The Fifth Risk: Undoing Democracy

by Michael Lewis

A team of researchers at Stanford University, led by an economist named Raj Chetty, used newly accessible data from the Internal Revenue Service to write a series of papers that addressed questions of opportunity in American life. One, titled “The Fading American Dream,” asked a simple question: How likely is it that an American child will be better off than his parents? The IRS data allowed Chetty to study Americans across generations, and the census data let him compare them by race, gender, or whichever trait he wished to isolate. In the data he found an answer to his question, and much more. He discovered that while just over 90 percent of children born in 1940 went on to earn more than their parents, only 50 percent of children born in the 1980s did so. Every year, the economic future of an American child was a bit less bright. And the big reason was not lower rates of economic growth but the increasingly unequal distribution of money. More and more of the gains were being captured by the very rich.