Characteristics of a Bell Curve
In statistics, a bell curve represents the simple understanding that many things with similar inputs can have different results. Bell curves show us that despite that difference, we can still come to an accurate understanding of how things will generally turn out.
Statistics does not concern itself with being able to find root causes for every result, but instead, mathematically, it makes sense of the range of results and pulls out certain, distinctive threads that drive overall trends. In statistics, major impacts, turning points, and general trends that effect the entire curve are what really matter.
The most important part of the bell curve is the median. Located at the center of the curve, it represents the most frequent results of a given situation. Things near the median are boring and expected, but critically important.
Outliers exist on the edges of every bell curve. Outliers represent unexpected outcomes, and we often hear about them on the news. The biggest fraud, the strongest man, the biggest storms. All outliers.
What statistics seeks to understand is not just the outliers, but also the 99 other cases of fraud, the 49 slightly weaker men, the 149 other minor storms. In other words, "What moves the median? What changes the most frequent outcome? (and the rest of the curve with it?)", as opposed just understanding the outliers.
How Human Investment Works
Now some of you may be asking what this has to do with Human Investment (since it's mentioned in the title). Human Investment is a basic principle of Labor Economics. It goes something like this: The more you invest in a person, the better chance they have of doing well.
It sounds heartless, but has proven to be remarkably accurate in explaining how labor markets work. For example, if you invest in the best paint, suspension, engine, and transmission for your car, your car will have increased value. In a similar fashion, if a person obtains valuable skills like electrical repair, programming, teaching, or welding, they have increased value in the job market.
All cars with the same parts and repair histories don't sell for the same price, and people with the same skills don't all get paid the same wage. There are differences based on location, popular opinion, even the weather, but generally, you can get an idea of how much you'd expect to sell the car for, or get paid, thanks to a bell curve.
The Human Investment Bell Curve
Now, bell curves become important here for highlighting 2, contradictory truths. You may hear people say "You are what you make of yourself. Hard work determines your life", and that is right. You may also hear people say "You are a result of your situation. Your environment determines your outcomes", and that is also right. Both are true.
The whole truth is that your economic inputs (social class, race, family situation, neighborhood, school district, etc) put you on a bell curve, and the results of that curve vary widely. As an example, you might consider classmates that lived in your neighborhood, went to the same schools, had a similar socio-economic situation, but now have a vastly different quality of life than you.
The Influence of Outliers
A prime example of an outlier is Republican presidential candidate Ben Carson. He grew up in the ghetto, but has become of the most respected pediatric neurosurgeons in the world. He is a Human Investment outlier of the greatest kind.
Let's say Dr. Carson graduated with 300 other students. What has come of the 299 other kids in his graduating class? Their lives and economic opportunities represent the rest of his high school's bell curve. For every Ben Carson on the top end of performers, there is likely a counter-balancing person serving a life sentence in prison, who received the same opportunities, but did different things with them.
That leaves us with 298 students left. If we are going to make the greatest impact on the greatest number of people, our public policy decisions should not focus on the Ben Carson or the prison lifer, but reflect the outcomes of the bulk of the population, the other 298 of Ben Carson's classmates. It should attempt to move the median.
Based on what we know of his environment, we can reasonably assume that the curve looks something like this: a few in prison, some unemployed, many underemployed, many employed at minimum wage, some employed above minimum wage, and a few successful businessmen. Each and every one of these people is as important as Ben Carson, and public policy should try and improve their median outcomes.
Takeaways
All of this should inform our perspective on the "1%" debate. When we look at business creators, we understand that they have likely performed above average on their bell curve.
We can understand that children born into wealth have a good shot at being wealthy, because of the Human Investments they receive. The median of their economic bell curve is high.
We also understand that children born into poverty have a good shot at remaining in poverty, because their family can't provide the same kind of Human Investments. The median of their economic bell is situated very low.
Their 'good shot' is simply a matter of where their median lies.
All of them have dictated the direction of their lives, and yet, all of them are also a result of their given opportunities. Both ideas are true, and complimentary.
As we make decisions on policies we intend to support this upcoming election, I might suggest that we remember the principle of the Bell Curve in Human Investment, and move toward those policies that will help nudge the median (and therefore, the entire Bell Curve) up a little higher for our neighbors, ourselves, and our children.
Until Later,
Greg Lewis
