August 16, 2015

Your genes WON'T make you wealthy: Becoming rich is more about nurture than nature, study finds (?)

I add some skeptical comments at the foot of the report below.  The usual finding is that high IQ people tend disproportionately to be high income earners.  And IQ is of course highly hereditary

If your parents are rich, then you're more likely to be wealthy too.

Scientists have long debated whether this is down to genetics or the culture in which children are raised.  Now, a new study claims to have finally settled the debate; nurture, it says, is far more important that nature when it comes to amassing wealth.

`Innate biology is only a small factor in wealth', Kaveh Majlesi, a professor of economics at Lund University in Sweden and co-author of the study told fivethirtyeight.com

Previous studies have attempting to find a `rich gene' which might explain how genetic characteristics that cause people to be wealthy are passed down.

The latest research, however, found that the wealth of an adopted child - before receiving an inheritance - is similar to that of their adoptive parents, rather than their biological ones.

The study included data from 2,519 Swedish children who were adopted between 1950 and 1970.

The researchers then compared this to data on adults' overall wealth in Sweden between 1999 and 2007. This allowed scientists to compare the wealth of the adult adoptees to the wealth of potential biological and adoptive parents.

The biological parents were tended to be younger, poorer and less-educated than the adoptive parents.

Researchers found the adoptive parents had 1.7 to 2.4 times more of an effect than the biological parents did on the adopted child's adult wealth.

SOURCE


I hate to rubbish a very carefully and laboriously done study but it is important to note that this is a study of WEALTH, not income. It is derived from data collected by the Swedish government for the purposes of its wealth tax.

I have read the whole original study ("Poor Little Rich Kids? The Determinants of the Intergenerational Transmission of Wealth") and note that it showed great statistical care.

It does not show much knowledge of people however.  It covers gifts in the form of bequests but otherwise omits the issue of gifts altogether.  The authors seem quite unaware that well-off people tend to give their kids money on various occasions and for various reasons.  My son, for instance, does well every birthday.

And since the adoptive parents in the study above were richer than the natural parents, it is almost certain that the adopted kids got more gifts -- thus accounting entirely for the finding that those kids had more wealth.  The study therefore tells us nothing about any biological effect -- including the influence of genes.

I might add the general point that wealth taxes of any kind are quite like other taxes in that they provoke avoidance (legal)  and evasion (illegal).  And the standard way of avoiding wealth taxes is to transfer funds to later generations in the form of gifts.  Gift taxes hinder but do not prevent that. So the fact that the data originate from official Swedish wealth tax statistics is rather unfortunate for this study.  It guarantees that a LOT of intergenerational giving did go on.  So the findings in this study would seem to be largely an artifact of Swedish law.

The data of the study is therefore not capable of supporting the conclusions of the study.  I can't say I am surprised by social scientists who know nothing about people.  I had a lot of fun pointing out the follies of my fellow social scientists during my own 20-year research career.  But I guess I shouldn't laugh!





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