The reviews are in — and so is the cash. While the newest cinematographic version of F. Scott Fitzgerald’s “The Great Gatsby” tanked with prominent critics, it reportedly raked in more than $100 million at the domestic box office (and more than $60 million overseas).
The adaptation of this classic rags to riches narrative — despite its tragic ending — may be so successful in the U.S. because it reminds us of that original American Dream story — the idea that anybody can achieve anything if she only works hard enough, regardless of social status or wealth at birth.
Economists study this topic under the heading of intergenerational mobility — and the dreamy-eyed outlook won’t stand up to cold hard facts anymore.
That was the topic of a talk earlier this year by the outgoing chairman of the President’s Council of Economic Advisers, Alan Krueger, who will return to his position as professor of economics at Princeton University.
In his January speech (available here: http://goo.gl/vg60H, the slides and graphs can be seen at: http://goo.gl/j9MTK), Krueger discussed “The Rise and Consequences of Inequality” and suggested we have “reached the point that inequality in incomes is causing an unhealthy division in opportunities and is a threat to our economic growth.”
Using a slide titled “The Great Gatsby Curve,” he presented data showing that “countries that had more inequality across households also had more persistence in income from one generation to the next.”
The same graph can be seen in a report published by the liberal Center for American Progress (available here: http://goo.gl/qkE88, the graph is on page 2).
Of course, from a free enterprise point of view, there is nothing inherently negative about income disparities. On the contrary, those provide incentives for people to work hard to reach a higher income group, and it creates an environment in which achievement can be appropriately rewarded.
However, some recently published data on the topic of intergenerational mobility seem to suggest this pendulum may have swung too far.
A just-released study (written by economists at Berkeley, Oxford and the Paris School of Economics) also submits that the doubling of the income share going to the top 1 percent over the last 30 years may have detrimental effects in the long run.
The paper has the title “The top 1 percent in international and historical perspective” (it is available at: http://goo.gl/i28c1).
An economy is in a sweet spot when it harnesses as much of its productive resources as possible. That includes labor, as well as capital. The returns to those activities should, then, accrue in larger measures to those who contribute the most to overall economic success of the nation.
The problem starts when one group may be able to accumulate more and more of the overall wealth — not because of current productivity but based on historical success.
If that is compounded by a development that sees children born into wealthy families outperform those of lower-income families not necessarily because of merit and talent but because of opportunities, then we are wasting productive resources on a grand scale.
In that sense, the “Great Gatsby” celebrates the economic upstarts that challenge the establishment while the (not so) “Great Gatsby Curve” is a warning about how economic vibrancy can be stifled when institutional settings make upstarts a rarity.
Dr. Michael Reksulak teaches economics and public finance in Georgia Southern University’s College of Business Administration. He may be reached by email at mreksula@georgiasouthern.edu.