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Thu March 6, 2014
What a massive land lottery in antebellum Georgia tells us about wealth and opportunity today
In the early 1800s, the newly formed state of Georgia had a lot of new land under its control. The land had been taken mostly from the native Muskogee and Cherokee people, and leaders of the young American state were looking for ways to transfer the land to white settlers. What they ultimately decided on was a series of lotteries.
The forced transfer of property from native people to white settlers was common in America during the 19th century, but the lottery system was not. It meant that basically any white male adult in Georgia, rich or poor, had the same shot at winning a valuable piece of land. And, while the system itself was unjust and just plain wrong on multiple levels, it also set up an ideal research experiment.
If you're a social scientist looking back, what you see in Georgia in the early 1800s isn't just a lottery, it's a randomized controlled trial. And it allows economists to ask a question that's still relevant today: What happens to a family when it suddenly comes into wealth?
Two economists recently tried to answer that question, in a pair of working papers published by the National Bureau of Economic Research. Hoyt Bleakley, from the University of Chicago, and Joseph Ferrie, from Northwestern University, gathered data from the 1832 Cherokee Land Lottery in Georgia. They gathered census data on 14,000 males who were eligible to win the land lottery, and tracked their wealth over time. As Bleakley and Ferrie write in their second paper:
Lottery winnings were essentially a pure wealth shock - there was no homesteading requirement and the claim could be readily liquidated without even setting foot on the land.
Each parcel of land covered 160 acres. According to Bleakley and Ferrie, winning a parcel was worth several hundred dollars, an amount equal to the median household wealth at the time. The U.S. Census reports household net worth in 2011 was about $68,000. Imagine if a state suddenly started randomly awarding properties worth $70,000 in today's market, and you'll have some idea of what the Cherokee Land Lottery was like for white males in Georgia in 1832.
Bleakley and Ferrie's first working paper on the topic looked at outcomes 18 years after the lottery. Their second paper, which has more relevance for our work at State of Opportunity, looked at outcomes for the children and grandchildren of lottery winners.
Both papers go into great detail about the data and methods behind the research, but I'll go ahead and spoil the ending for you: The Cherokee Land Lottery did affect the distribution of wealth in Georgia, but only for those who were already middle or upper class. White males who were poor before winning the land lottery were still poor 18 years later. And, overall, Bleakley and Ferrie report the land lottery had very little impact beyond the first generation of winners.
... in 1880, we do not find differences in occupational standing or literacy as a function of their father's lottery status. In 1880, the grandchildren themselves do not have significantly greater literacy or school attendance if their grandfather was a lottery winner. If anything, the grandchildren of the treated are less likely to be in school in 1880, some five decades after the lottery.
Now, granted, quite a lot happened in Georgia between 1832 and 1880. But Bleakley and Ferrie write that by 1880 school attendance for white children in the south was back up to pre-war levels. Also, while the war destroyed plenty of wealth in the south, the transfer of the remaining wealth continued on, from father to son, just as before. Ultimately, the land lottery did not alter the rise and fall of families.
So what does this tell us? That a family can suddenly come into a windfall equivalent to $70,000 in today's dollars, and yet there's no statistically measurable benefit for their grandchildren 50 years later (at least, no benefit that could be tracked in the public records of 1880).
It tells us that the benefits and opportunities parents provide their children are not exclusively, and maybe not even substantially, determined by wealth. There is something else parents contribute that matters much more. What that something else is, Bleakley and Ferrie did not identify.
But you can probably think of a few things parents contribute that might be worth more than money: social training, social connections, education, character.
Financial wealth can rise and fall. Social wealth is what persists.