Friday, May 20, 2011

Cumulative Advantage

(As published on

The attraction of the United States for immigrants has been the hope of social mobility. That with some hard work and good ideas you have a shot at a better economic life. In India social mobility is far more elusive. For a long time there was little expectation of it. People knew and accepted their place. Today something is changing. Hopes are emerging. Aspirations are rising. But what does it take to create conditions that allow social mobility? Why is it so hard the world over to achieve and hold on to?

Our biology and natural social structure works against social mobility. For starters, we generally pass on our wealth to our children rather than to society at large. In India a little over 80% of the rupee billionaires inherited their billionaire status (compared to 20% in the United States). But that’s only a small part. What we do for our children runs far beyond simply passing on wealth. More than any other species, we humans spend inordinate time and effort raising our young, struggling for 20+ years over where to live, school choices and how to get our kids to behave properly. And what we are doing is essentially working hard to integrate them into society – linking them into social networks as well as knowledge and information networks. Our children inherit not just wealth but relationships and access.
When we are wealthy, these relationships tend to be far more economically valuable. They are relationships typically to others who are similarly wealthy and most likely hold keys to opportunities such as jobs, business deals and large bank loans. And they are often relationships that come with social capital accumulated over generations. “You are so-and-so’s son? Please come in, I knew your father and grandfather very well.” We also pass on behaviours that signal our social standing. “You talk just like your father. Please come. What can I do for you?”. So also when we choose a more expensive “better” school we also place our children in social networks of higher economic value. “Hey, meet my friend. He’s also IIM-Microsoft.”

In our generational effort to ensure the success of our DNA we offer up our cumulative social capital to our children. For some of us this is a cumulative advantage. And in India, like nowhere else, we have had a deep seeded respect for the entitlement of accumulated social capital as part of a natural social order. As a nation we have transferred our allegiance and loyalties from generation to generation of political and business dynasties with ease.

For most, however, it is a cumulative disadvantage. There are few relatively wealthy in India - hardly a few percent. This means that entry into this world is extraordinarily hard for the poor. They are unlikely to know people in these networks and rather have economically disadvantaged relationships. “I don’t have a job myself. How can I help you?” Nor do they have the information networks that would lead them easily to larger opportunities. This means that the rich have a terrifically easier time getting richer than the poor. Social network scientists have been building models of this under various names such as ‘preferential attachment [into the social network]’ and ‘cumulative advantage’. In these models, with each generation, people grow wealthier with a probability that depends on ‘who’ they are connected to or how much social capital they have to start with. No surprise that these models produce results of wealth distribution and social mobility (or lack thereof) that can be highly similar to empirical measurement – highly skewed distributions where most of the wealth is held by a few for many generations.

Yet it is not economic inequality that bothers most. What troubles young aspirants more is when there is little hope of socioeconomic movement, of social mobility. It’s OK if only a few are rich if I feel empowered enough to have a shot of getting there myself. So what are the keys of social mobility? We can’t change the way we inherit wealth and relationships unless we dramatically change our social structure away from family units. But we can find ways of creating more equitable access to knowledge and information to make good on the hopes and dreams of a new generation.


  1. Maya ThiagarajanJune 24, 2011 at 7:07 AM

    Depressing to think about, but very, very true. As a private school teacher, I often think of myself and my colleagues as the "gatekeepers of privilege."

    Until we have really good public schools -- in India and in other countries -- it's going to be hard to create more equitable access to knowledge. That said, Singapore is doing a pretty good job. Their govt. pumps alot of money and energy into their education system, and in order to become a public school teacher/attend an education degree program, one has to graduate in the top third of his high school class.

    But even in Singapore, children inherit all their parent's social, cultural, and intellectual capital. That's not going to change -- even in communist countries like China, where the govt. has tried hard to shift loyalties away from the family and towards the state, family loyalties persist. It's part of our evolutionary biology, isn't it?

  2. Its so true. To what Ms.Maya said, "gatekeepers of privilege", it extends not only to schools but also to businesses, communities, social networks ; everywhere.

    What is detrimental in this phenomenon is that growth based on innovation gets stymied. While those who have the reasons to innovate, as that old adage goes 'necessity is mother of all inventions', do not get the means & resources to do so. Those who have resources to do so do not have the reasons to innovate.

    The environment, therefore, doesn't remain conducive anymore to innovation & entrepreneurship and therefore growth & welfare.

    A very long time indeed since I came across some meaningful writing on real issues. A very good break from the regular shallow wishful thinking of 'India-Shining' , India doing this and doing that stuff that we generally read.