How Risk is Like Religion

Religion is, generally, inherited: the chances are overwhelming that a person of any given religion will have parents of that religion. On the other hand, if your parents are complete religious nutcases, there's a higher-than-normal chance that you'll reject their beliefs.

Risk, it seems, is much like religion in this respect:

According to Thomas Dohmen, Armin Falk, David Huffman, and Uwe Sunde, there is an extremely strong correlation between parents' risk attitudes and those of their children:

We find that parents who are more trusting and parents who are risk tolerant have children with similar attitudes... Parents also tend to marry individuals with similar trust and risk attitudes. This reinforces the impact on the child; having one parent with a given attitude means that the child is likely to have a second parent with that attitude as well.

This could help explain why rich families tend to remain rich, and poor families tend to remain poor, across many generations, just as religion tends to stick around within families:

Evidence of transmission of attitudes from parents to children is also highly relevant for understanding why there is a strong persistence in economic outcomes across generations for individual families. There is a large literature studying social mobility with countries, which documents substantial correlations between parents and children in terms of wealth, education, and occupation. Transmission of attitudes could be one mechanism underlying such correlations: one reason that children may end up with similar outcomes to their parents may be that they inherit similar attitudes and thus make similar economic choices. Trust and risk attitudes are both relevant for the types of outcomes that are typically correlated between parents and children, such as wealth accumulation and occupational choice.

But the datapoints which fascinate me are the ones at the far right hand edge of the graphs, where the children of parents (especially mothers) with extremely high risk tolerance turn out to be unusually risk-averse. It's as though kids will accept just about anything which seems remotely reasonable, but are still quite good at rejecting the obviously unreasonable. Which seems reasonable to me.

(HT: Thoma)

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