When Steve Jobs died last October 5th my Facebook news feed was flooded with posts to his speech at Stanford University in 2005. These posts were just part of the overwhelming wave of tributes and praise that followed to his death. I have to confess that I was surprised and slightly puzzled by that phenomenon. In the end, Jobs was a (very) smart entrepreneur but he was not a messiah or genius inventor. (Wilson Greatbatch, the inventor of the pacemaker, died last week; helped to save many lives and received an infinitesimal fraction of Jobs' praise). At that point I just thought that probably a similar crazyness developed when Elvis Presley died back in 1977,
Still, I watched the Stanford speech in order to find out what was so special about it. What I found, in my view, was just the usual number of common places surrounding the concept of the American Dream: The idea that if you work hard enough, that if you "stay hungry" your effort will be rewarded and good things will come to you. Nothing really new. Still, the resucitation of this speech seemed very telling because right now many within the ranks of the middle classes are turning their rage from the rich bankers to the underclasses because the latter allegedly commit massive benefit fraud and do not work hard enough. Anyway, that is another story. The important thing is that the ideas in Jobs' speech seem to be backed by the received wisdom that says that in America social mobility is so high that the son of an immigrant from Kenya can become President. Jobs himself was a very successful person with a middle-class background, and that fact added even more plausibility to the ideas he wanted to convey.
But me being an skeptic means that I have to question any received wisdom. And given that I am also European (and being an skeptic and being European seem to go hand in hand) I have an even stronger tendency to question the received wisdom that comes from America. To start with, survey results show that in the US most people hold what I will call the Jobs' view and believe that effort rather than luck determines personal income. In Europe the majority believes the opposite. Similarly, in the US there is the extended belief that the poor are poor because they "are lazy and lack willpower". Still, the reality is that social mobility is NOT higher in the US than in Europe and that people in the lowest income quintile on the two sides of the Atlantic work a fairly similar amount of hours. Then why is it that the Jobs' view is so persistent and widespread?
These questions made me remember I very nice article by professors Roland Benabou and Jean Tirole entitled Belief in a just world and redistributive politics, published in the Quarterly Journal of Economics in 2006. The authors propose a nice theory to account for the prevalence of the Jobs' view but also why it is so different from the standard, and opposite, European view: Individuals can choose to believe in the idea that the world is a just place where effort is rewarded and people get what they deserve. Even though daily evidence may run against this belief they will strive to reduce this dissonance and, also importantly, will try to shield their children from this evidence. In the end that belief leads to low tax rates and high effort, partially because the lower taxation but also because people genuinely belief that effort pays. In the other equilibrium, people hold "European beliefs" and do not expect effort to bring high rewards. Then they vote for high taxes and exert lower effort.
In the end, people under the Jobs' view may be wrong but they welfare may be higher even if the psychological cost of maintaining false beliefs is included. The poor though are very likely to end up worse off: Both because they receive less transfers and also because since the prevalent belief is that effort pays, they will be more likely to be stigmatized and labelled as "lazy". And they will stay hungry.
Still, I watched the Stanford speech in order to find out what was so special about it. What I found, in my view, was just the usual number of common places surrounding the concept of the American Dream: The idea that if you work hard enough, that if you "stay hungry" your effort will be rewarded and good things will come to you. Nothing really new. Still, the resucitation of this speech seemed very telling because right now many within the ranks of the middle classes are turning their rage from the rich bankers to the underclasses because the latter allegedly commit massive benefit fraud and do not work hard enough. Anyway, that is another story. The important thing is that the ideas in Jobs' speech seem to be backed by the received wisdom that says that in America social mobility is so high that the son of an immigrant from Kenya can become President. Jobs himself was a very successful person with a middle-class background, and that fact added even more plausibility to the ideas he wanted to convey.
But me being an skeptic means that I have to question any received wisdom. And given that I am also European (and being an skeptic and being European seem to go hand in hand) I have an even stronger tendency to question the received wisdom that comes from America. To start with, survey results show that in the US most people hold what I will call the Jobs' view and believe that effort rather than luck determines personal income. In Europe the majority believes the opposite. Similarly, in the US there is the extended belief that the poor are poor because they "are lazy and lack willpower". Still, the reality is that social mobility is NOT higher in the US than in Europe and that people in the lowest income quintile on the two sides of the Atlantic work a fairly similar amount of hours. Then why is it that the Jobs' view is so persistent and widespread?
These questions made me remember I very nice article by professors Roland Benabou and Jean Tirole entitled Belief in a just world and redistributive politics, published in the Quarterly Journal of Economics in 2006. The authors propose a nice theory to account for the prevalence of the Jobs' view but also why it is so different from the standard, and opposite, European view: Individuals can choose to believe in the idea that the world is a just place where effort is rewarded and people get what they deserve. Even though daily evidence may run against this belief they will strive to reduce this dissonance and, also importantly, will try to shield their children from this evidence. In the end that belief leads to low tax rates and high effort, partially because the lower taxation but also because people genuinely belief that effort pays. In the other equilibrium, people hold "European beliefs" and do not expect effort to bring high rewards. Then they vote for high taxes and exert lower effort.
In the end, people under the Jobs' view may be wrong but they welfare may be higher even if the psychological cost of maintaining false beliefs is included. The poor though are very likely to end up worse off: Both because they receive less transfers and also because since the prevalent belief is that effort pays, they will be more likely to be stigmatized and labelled as "lazy". And they will stay hungry.
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