At his talk titled “Why Luck Matters More Than You Think” in the Rehm Library last week, Cornell economist Robert Frank claimed that he was only alive at that moment to give the talk due to dumb luck. Years ago, he suffered “sudden cardiac death”, but received timely medical care under almost miraculous conditions.
According to Frank, the role of luck in the world extends far beyond his own life experiences – he argues that success is not the result of own hard work and dedication, as we are led to believe, but rather that luck accounts for at least some part of it.
His theory that good fortune and luck determine success has implications for economic policy, especially for redistribution. Frank posits that when high-income earners recognize that at least some of their wealth is due to factors outside of their control (luck), they are more likely to give some of it up. He gave an example of an experiment, in which participants were asked to think of something good that happened to them, and then asked if they would like to participate in charity. The treatment group, who realized that good things can happen outside of their influence, were more likely to donate than the control group who were asked to donate without thinking of good fortune before.
Frank argues that making the wealthy aware of the role of luck in their success could benefit all of the U.S. economy, since it could cause them to be more tolerant of higher taxes on their income. Just as in the experiment, the knowledge that their income was dependent on luck rather than only their own efforts could convince them to accept more of their income being used for the public good through taxes. This should be easy, says Frank, since the U.S. is already a relatively low taxing country, and due to the fact that the wealthy can already afford everything they want. The difference between their pre-tax and post-tax consumption, Frank proposes, would be the same as choosing between driving a Ferrari F12 Berlinetta ($333,000) on a pot-hole covered road and a Porsche 911 Turbo ($150,000) on a maintained highway.
While it may be difficult to accept that our society is not a perfect meritocracy – where those that work the hardest achieve the most – understanding the role of luck in our lives can have powerful impacts on the economy as a whole. The promotion of redistribution policies could end up spreading some good fortune to the unluckier members of our society.