Capital: What it is and How it Defines the American Dream

Abstract

The “American dream” is rooted on the idea that people can go from “poor” to “not poor” in this country with a can-do attitude and strong work ethic. Although we’ve heard a handful of these “rags to riches” stories, research shows that it isn’t as easy as it used to be.

In this easy to read perspective, I explore the economic factors, particularly the four types of capital, that facilitate (or hinder) the path up the economic ladder of today’s modern economy.

The political debate on income inequality has put experts in economics at center stage to find out what the heck is going on. Some economists claim that income inequality is bad because it restricts opportunities for some members of society, thus exacerbating divisions in social class and hindering growth. Other economists say that income inequality is good because it is a natural phenomenon that rewards people for bringing value to other people in the form of innovation and entrepreneurship; thus technological progress and economic growth.

Both sides should be taken into consideration, but that debate will get us nowhere if we do not focus on income mobility. That is, the ability to move in and out of different levels of socioeconomic classes. In today and tomorrow’s economy, the worry is: “I’m poor now, but what needs to happen for me to be not so poor later on?” Economic capital may be the answer.

Keywords: income inequality, income mobility, capital, social capital, human capital, cultural capital, economic capital