October is harvest time, and the results from our cabbage patch illustrate something that is as true in economic life as in horticulture. Environment has a great deal to do with outcomes.
Identical plants performed very differently because of one key difference in the situations in which they grew. In an analogous way, highly similar people can achieve very different levels of financial success, depending on the circumstances in which they live and work.
In April, I planted two six-packs of started cabbage plants, all of the same variety bought on the same day from the same store. Five went in the plot to the left of our home's entry and seven to the right. All were watered liberally through the summer. The soil is the same. I weeded both. But while the ones on the right grew well, the ones on the left were pretty much a bust.
A typical cabbage from the right weighed 6 pounds, 9 ounces. A typical one from the left was 2.3 ounces. Why such a difference?
The answer is that the ones on the right were in full sunlight all day, while the ones on the left were in at least partial shade all day. Same genetics, water and fertility, but very different productivity depending on one crucial variable.
The same can be true for humans. Some financially successful people like to think that their success is due entirely to their own abilities and efforts. But, as with vegetables, circumstance and environment also play a role in many outcomes.
Yes, cabbages don’t have free will.
They cannot “make an effort” or be “determined” as humans can. Ability, hard work and determination certainly account for a great deal in human endeavors. These qualities should be honored. But they are far from the sole determinants of success, either as a self-employed entrepreneur or as an employee of someone else. Comparisons across both time and space demonstrate this.
Start with time. Richard Easterlin, an economics professor at the University of Southern California, did much research on how the year of birth affected people’s lifetime earnings. As explained in his book, “Birth and Fortune,” Easterlin found that a cohort of people born so that they were in their prime earning years during a substantial downturn, like the Depression, had substantially lower average earnings over their entire lifetimes than cohorts that came before or after them.
More recent research by others demonstrates that cohorts of college students that graduate at the beginnings of recessions not only have harder times getting jobs, on average, but experience a hit to their earnings over many years, even after the recession has ended.
Within each group, people who work hard may do better than those who do not. But the average outcome does vary because of circumstances beyond the control of anyone in the group.
Then think about comparisons across space or political boundaries.
Different outcomes for people with comparable effort and ability are apparent to anyone who has lived in a developing country.
Thirty years ago, I worked on a livestock development project in Peru. The peasant farmers I met worked extremely hard, as hard or harder than any farmer in my hometown. And many were very intelligent, although uneducated.
However, they did not have access to credit, did not own machinery, had to sell their products in markets that were inefficient and highly manipulated by middlemen with much better access to information.
They did not have access to health services and were at a disadvantage in any legal dispute. There was no Social Security or other means of reducing risks of bad health or old age, so all resource allocation decisions had to take such risk into account.
Extremely hard work did not keep them from poverty. Nor was this limited to peasants.
If you have worked hard and done well financially, be proud of what you have accomplished. But don’t assume you did it all by yourself. We all stand on the shoulders of those who came before us.
Economist Edward Lotterman teaches and writes in St. Paul, Minn. Write him at ed@edlotterman.com.
