Our weekly explainer on economics using lessons from popular culture. In Installment 60, the Kardashians demonstrate the Matthew Effect.
A lot of people, including my friends and colleagues, are bewildered by the popularity of the Kardashians. They just don’t get it. Enumerating the reasons and development of their fame invariably involves a complex explanation of the complicated familial ties and the oft-occurring controversies. I do receive a lot of scoffing and derision for keeping up with the Kardashians this well.
If I have to be curt, they’re famous for being famous. Another way of understanding how a family (+ dogs+friends+assistants) has risen to unprecedented levels of fame and fortune is by the Principle of Cumulative Advantage. This principle is also known as the Matthew Effect, and refers to the phenomenon of those who already have an advantage acquiring more of it. This concept is applicable to both financial and social capital.
This Principle of Cumulative Advantage holds true in many fields and aspects of life. There are certain feedback loops built into most social and economic structures that make themselves apparent with time. For example, a person born into a wealthy household will have access to quality educational institutions, proper nourishment and the social network accruing from attending those institutions, as well as those of their parents, which can be leveraged for opportunities if required. These benefits play a huge role in ensuring that they have a higher chance at prosperity.
On the other hand, a person born into a less than well-to-do household will lack access to all these, and have to work harder not just to reach the same level of fortune but also to escape the vicious circle of poverty.
The youngest adult of the family, Kylie Jenner, recently graced the cover of Forbes magazine as the “Youngest-Ever Self-Made Billionaire” and ruffled quite a few trigger-happy internet feathers. She’s not self-made, is what the general consensus was. She had the support of an ultra-rich and ultra-famous family that aided in her establishing and furthering her makeup empire. She had cumulative social and financial advantage which she leveraged in order to get where she is.
This principle is generally encapsulated in the phrase, “the rich get richer and the poor get poorer.” There is a misconception at the heart of this phrase, but it does get the Matthew Principle right. The misconception is that economics and society are a zero-sum game, and the poor must get poorer for the rich to get richer. This is not true, and over the last century, people have escaped poverty with an unprecedented velocity, making that phrase obsolete. A lot of social welfare programs and redistributive policies, nevertheless, are guided by that phrase. Their well-meaning but simplistic attempts to create a level-playing field lead to unintended consequences that make things worse — but that is a subject for another day!
Financial institutions are well aware of the Matthew Effect. It is reflected in differing risk premiums charged to the poor vis-à-vis the rich. Moreover, the poor, who are short on money, often have no option but to borrow, and this desperation leads them to be willing to pay high interest rates. They lack negotiating power and end up getting a bad deal.
The Matthew Effect has also been studied in the academic research community, wherein a research paper cited multiple times goes on to be cited by other authors as well partly due to its large number of citations, whereas an equally valid or even superior study gets ignored due to low numbers of citations. Both these cycles keep on perpetuating, sometimes at the peril of the accumulated knowledge in the community.
Cognitive psychologist Steven Pinker invoked the Matthew Effect in societies in his book, The Better Angels of Our Nature: Why Violence Has Declined. He does a comparative analysis of societies where everything seems to go right and ones where everything seems to go wrong. He posits that this could be the result of a positive feedback loop, in which reckless behavior by some individuals creates a low-trust, chaotic environment that encourages reckless behavior by others. He cites research showing that more unstable the environment, the more steeply people discount the future, and the less forward-looking their behavior.
Keith Stanovich has done a lot of work in studying the Matthew effect in reading among children. He found that children who initially fall behind in reading due to any reason eventually fall behind in academics overall. Their deficiency in the time when they were learning to read is reflected at a stage where they are reading to learn and increases the gap between them and their peers. In this way they fall farther and farther behind in school, dropping out at a much higher rate than their peers.
Who knew that Keeping Up With the Kardashians could be a goldmine of lessons relating to business, economics, psychology, sociology and the effects of plastic surgery? I did, and thus kept learning from it, while the rest of you missed out on the insight — which is also the Matthew Effect at play.