just kind of enable choice, which I think is a sensible thing to do. But of course, that can't be the only solution we take. Not everyone wants to move. It's clearly not a scalable solution. Not everyone can move. And so really, I think for me, the work on neighborhoods

and all the research we've been talking about, its greatest values, not so much in showing that we should help people move to a different neighborhood, but rather that it gives us kind of a lens. Think of it as a new microscope to study the determinants of economic mobility in a way that we've never had before. By comparing this neighborhood versus that neighborhood in your city, you can start to understand in the way that we've been doing during this conversation what it is that actually makes some places better than others. And then we can think about how we can intervene in the lower opportunity places to do things like increase cross-class interaction, perhaps, or change the nature of schools.

We didn't spend as much time on K through 12 schools, but I think elementary education and early childhood education are very important determinants of kids' long-term outcomes as well. And you can think about testing interventions in each of these different domains and then systematically tracking the outcomes with the type of data our team has assembled and has been studying to understand what it is

that really can improve economic opportunity in a given place. So I think much more remains to be learned there. We don't have all the answers yet, but I think we're making progress, which makes me optimistic. I'm glad that you mentioned K through 12 because there are variables that we didn't have time to discuss. We didn't have time to discuss pre-K or K through 12 or environmental justice, environmental inequality. There's so many factors to look at when it comes to how does a person become a person? We're sort of, you know, we're taking just the top of the iceberg here. But let me close with this question.

what's the most interesting question that you don't know the answer to yet, that you are buzzing to learn the answer to yet? The same way that maybe if we had this conversation three years ago, you might have said, I think there's something about social capital. There's something about friendships that I haven't quite put my finger on, but I think is really powerful. What is that next question that you're really obsessed with answering? So one aspect of economic opportunity that we've touched on briefly, but is clearly central, and I think people are recognizing that given the conversation in the past couple of years in the U.S. are racial disparities in economic opportunity.

The dramatic differences in rates of upward mobility that we see between black and white men. Interestingly, not so much black and white women, but specifically black men have lower odds of rising up than white men. And moreover, the much higher rates of downward mobility for black men than white men. So something I found quite shocking in our earlier work is I thought, you know, once you have a certain level of income, maybe race would become less important and play less of a role. But what we find is even if you grow up in the most affluent families, go to the best schools and so on, black boys have a much higher chance of falling down the income ladder in the next generation than white boys do.

And so many people have asked me, and I feel like I have not had a good answer, what is it exactly that's driving those sharp disparities in outcomes for black and white kids who grow up in exactly the same neighborhoods? in affluent families, and so forth. I, you know, I think figuring out the answer to that could be quite important in understanding how we narrow racial disparities in America going forward and in understanding more broadly what the determinants of economic opportunity are. So that's a question I would certainly like to have an answer to and hope to spend some time studying in the years to come. That's a massive question. Well, thank you for your research and thank you for your time, Professor Raj Chetty. I really appreciate it.

Thank you, Derek. My pleasure. I'm Derek Thompson. That was Plain English. Thanks very much to our producer, Devin Manzi. If you have any questions, comments, ideas for future episodes, please shoot us an email at plain English at Spotify.com. That's plain, no space, English at Spotify.com. And don't forget to check out our new, beautiful TikTok page. You can find us at at plain English underscore. Yes, that's. at plain English underscore, and we'll see you on the TikToks. Thanks very much.