Signal or cause?

I heard about this study about how attaining the American Dream may be influenced by your neighborhood in the news.

This part caught my attention:

Chetty found, according to NPR’s Morning Edition, that if a person moves out of a neighborhood with worse prospects into to a neighborhood with better outlooks, that move increases lifetime earnings for low-income children by an average of $200,000. But moving a lot of people is impractical, so researchers instead are trying to help low-performing areas improve, according to Morning Edition.

I find it surprising that the suggestion to move a lot of people is discounted for being impractical.

It should be discounted for confusing a signal with a cause.

I heard a good analogy on an episode of EconTalk podcast once (I believe) that illustrates the slip up:

Since wealthy people vacation in Monaco, you should vacation in Monaco if you want to become wealthy.

Vacationing is Monaco is the signal of being wealthy, not the cause, vacationing there isn’t likely to make you wealthy.

Likewise, parents moving to neighborhoods with better outlooks may be a signal of what produces those better outlooks, not the cause.

A hypothesis to consider is that the values parents instill in their children is the biggest contributor to producing better outlooks.

That may show up at the neighborhood level because parents tend to move to neighborhoods where other parents share their values.

If true, then moving folks to better outlook neighborhoods or recreating other signals of those neighborhoods in worse prospect neighborhoods may not be effective ways to produce better outlooks.

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