The Great Gatsby and the Demise of the American Dream

The Great American Novel

The American Dream is no longer American

How do we quantify the effect of inequality on the distribution of opportunities?
The Great Gatsby curve attempts to do just that. The curve shows the relationship between the inequality in income distribution on the x-axis (in terms of Gini coefficient) and intergenerational socioeconomic mobility on the y-axis.
Source: The white house archive.

The Price of Inequality

The plot represents the percentage of offspring who earned more than their parents on the y-axis and the year the cohort was born in on the x-axis. We can see how it has been steadily declining. At this point, it’s about 50%.

How much did Inequality rise?

How does Inequality Affect the Distribution of Opportunities?

Moving Forward

Appendix

The counterfactual experiments run by Chetty et al. The blue curve shows what we’re striving for, which is what happened in the 1940s. The red curve is what we currently have, we can see that it will spiral down where almost no upward mobility is possible. The green curve is what we would get if we split income the way we did in 1940. The orange curve is what we would get if we had growth like what we did in 1940.

Software Engineer @Microsoft

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