Full Disclosure Finance

By Andrew

I stumbled across a slightly dated, yet interesting blog post the other day while I was researching my Rich Dad, Poor Dad post. The post was on Greg Mankiw’s Blog: Random Observations for Students of Economics and discussed the issue of nature vs. nurture applied to education and income level. According to an article in the Washington Post, the chances of becoming rich are about 20 times higher if you are born into a rich family than if you are born into a low-income family. So is this inequality due to a ‘rich’ gene passed down from your parents or the valuable life lessons and expensive private schools that your parents could provide you. Mankiw highlights a fascinating research paper by Dartmouth economist Bruce Sacerdote where adopted children were randomly assigned to families with various education levels. The study found that having a college educated adopted mother increases a child’s probability of graduating from college by 7 percentage points, whereas having a college educated biological mother raises a child’s probability of graduating from college by 26 percentage points. This study suggests that, at least for education level, nature trumps nurture. I would like to see this type of study applied to measure success in terms of say income level. It would be interesting to see if children raised by more successful non-biological parents are also more likely to be successful. Because, as we all know success isn’t always correlated with education level. I’m of the belief that success in life is directly related to surrounding yourself and learning from greatly successful individuals, and not necessarily having successful biological parents.