The abstract of a working paper by David Cesarini and others says,
We use administrative data on Swedish lottery players to estimate the causal impact of wealth on players’ own health and their children’s health and developmental outcomes. Our estimation sample is large, virtually free of attrition, and allows us to control for the factors ‒ such as the number of lottery tickets ‒ conditional on which the prizes were randomly assigned. In adults, we find no evidence that wealth impacts mortality or health care utilization, with the possible exception of a small reduction in the consumption of mental health drugs.
Our estimates allow us to rule out effects on 10-year mortality one sixth as large the cross-sectional gradient. In our intergenerational analyses, we find that wealth increases children’s health care utilization in the years following the lottery and may also reduce obesity risk. The effects on most other child outcomes, which include drug consumption, scholastic performance, and skills, can usually be bounded to a tight interval around zero. Overall, our findings suggest that correlations observed in affluent, developed countries between (i) wealth and health or (ii) parental income and children’s outcomes do not reflect a causal effect of wealth.
Pointer from James Pethokoukis.
Somebody should replicate this study in the United States. I would not be surprised if the effects on child outcomes were closely bounded to a tight interval around zero here, also.
This is the sort of evidence that I wish Robert Putnam would confront.
I recall a couple of stories with the relationship of lottery winners (in the US) having poorer life outcomes, especially winners from a lower socio-economic backgrounds.
“We use administrative data…”
Read Ben Casselman on why this kind of study probably can’t be replicated in the United States.
http://fivethirtyeight.com/features/big-government-is-getting-in-the-way-of-big-data/
“Our Harvard and Yale and Princeton economists are studying Finland because they can’t study the same thing here”
Amen!
There was a meme going around a year or two ago that one of the reasons for the persistence of poverty was that being poor was so stressful and psychologically taxing that it had a really adverse effect on people’s decision-making skills and ability to think and plan for the future. This would seem to cut against that notion a bit.
Well, I hope the study looks at things other than what we already know has little to do with wealth. Health outcomes is mostly genes. Like education, most of healthcare is spent trying to bring people to median (an aside to why I don’t fully trust the ‘lack of significant impact therefore parenting doesn’t matter’ studies).
On the other hand, if your bike keeps getting stolen I can see that having a negative impact on the positive feedback loops required for improving economic outcomes. So, I think what you refer requires a different study, and I’d like to see that one too.
Lastly, this is a unique case where people are given a wealth shock. I suspect that being rich is its own skill set. For one thing, you have to know how to deal with people and money. Athletes and entertainers always seem to be taken advantage of by money managers, for example. Wealth shock recipients haven’t had the learning process of building the snowball and the associated skills of managing it.
In a developed country with socialized healthcare, I would not expect any difference. That is a world away from what the US was. Consider merely the provision of Medicare Part D, and Up to 27000 lives saved.
Up to 27000 lives saved.
Probably argues that we are better off giving specific items (therapeutic drugs in this case) rather than cash, which is often used to buy the wrong type of friends.
I cringe a bit at the utilitarian nature of this analysis here, such as ascribing $200,000 of value to each year of life. Reducing cardiovascular events in 70 year olds may set them up for more expensive end of life procedures as 90 yr olds. One might start to conclude, in Age of Ultron fashion, that we have an economic sink on our hands.
The other way of saying “provision of Medicare part drugs” is that they irrationally subsidized non-pharma procedures previously and were killing X people, both through over-treatment and undermedication.
It is not true that all socialized medical flows from rich to poor. Mostly it comes and goes back to the same people passing through bureaucratic mandates.
The article makes no mention of how many tens of thousands (probably orders of magnitude more, though), died younger than they otherwise would have if the government hadn’t take money out of their pockets in order to buy votes from people like you. Pro tip: even for utilitarians only NET lives saved matters; ignoring the costs, which surely includes early death due to LESS resources because of government took those resources, is quite simply dishonest.
If you look at cross country stats, it isn’t at all difficult to come to the conclusion, public health care spending is very efficient, private spending almost entirely wasted.
Ahem, that is not even close to a valid methodological design, and very little can be extrapolated to the general population from those findings. Their sample, being constrained to lottery players, is highly biased and does not even come close to reflecting the impacts of long term multi-generational wealth. Conditioning on lottery players introduces a large source of self-selection bias, as established wealthy individuals have much less incentive to play lotteries to those suffering from long term poverty.
Somebody needs to go back to experimental design school…very naughty indeed!
Hi Aaron,
I am one of the authors of this paper. Your post makes me wonder whether you have read the paper carefully.
You write: “Conditioning on lottery players introduces a large source of self-selection bias, as established wealthy individuals have much less incentive to play lotteries to those suffering from long term poverty.”
Table 4 in the paper shows that, in fact, the average income in each of the four lottery samples we consider is slightly higher than in a representative sample matched on age and gender. And the dispersion of income (SD) is also similar. Our lottery samples thus match the population quite well in terms of the distribution of income, albeit not perfectly.
It is also not correct to say that “conditioning on lottery players introduces a large source of self-selection bias”. Selection bias occurs when a certain treatment affects selection into the sample. But this is not the case here: the amount won does not affect selection into the sample of lottery players. Our setting is instead very similar to a medical trial where people are recruited to an experiment and treatment is then randomized among this group of people. The representativeness of the recruited group may be a cause of concern, but if randomization is conducted properly the experiment gives an unbiased estimate of the treatment effect in this group of people.
Did your study select for players that were actually net winners? Logically, the biggest winners will be players that have bought the most tickets overall….
We compare the health outcomes of lottery players who bought the same number of lottery tickets in a given draw, but won different amounts. For a given number of lottery tickets, amount won is therfore uncorrelated with number of lottery tickets bought both in the past and in the present.
In fact the authors themselves discouraged such broad generalizations as you have conjectured here. The authors in the discussion specifically qualify that the findings are only applicable to understanding the impact of wealth shocks, not the long term impact of multi-generational wealth.
Sure, but then they say this: “Overall, our findings suggest that correlations observed in affluent, developed countries between (i) wealth and health or (ii) parental income and children’s outcomes do not reflect a causal effect of wealth.”
It all seems a bit fuzzy as to what they do or don’t think it all implies…
I’ll go with the discussion over the abstract, which at the end of the day is really just marketing.
That last sentence in the abstract is also a bit weasely, in using the wording “causal effect”. That wording implicitly restricts the discussion to only direct causation, and not the broader sociology of poverty and its behavioural impacts.
The abstract explicitly states that we study the effect of lottery wealth on the winners and the winners’ children. Hence it should be quite obvious that we are referring to the link between wealth and health outcomes on an individual level when we say that are results suggest the absence of a causal effect.
This only applies to a very narrow definition of wealth. Wealthy families also have the social and human capital necessary to make the most of monetary capital. Someone who has money drop in their lap shouldn’t really be expected to make good use of it unless the things that typically proceed wealth are already in place.
DIrect financial aid is the easiest way to give help to the poor but, as anecdotal evidence and some research suggests, it might not be particularly effective outside the developing world. We can make some inroads on the human capital problem (even if that also leaves a lot to be desired), but it’s nearly impossible for government intervention to improve social capital. Of course, having some baseline of wealth might lead to/enable improved human and social capital.
All in all it looks like an interesting paper, but I’m not reading too much into it. All it really shows is that in the specific case of a sudden wealth increase, people don’t get the same outcomes as those with established wealth. However, you can’t jump from there to the claim that wealth has no effect on outcomes, much as I sympathize with the inherent problems in trying to design social policy to improve outcomes.
Aren’t you saying, though, that the authors are basically correct to conclude “that wealth has no effect on outcomes”, given their definition of wealth as “monetary capital”?
If this were a very controversial definition, I would agree that their finding is much weaker than it appears at first. But in most discussions of wealth, “monetary capital” is exactly what people are talking about.
“All it really shows is that in the specific case of a sudden wealth increase, people don’t get the same outcomes as those with established wealth.”
The sentence above suggests that all we can do is to reject the gradient between wealth and health. In fact, we can rule out positive effects much smaller than the cross-sectional gradient. Although there is scope for discussion as to what is an adequate benchmark for our lottery-based estimates (something we address in the paper), it is hardly controversial to describe the effects as “small”.
“However, you can’t jump from there to the claim that wealth has no effect on outcomes.”
First, we never say that wealth has “no effect” on health or child development: we say that the effects are too small to account for the correlations observed in cross-sectional data. Second, if giving people large amounts of wealth does not seem to improve their outcomes, how could that not be evidence against wealth having a positive causal effect? What is your argument here, exactly?
Nothing in our paper suggest that education or “social capital” could not be important for outcomes. These factors are of course positively correlated with wealth, which is why we need quasi-experiments in order to disentagle the effect of wealth.