Robert Frank’s new book Success and Luck: Good Fortune and the Myth of Meritocracy is a nice, brief overview of why luck plays such a big role in an individual’s economic success (or otherwise).
Success and Luck: Good Fortune and the Myth of Meritocracy
This very readable book canters through some of the key evidence on how economic success depends on chance, amplified by phenomena such as winner take all markets, and by policy. Mainly, though, it is another pitch for Frank’s favourite policy prescription of a progressive consumption tax, something he’s been advocating since The Darwin Economy, Luxury Fever and possibly before. As in those books, he relies here on the argument that much consumption consists of positional spending and the ‘arms races’ need to be limited by policy intervention.
I’m not persuaded about the consumption tax idea, because when you ask policymakers to select luxury goods will probably choose something that might be a luxury now but will become a useful mass market product. Remember Norman Lamont in 1991 taxing mobile phones as yuppie status symbols – which indeed they were at the time. (“I turn now to what I regard as one of the greatest scourges of modern life. I refer to the mobile telephone. I propose to bring the benefit of car phones into income tax and to simplify the tax treatment of mobile phones by introducing a standard charge on the private use of such phones provided by an employer. Tax will be paid of £200 for each phone for 1991-92. I hope that, as a result of this measure, restaurants will be quieter and the roads will be safer.” Budget speech 19 March 1991.) One could be on safer ground with, say, gold leaf covered sports cars, but even so my preference is for progressive income and especially property taxes.
Still, the reminder about the important role of luck is welcome, although it is surely neither wholly necessary nor sufficient for economic success. The most important conclusion to my mind is the negative one that people who are poor are most likely unlucky, whether that be in terms of their parents’ income and status or the quality of their school and neighbourhood, and poverty or unemployment can’t be blamed on laziness. As Julia Unwin pointed out so eloquently in Why Fight Poverty?, we often make unjustified moral judgements about poor people out of fear; we need to recognise the bad hand life has dealt them.