Correlation, Causation

By James Kwak

XKCD (blacked out until tomorrow).

Economix has a table listing undergraduate majors by the percentage of graduates in each major that are in the “1 percent” (by income, which I think is less important than by wealth). The data are interesting, but I don’t think it’s correct to say that “the majors that give you the best chance of reaching the 1 percent are pre-med, economics, biochemistry, zoology and, yes, biology, in that order.”

All of the pre-med/life sciences majors (numbers 1, 3, 5, 8, and 11 on the list) do arguably increase your chances of making the 1% because they help you become a doctor, and many specialists are in the 1%. Of course, since many science majors are considered more difficult by undergraduates, you could argue that the inherent traits people bring to college are just as important as the majors they choose. Economics is #2, but that’s in part because many of the people who want to be in the 1 percent major in economics.

But the interesting cases are art history (#9), area studies (#12), history (#14), and philosophy (#17), all of which are disproportionately represented in the 1%. (History, for example, ranks right behind finance.) I don’t think anyone would argue that knowledge of art history is likely to earn you a high income; there just aren’t that many executives at Sotheby’s and Christie’s. I think what’s going on is that these are the kinds of things that people study at elite schools—in particular, if you’re not that worried about what you’re going to do after graduation. These are not the things that most people at normal schools study. In 2009, for example, art history didn’t even show up on the list of majors (it’s probably tucked into “liberal arts and sciences, general studies, and humanities,” which came in 11th), area studies was one of the least popular majors, and so was philosophy.

So there are two possible reasons why these people make the top 1 percent. One is that they are talented, hardworking people who succeed (financially) despite what they majored in—but then why are talented, hardworking people overrepresented in these majors? The other is that they are children of the elite who go to elite schools, study whatever they feel like, and succeed because of their upbringing and connections. (The reasons are not mutually exclusive.) Given the increasing evidence that America, the land of opportunity, is actually one of limited social mobility, I think we can’t overlook the latter explanation.

24 thoughts on “Correlation, Causation

  1. Just as a random note, anecdotally, I know many History/Philosophy folks who were planning on going into law.

  2. Or the liberal arts better prepare students to take advantage of the opportunities that present themselves (philosophy major from a tiny liberal arts school speaking).

  3. James Kwak is onto something that may finally be getting a little more attention from institutions like the New York Times (for a while, until wealthy born and bred Times editors and publishers decide that the risks of redistributive impulses being provoked by such stories are too great).

    Somewhere, very recently, I saw a report on the comparative probabilities of ending up in this or that percentile according to the percentile in which a person starts life. For example (and I’m making this number up), divide the population into fifths according to wealth (or income, and James Kwak is right regarding wealth being a more important indicator, especially if income is not broken down into earned and unearned), then a person born in the middle fifth might have a 40% probability of making it into the top fifth, while a person in the top fifth might have only a 10% chance of ending up in the bottom fifth. At the extremes, the odds of great change are surely far lower. The probability of someone in the top 1% ending up in the bottom 1% must be vanishingly small and vice versa (lottery winners might comprise the latter group).

    Now take the university population. There is a socioeconomic background for those entering university. Then there is the variation across universities. The socioeconomic makeup of students entering Yale is very different from that of those entering CUNY. There are whatever patterns of preferences that correlate with socioeconomic status. Then there is the pattern of choices in college and how they correlate. Do students of wealthier backgrounds study art history because they were exposed to various arts in their childhoods or because they have no fear of financial hardship arising from an “imprudent” choice? Probably both.

    Decided Fence Sitter points out another factor — which subjects are “gateway” disciplines for the strategically minded? And, then, does such strategic thinking correlate with background?

    Of course, if you’re part of the N. Gregory Mankiw or Caroline Minter Hoxby school, then you take the view that “hard-workingness” and “intelligence” and “talent for rent-seeking” are heritable, genetically coded traits, so any cultural influence is just leftist hand-waving.

  4. A quick check of the Times data shows that the third column (percentage of people majoring in x who make into the 1%) adds up to 136%, so a fair number of people are doing multiple majors — or something.

    One way or another, the Times column leaves out an enormous amount of detail (or, to be blunter, the Times column is deeply confused).

  5. I would second the idea that Philosophy, History, and Political Science are all pre-law majors. I would also lump Chemical Engineering in the Pre-med category.

  6. 1) Maybe a lot of people with inherited wealth, which yields investment income, major in areas like art history. (You probably don’t find many construction laborer’s children majoring in art history.) I think you might also find this more in “old wealth” and the older wealthy, who made these decisions in a time when social convention was stricter as far as appropriate college majors for genteel folks.

    2) Maybe high earning doctors, lawyers and engineers marry history, art and philosophy majors. (Let’s hope those in the second group are not marrying each other. Someone in the family has to bring home some real money.)

  7. Guess none of you guys watch TV shows like “Revenge” and “Veronica Mars”….?

    Generalizations like “rich man’s idiot son” have some basis in fact.

    Are the 1% in a position to indulge in *eugenics* against genius rising up from the 99%? You betcha.

    Tax policies, anyone?

    The ultimate rent-seeking with the ultimate security – jail house rock. Oh to be the daughter the daddy with the privatized jail fortune in the 21st century…sigh.

  8. Is there really any question that correlation does not equal causation?

    What more then is there to say about such a study? My preference would have been to devote all of my effort to attacking the assumptions of the study, but I lack your education, experience, and eloquence. So I prefer that you would have done so.

    But here goes anyway:
    Wealth is not portioned out according to merit. Furthermore I assert that the belief that we are in an economic system that rewards people according to merit – typically the dogma is “to those that work hard or are talented” – is absurd. One need only observe the economic circumstances of any laborer to begin to see a problem with belief in meritocracy. Yes I am only making an assertion which is meaningless on its own, but the implication that “we live in a meritocracy” has never been proven, and yet only requires one to “prove a positive”. Shouldn’t the burden of proof lay on those that claim we do live in one?

    So the challenge:
    Is there a compelling argument (that isn’t riddled with logical fallacies) to support the assertion that wealth flows from hardwork and talent?

    I’m confidant that nothing compelling will be put forth and so that ought to settle it, but I know it won’t.

    The real problem:
    It isn’t reasoning that leads members of the middle class to believe in a meritocracy. No, there is another problem here. Many that cling to the middle class have a deep seated psychological need to justify their above median income, pay typically received for work that provides little if any real benefit to others. Belief in the Meritocracy is a salve for guilt.

    An observation that I would like to see challenged with data:
    There appears to be an INVERSE relationship between the importance of one’s work to the broader society and how much someone is paid. Some of the reasons why I believe this include the following observations which I find much more compelling than discussion about how an art history degree
    (1) Labor is always paid less than management – even when the business practically runs itself.
    (2) The most essential labor pays the least: producers of clothing and food are slaves in all but name.
    (3) The least essential work is rewarded the most. Given the destructive nature of financial institutions, as radical as this third statement may sound, I’d really like to see someone argue specifically against this last point.

  9. I dispute the connection with relative social mobility in the United States. The linked New York Times article does not present a strong case, nor do the studies mentioned comparing European and American relative social mobility. I’ve seen much stronger data indicating that wealth has little influence across generations. For example, Robin Hanson writes about this in a recent post.

  10. I recall that for the longest time, North Carolina-Chapel Hill had “geography” as the major with the highest average salary for graduates — figure in one Michael Jordan and the numbers got a bit skewed.

  11. My undergraduate college, Rose-Hulman Institute of Technology had a similar phenomenon. It is located in Terre Haute, Indiana, along with Indiana State University. Rose-Hulman almost always boasts higher average salary for graduates because it is somewhat of a boutique engineering and computer science school. However, in 1979, Larry Bird graduated from Indiana State and signed a $3.25 million dollar contract with the Celtics (a then-record for a rookie in any pro sport), which boosted Indiana State’s average graduate salary well above Rose-Hulman (even considering that Indiana State was about 5-6 times larger at the time). Bird’s case is also interesting because he was drafted in 1978 even though he vocally advertised that he intended to return for his senior year of school. That’s certainly not something you see in pro basketball these days.

  12. I’m willing to bet that there are quite a few history and philosophy majors working on K street and in the halls of Washington — perhaps another reason why they disproportionately make it into the top 1%

  13. If there are 300 million people in the US then 1% is 3 million people, so maybe we all need to reconsider what wealthy elite means in this discussion. A guy like Mitt Romney is not in the 1% he’s in the 0.1%.

  14. I think you are missing the inherent reason. Since the STEM majors are harder, fewer people go into those majors, and, consequently, there are fewer individuals competing for those jobs. Since those jobs are relatively scarce, the price gets bid up, so the chances of reaching the 1% are comparatively easier.

    Then there are the humanities majors. Since those are generally easier courses, more students enroll. However, there are fewer positions, which causes a less likely chance to make it to the 1%. Additionally, the people who generally make it to the 1% from the humanities majors usually benefit more from globalization – writers, directors, musicians – so their wages get increased dramatically and further polarizes the wage distribution.

  15. Well kids, we have another WINNER!!!! Best Tweet of January 19, 2012:!/CJFDillow/status/159926847658934272

    In separate news, the Chinese Government totally F*CKS, REAMS, and Wen Jiabao personally (metaphorically) S*domizes Chinese writer Li Tie for having the utter nerve to write a poem calling for freedom in China.

  16. James, I hate to be critical, but I am not sure why any of this is important. It seems to me that what degree or area of academic pursuit one choses means very much. There may be some correlation between the level of motivation toward wealth, and the choosing of pathways to achieve it. That said, I have know many wealthy people who are only high school graduates, and many unemployed attorneys. In the long run, if I were to advise anyone on career path, the thing I would tell them is what I told my children. Remember that whatever you choose will be something you spend a substantial part of the time in your prime years doing, and, therefore your prime consideration should be choosing something you absolutely love. However, if you don’t have a passion for any profession, but only a passion for usance, be sure to pick a path to financial success based upon your talents. Otherwise, there is no argument worth making.

  17. James maybe we should look at this another way; not everyone who attends a University wants to be in the top 1%. Money is not everything and once you reach a certain intellectual level, people realize money is a tool to do what you want and not a status symbol to join the top 1%. Things are nothing more than tools and should not be status symbols either (These should not be confused with a ring a spouse gives or a writing desk that has been in the family for over 100 years.).

    Intellectually, one would think that the more education one receives; based on actual philosophy, economics, and social understanding, the less need there would be for being in the top 1%. To some of us, many but not all, of the nouveau riche are children in a candy store and they pass out their extra candy to impress and create a good ol boy’s club. (Not that some intellectuals do not do the same thing, these I tend to find rather boring and limited in knowledge or working for the top 1%.) Both groups need to restudy the history of churches that flaunted wealth or various Kings, France, our own struggles, etc. and for the intellectuals who cater to the top 1% they need to be reminded of Thomas More. If the only reason these people went to college was to become or stay in the top 1%, then they learned nothing, but a vocation. As it is, Enlightenment is lost to the point where Gingrich and others, use the fact that people who have a college education in a Liberal Arts field and learned a foreign language are now considered “elitists”. (If Newt really went to college to study history, he himself should read at least one or two languages.)

    One of the worst things I have observed in the last thirty-two years is people like you pandering to the top 1%. Asking why people cannot break into this group and saying those with a Liberal Arts degree must have a sugar someone, rich parents, or could not cut it in another field. No, there are some of us who still value the Enlightenment ideals based not only on the Liberal Arts, but the Natural Sciences, and true observation and we do not give a tinker’s dam about money beyond it being a basic tool.

    As a historian, you should know when the rich are beginning to be questioned about their wealth; they first find others to blame — the intellectuals for pointing out inequities as heretics/elitists and even burned them during the Reformation and other periods. Next, they say we should all aspire to be like them and if we chose the right field we can join them. Darwinism and Economics should tell you it does not work that way unless you come-up with something someone else wants or sets you apart that is advantageous. Then, they return to superstition of any field that would speak out against them.

    Sooner or later, this top 1% group will topple and I give them about 30 years if the tax codes do not change in the next few years — as more middle class people see themselves not doing at least as well as their parents, but are actually falling into borderline poverty after doing everything “right”; they will speak out and we may get our “Spring”. Or we will be so absorbed by money; we will work only for our self-gratification of things and entertainment; not for family, and within which, to have children.

    Finally, it is not our money or aspiring to be in the top 1% that leaves the most impression on history, but it is our words and actions that makes the history books.

  18. Do these numbers have any bearing on the oft repeated story that doctors (MDs) are facing hardships and privation due to malpractice driven insurance rates and gov’t regulations ?

    Taken at face value, the numbers say that an MD is still the surest ticket to wealth in the US
    (In the 60s, when I was in high school, my grandfather, a fairly successful business guy, advised me to get a professional degree , he said, business is chancy, I’ve seen to many good people fall by the wayside. Of course, I didn’t understand that for years)

    Another explanation is that within the MD community, the “1%” are pulling away from the others

  19. @ezra – Indeed, powerful economic juju – the combo of fiat $$$$ and shamanism :-) People are going to be fined by the IRS for not tithing to health insurance companies…

    Professional Engineer is still the toughest license to get (have to really know what *IS*) and the financial rewards are diminishing for being competent enough to approve a public infrastructure project that serves hundreds of thousands of people as they go about their daily lives…

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