I think lottery winners are just not a good proxy for exogenous climb up the economic ladder because they're one-time wealth transfer, not income transfer, and people do not adjust their behaviour as much when they don't expect their long-term income change, and lottery winnings do run out eventually.
"They find mostly no effect and a few *determinantal* effects on mental health and stress."
"The causal effect of wealth on mortality is zero. That means that if you took someone from the poorer cohort, who is 2% more likely to die than someone with $140k in extra cash and you gave them $140,000, they would still be 2% more likely *** than the people who started with that money." ***missing "to die" here?
One thing I'd be interested to see - if this cross-applies to different countries.
My theory is that conscientiousness and IQ both causally affect health *and* income, hence why income and health are correlated and also why a lottery winner continues to have worse health outcomes. But, that also, this is greatly affected by environment.
For example, I think high IQ and conscientiousness regularly pulls people out of poverty in say, Sweden or the USA. However, if you're born a poor farmer in Rwanda, hard work and a high IQ have much less of an effect because of the poverty trap. My theory would predict that Rwandan lottery winners would indeed end up having better health outcomes.
Also, at a sufficient level of poverty, money is actually the limiting factor for health, whereas in Sweden, everybody already has enough money to eat relatively healthy, so there are other differentiating factors for doing so (e.g. do you regularly choose to eat frozen pizzas or lentil soup).
Are we really going to do a whole segment on how the causal effect of wealth on health is zero… in Sweden, a country with universal healthcare… without mentioning that we are talking about Sweden?
"I expect the main criticism of the Swedish lottery paper to be external validity. They have a sample large and varied enough to accurately measure the causal effects of income on Swedish people in Sweden, but these results may not generalize to other contexts. In particular, to countries with more poverty and less of a social safety net like the US.
The next paper extends the lottery design to a completely different group: impoverished households in Chicago who applied for housing vouchers in 1997. "
I think this reply does not really answer the criticism. Yes, you mention external validity farther down, but the Swedish caveat needs to discipline the inference in the Swedish section itself.
The claim you make there is much stronger than the paper warrants: “the reason richer people live longer is not because of what they can afford. It’s **not because of better health care, private doctors**, fancy food, safer cars, bigger houses, or longer vacations.” That is not identified by this paper. In Sweden, health care is universal and the private health care margin is very different from the US case; private provision often still sits inside a publicly financed system. So the Swedish lottery result is good evidence against a simple wealth-shock explanation of the Swedish wealth-health gradient, but it is not evidence that private doctors or better health care are irrelevant in general.
The Chicago voucher paper also does not cleanly solve the external-validity issue—especially around health. It is a different treatment _and_ a different estimand. Emergency room visits /= mortality, and housing is not liquid wealth. It is useful triangulation, but it cannot be used as if it were the same experiment replicated in a poorer, less universalistic setting.
This claim about private doctors and healthcare is just not substantiated.
Luckily, I also cover three experiments in poorer settings!
"In a previous post I covered three high-sample randomized control trials that also test the causal effect of income on a slew of possible outcomes (the fourth RCT was about the minimum wage).
The first trial relieved $169 million dollars of medical debt for a randomly selected group of 83,401 Americans over two years from 2018-2020. They find precise null effects on a range of economic outcomes like credit access, utilization, and financial distress. They find mostly no effect and a few determinantal effects on mental health and stress.
The second trial tests a UBI of $1000 a month over three years with a sample size of 1,000 treated participants and 2,000 controls in the United States. They find precise null effects on health, career prospects, and investments in education. After the first year even measures closely connected to income like food insecurity didn’t differ between the treated and control group.
The final RCT on the effect of income is the Denver Basic Income Project which also tested a UBI of $1000 a month but enrolled only homeless people and did not find any statistically distinguishable impact of the extra money on homelessness rates."
But then why do health outcomes change with income in the general population in Sweden? (I'm assuming they do, like in everywhere else—did not check the numbers)
Reverse causality perhaps? People may be unhealthy because they are poor, but people may also be poor because they are unhealthy.
It's not outrageous to suggest that health is mainly a function of lifestyle. By the time that bad choices result in a clinic or hospital visit, and an "outcome," it's too late.
Here's an interesting article at BigThink that you may like: The 2,500-year-old secrets to good health (that aren't secrets at all)
"Parental income is highly correlated with biological child income, but has zero effect on adopted child income."
This seemed pretty crazy to me so I checked it. It seems like it's more like parental income is *more* predictive of biological child income, but it's still somewhat predictive of adoptive child income too https://docs.iza.org/dp2665.pdf
Claude's summary: Björklund, Lindahl & Plug (2006), Swedish registry data with both sets of parents. Their unusual trick was running a horse race between biological and adoptive parents. All the coefficient estimates are positive (usually significantly so). For earnings, adoptive fathers' earnings predict adoptees' earnings at roughly the same magnitude as biological fathers' do (each around 0.1), and the two together add up to roughly the coefficient for own-birth children (~0.24). The evidence there is closer to "nature and nurture split it" than "nurture doesn't matter."
Tabarrok’s look at the limits of pure cash transfers hits the core issue: treating symptoms with standard redistribution levers leaves the underlying machinery untouched. If raw liquidity injections have zero causal effect on systemic outcomes, it means we have an architectural problem, not a funding problem.
To withstand the K-shaped pressures of an AI-driven economy, we have to move past standard "tax-and-spend" or unconditional transfers. True structural reform requires a native equity layer—specifically an asset-backed model anchored by a Sovereign Investment Fund and a Universal Revenue Tax. This shifts the citizens' role from passive welfare recipients to active equity stakeholders in national growth.
Version 1.9 of the National Growth Compact builds out the exact mathematics for this institutional transition. It’s live and entirely open-source for a rigorous economic audit. You can find it here on Substack.
Another great paper looks at elite Chinese families who were thrown into poverty during Mao's revolution.
All of their land and jobs and money were taken. But within 3 generations these families were back on top of the income scale.
A negative income shock was temporary.
Yes I agree, that's an incredible paper.
Persistence Despite Revolutions
https://www.nber.org/papers/w27053
Same for Japanese-Americans and Canadians thrown into internment camps and having all of their wealth stolen by the government during WWII
Would I be shot at dawn for wondering if SES and IQ might not be related?
Well, it's bad to shoot people dead. Even if they are dead wrong.
It's even worse when they're right.
Except it's less worse to shoot dead people than living ones...
Kids need two parents more than money
Brill post. A much better version of something I wrote 10 years ago https://www.adamsmith.org/blog/tax-spending/why-does-the-son-rise
Thank you Ben!
I think lottery winners are just not a good proxy for exogenous climb up the economic ladder because they're one-time wealth transfer, not income transfer, and people do not adjust their behaviour as much when they don't expect their long-term income change, and lottery winnings do run out eventually.
Thanks for the great post!
Noticed a few typos:
"They find mostly no effect and a few *determinantal* effects on mental health and stress."
"The causal effect of wealth on mortality is zero. That means that if you took someone from the poorer cohort, who is 2% more likely to die than someone with $140k in extra cash and you gave them $140,000, they would still be 2% more likely *** than the people who started with that money." ***missing "to die" here?
I don't know how I lived without Granmarly
One thing I'd be interested to see - if this cross-applies to different countries.
My theory is that conscientiousness and IQ both causally affect health *and* income, hence why income and health are correlated and also why a lottery winner continues to have worse health outcomes. But, that also, this is greatly affected by environment.
For example, I think high IQ and conscientiousness regularly pulls people out of poverty in say, Sweden or the USA. However, if you're born a poor farmer in Rwanda, hard work and a high IQ have much less of an effect because of the poverty trap. My theory would predict that Rwandan lottery winners would indeed end up having better health outcomes.
Also, at a sufficient level of poverty, money is actually the limiting factor for health, whereas in Sweden, everybody already has enough money to eat relatively healthy, so there are other differentiating factors for doing so (e.g. do you regularly choose to eat frozen pizzas or lentil soup).
Lol, I finished the article and you covered this! Well, my prediction was correct 😛
Are we really going to do a whole segment on how the causal effect of wealth on health is zero… in Sweden, a country with universal healthcare… without mentioning that we are talking about Sweden?
Quote from the very next section of the piece:
"I expect the main criticism of the Swedish lottery paper to be external validity. They have a sample large and varied enough to accurately measure the causal effects of income on Swedish people in Sweden, but these results may not generalize to other contexts. In particular, to countries with more poverty and less of a social safety net like the US.
The next paper extends the lottery design to a completely different group: impoverished households in Chicago who applied for housing vouchers in 1997. "
I think this reply does not really answer the criticism. Yes, you mention external validity farther down, but the Swedish caveat needs to discipline the inference in the Swedish section itself.
The claim you make there is much stronger than the paper warrants: “the reason richer people live longer is not because of what they can afford. It’s **not because of better health care, private doctors**, fancy food, safer cars, bigger houses, or longer vacations.” That is not identified by this paper. In Sweden, health care is universal and the private health care margin is very different from the US case; private provision often still sits inside a publicly financed system. So the Swedish lottery result is good evidence against a simple wealth-shock explanation of the Swedish wealth-health gradient, but it is not evidence that private doctors or better health care are irrelevant in general.
The Chicago voucher paper also does not cleanly solve the external-validity issue—especially around health. It is a different treatment _and_ a different estimand. Emergency room visits /= mortality, and housing is not liquid wealth. It is useful triangulation, but it cannot be used as if it were the same experiment replicated in a poorer, less universalistic setting.
This claim about private doctors and healthcare is just not substantiated.
Luckily, I also cover three experiments in poorer settings!
"In a previous post I covered three high-sample randomized control trials that also test the causal effect of income on a slew of possible outcomes (the fourth RCT was about the minimum wage).
The first trial relieved $169 million dollars of medical debt for a randomly selected group of 83,401 Americans over two years from 2018-2020. They find precise null effects on a range of economic outcomes like credit access, utilization, and financial distress. They find mostly no effect and a few determinantal effects on mental health and stress.
The second trial tests a UBI of $1000 a month over three years with a sample size of 1,000 treated participants and 2,000 controls in the United States. They find precise null effects on health, career prospects, and investments in education. After the first year even measures closely connected to income like food insecurity didn’t differ between the treated and control group.
The final RCT on the effect of income is the Denver Basic Income Project which also tested a UBI of $1000 a month but enrolled only homeless people and did not find any statistically distinguishable impact of the extra money on homelessness rates."
great call pointing out the previous post. I need to check that out. Thanks.
But then why do health outcomes change with income in the general population in Sweden? (I'm assuming they do, like in everywhere else—did not check the numbers)
Reverse causality perhaps? People may be unhealthy because they are poor, but people may also be poor because they are unhealthy.
It's not outrageous to suggest that health is mainly a function of lifestyle. By the time that bad choices result in a clinic or hospital visit, and an "outcome," it's too late.
Here's an interesting article at BigThink that you may like: The 2,500-year-old secrets to good health (that aren't secrets at all)
https://bigthinkmedia.substack.com/p/the-2500-year-old-secrets-to-good
It is pretty compressed in Sweden, and confounded by education.
I thought that you were an economist, and you confuse wealth with income.
The Japanese internees during world War 2 basically lost everything. Within a decade their incomes were above average American income.
"Parental income is highly correlated with biological child income, but has zero effect on adopted child income."
This seemed pretty crazy to me so I checked it. It seems like it's more like parental income is *more* predictive of biological child income, but it's still somewhat predictive of adoptive child income too https://docs.iza.org/dp2665.pdf
Claude's summary: Björklund, Lindahl & Plug (2006), Swedish registry data with both sets of parents. Their unusual trick was running a horse race between biological and adoptive parents. All the coefficient estimates are positive (usually significantly so). For earnings, adoptive fathers' earnings predict adoptees' earnings at roughly the same magnitude as biological fathers' do (each around 0.1), and the two together add up to roughly the coefficient for own-birth children (~0.24). The evidence there is closer to "nature and nurture split it" than "nurture doesn't matter."
Excellent post.
The underlying factors are obviously genetic: IQ, impulsiveness, personality.
Thanks for this write up! Can you talk about how the results from Oregon’s Direct Cash Transfers Plus (DCT+) pilot program fit into this?
Tabarrok’s look at the limits of pure cash transfers hits the core issue: treating symptoms with standard redistribution levers leaves the underlying machinery untouched. If raw liquidity injections have zero causal effect on systemic outcomes, it means we have an architectural problem, not a funding problem.
To withstand the K-shaped pressures of an AI-driven economy, we have to move past standard "tax-and-spend" or unconditional transfers. True structural reform requires a native equity layer—specifically an asset-backed model anchored by a Sovereign Investment Fund and a Universal Revenue Tax. This shifts the citizens' role from passive welfare recipients to active equity stakeholders in national growth.
Version 1.9 of the National Growth Compact builds out the exact mathematics for this institutional transition. It’s live and entirely open-source for a rigorous economic audit. You can find it here on Substack.