The Lottery of Life & the Role of the State

What India needs is a dynamic and granular database on socio-economic inequalities

- Pramit Bhattacharya

For most of human history, one's life trajectory was determined right at birth. If you were born in a royal family, you led an opulent life. If you were born in a serf's family, you led a life of misery.

The industrial revolution and the spread of democracy helped create a more dynamic world. In the modern era, a cab driver's daughter can dream about becoming a billionaire. A billionaire's son can have nightmares about going bankrupt one day.

Yet, even in the modern world, the distribution of wealth and power is far more unequal than the distribution of talent. A 2018 research paper by the Italian physicists A Pluchino and A Rapisarda and the economist AE Biondo shows how randomness (or luck) could help explain this puzzle. Using a simple simulation, the trio show how mediocre-but-lucky individuals are likely to reach much greater heights of success than their more talented peers.

Several studies on stock market investors reach a similar verdict: luck plays a big role in generating outsized stock market fortunes for a few. The rest have to be content with average or below-average returns.