An early start in life is a good start

A’la James Heckman, the importance of early life for economic outcomes seems only to grow:

Is lifetime inequality mainly due to differences across people
established early in life or to differences in luck experienced over
the working lifetime?  We answer this question within a model that
features idiosyncratic shocks to human capital, estimated directly from
data, as well as heterogeneity in ability to learn, initial human
capital, and initial wealth — features which are chosen to match
observed properties of earnings dynamics by cohorts.  We find that as of
age 20, differences in initial conditions account for more of the
variation in lifetime utility, lifetime earnings and lifetime wealth
than do differences in shocks received over the lifetime.
  Among initial
conditions, variation in initial human capital is substantially more
important than variation in learning ability or initial wealth for
determining how an agent fares in life.  An increase in an agent’s human
capital affects expected lifetime utility by raising an agent’s
expected earnings profile, whereas an increase in learning ability
affects expected utility by producing a steeper expected earnings
profile.

The emphasis is mine; here is the whole paper.  Here is a non-gated version.  In other words, treat your kids well, invest in them, and realize that determinism is not altogether crazy.  Here is a related paper about how mental health problems in childhood plague later life and earnings.

Comments

I wonder what Judith Rich Harris would think of the paper in question.

By the time a person reaches age 20 their stock of human capital may be largely a function of their intelligence/ability to learn. So it seems a bit odd to suggest that human capital as of age 20 is more significant than ability to learn.

Can somebody explain how "human capital" and "learning ability" are defined and measured in this paper? I skimmed the whole thing but found it frustratingly vague about what they are actually talking about.

I got my MBA during the recession year of 1982 and it no doubt cost me some salary for much of the rest of my corporate career. Something else that I noticed was how much higher in quality we 1981-1983 hires were at my company than the subsequent 1984 onward hires. My firm was one of the few that was hiring briskly during the recession, so it had its pick of the litter of new grads. From 1984 onward, there was much more competition from other firms for new grads, so our quality went down.

That makes a lot of sense to me, though not necessarily for talent reasons. Where someone is in life at age 20 largely depends on two factors:

1) How well one's parents have been doing, and
2) How well one has avoided life's major perils -- drug addiction, chronic disease, accident, etc.

My friends who have been successful in life have nearly all had (1) and (2). The ones who were marginally successful had (1) or (2). The ones who've done poorly had neither -- or didn't have (1) or (2) in some extreme fashion. Talent seemed only to act as a multiplier for whatever ended up happening.

End of the meritocracy, I guess.

"I assume that nobody has any idea what this paper claims to measure?"

Steve, seriously, isn't that putting too fine a point on things? We're talking JAMES HECKMAN here!

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