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Raj Chetty’s Latest Study Demonstrates that High Inequality = Lost Opportunity and “Lost Einsteins”

February 4, 2018

Early last December when I was on vacation away from the internet I missed an article by NYTimes columnist David Leonardt titled “Lost Einsteins: The Innovations We’re Missing“. In the article Mr. Leonardt describes the most recent research of Stanford professor Raj Chetty, who has done extensive work documenting the effects of income inequality on our country. His latest research examines the impact of income inequality on invention, and the results show that more than half of our students are missing out on opportunities to develop the backgrounds needed to become inventors. Mr. Leonardt, in examining Mr. Chetty’s research and the actions of Congress regarding “tax reform” writes:

The project’s latest paper, out Sunday, looks at who becomes an inventor — and who doesn’t. The results are disturbing. They have left me stewing over how many breakthrough innovations we have missed because of extreme inequality. The findings also make me even more frustrated by new tax legislation that will worsen inequality. This Congress is solving economic problems that don’t exist and aggravating those that do.

The key phrase in the research paper is “lost Einsteins.” It’s a reference to people who could “have had highly impactful innovations” if they had been able to pursue the opportunities they deserved, the authors write. Nobody knows precisely who the lost Einsteins are, of course, but there is little doubt that they exist.

Using tax records and data on the issuance of patents, Mr. Chetty’s research team reached the following conclusions:

  • children who excelled in math were far more likely to become inventors

  • Only the top students who also came from high-income families had a decent chance to become an inventor

  • Low-income students who are among the very best math students — those who score in the top 5 percent of all third graders — are no more likely to become inventors than below-average math students from affluent families

  • Middle-class students have innovation rates closer to that of the poor than the affluent

  • children from the southeastern United States are notably unlikely to become inventors.

  • (innovation rates) are low for African-Americans and Latinos

  • innovation rates are low for women

There are a host of conclusions that could be drawn from these findings. Mr. Leonardt focuses on the clearest and most unarguable ones and concludes:

Our society appears to be missing out on most potential inventors from these groups. And these groups together make up most of the American population.

The groups also span the political left and right — a reminder that Americans of different tribes have a common interest in attacking inequality.

How can we do so? We can stop showering huge tax breaks on the affluent and reinvest the money where it’s needed. We can work to narrow educational inequities.

Mr. Leonardt also offers another possibility drawn from Mr. Chetty’s research: we could offer opportunities for those who have the potential to become innovators with those who already are. Chetty’s research team determined that “Children who grow up exposed to a particular type of invention or inventor are far more likely to follow that path.” Given that finding, it might be possible to develop social networks with role-model-innovators or create mentoring programs that do so.

Mr. Leonardt and Mr. Chetty could be missing a major factor that, based on my experience over the past 15 years, is glaringly obvious. Schools serving affluent students do not worry about the standardized tests that determine whether a school is “failing” and, consequently, spend more time and money on the arts and offer a wider array of electives. It is not surprising that a student who scores well on the math section of a standardized test might lack the same propensity for inventiveness and innovation as any student who attended an affluent school, for the student in an affluent school has been more widely exposed to a wide range of topics, and one important element of innovation is the ability to apply ideas across different modalities of thinking. A student whose curriculum is marly focussed on passing a standardized test might do well on that test but might also lack the opportunity to draw on skills learned in music classes, art classes, or drama. Our emphasis on standardized testing, then, combined with the income inequality exacerbates the innovation gap and adds to our “lost Einstein” population.

I’ll conclude this post with a couple of quotes from an entrepreneur who concurs with Mr. Leonardt’s alarm, and Mr. Leonardt’s closing:

“There are great differences in innovation rates,” Chetty said. “Those differences don’t seem to be due to innate ability to innovate.” Or as Steve Case — the entrepreneur who’s now investing in regions that venture capital tends to ignore — told me when I called him to discuss the findings: “Creativity is broadly distributed. Opportunity is not.”

“We do a pretty good job at identifying the kids who are good at throwing a football or playing a trumpet,” Case said. “But we don’t do a particularly good job of identifying the kids who have the potential of creating a phenomenal new product or service or invention.” We all suffer for that failure.

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