>With their wealth of
>knowledge about economic statistics, Cox and Alm could have written a much
>better book if they had felt less need to be cheerleaders.
Cox & Alm are guilty of some of the most devious uses of statistics I've ever seen. They've been making their arguments in essays accompanying the annual reports of the Federal Reserve Bank of Dallas for the last 5 years or so (see the list at <http://www.dallasfed.org/htm/pubs/annual.html>). The 1995 edition was all about upward mobility - titled, of course, "By Our Own Bootstraps." If I may quote myself, from LBO #84:
<quote> Inventing bootstraps. The right's sacred text on mobility is W. Michael Cox and Richard Alm's essay "By Our Own Bootstraps," published in the Federal Reserve Bank of Dallas' 1995 annual report. While the class position of Fed research may not be to everyone's liking, it's usually rigorous and informative. Cox and Alm's stuff isn't. It was a study designed to make a point, and it stacked all the numbers its way.
Mobility studies are very sensitive to definitions, time scales, and data quality. Honest researchers slice the data several ways to see how robust the findings are; not Cox and Alm. They used all the sensitivities to their own advantage. They're out to prove that America is "the land of opportunity," the incomplete sentence that serves as their opening line. "Opportunity pervades our folklore," and folklore pervades their economics. They say that of the bottom quintile (fifth) of income earners in 1975, just 5% were still there in 1991; 60% were in the top two quintiles.
They stack their results in several ways. By making individuals, not households, the focus of their analysis which they say is standard practice, though it isn't subjects as young as 16 qualified. So the lower ranks were swelled by teenagers who contributed vastly to mobility just by growing up. To compare incomes over time, they used changes in real (inflation-adjusted) incomes over time, rather than comparing them to prevailing averages of each moment that is, they measured changes in absolute rather than relative incomes. While absolute changes matter some, most people judge their status and well-being against the rest of society, not against an ancient base fixed by a statistician. Peter Gottschalk's reworking of the numbers massively deflates their claims. Cox and Alm found that just 2% of those in 1975's bottom quintile remained there in 1991; by Gottschalk's calculation, 36% were. And instead of 39% ending up in the richest quintile, just 20% did. With relative measures which Cox and Alm don't use, of course 43% of 1975's bottom quintile would have remained there in 1991, and just 11% would have hit the top. </quote>
When the book came out, I looked to see if they acknowledged any of Gottschalk's critique (which was circulated as an unpublished manuscript, and has never been published). They didn't even acknowledge its existence, much less revise their claims. The whole book is like that, really - completely bogus propaganda.