Study: Rich kids 10 times as likely to become inventors, creating 'lost Einsteins'

Key Points
  • Children born into the top one percent of households by income are ten times as likely to become inventors as those from below-median income families, according to the study.
  • A study new study from Stanford and Harvard finds that lack of exposure to innovative mentoring and internships is inhibiting innovation.
  • Exposure to inventors in youth increases the likelihood kids become inventors themselves.
  • "Hence, there are many 'lost Einsteins,'" wrote the team "— individuals who do not pursue a career in innovation even though they would have had highly impactful innovations."
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Children born into the top 1 percent of households by income are 10 times as likely to become inventors as those from below-median income families, according to a new study.

Economists from Stanford, Harvard, MIT and the U.S. Treasury Department published their findings as part of a working paper with the National Bureau of Economic Research. The research team found that there is significant disparity across demographic groups in terms of numbers of inventors.

But they also found other disparities: White children are three times more likely to become inventors than black children, and only 18 percent of 40-year-old inventors are women. While that gender gap is closing, it will take another 118 years to reach gender parity at the current rate, according to the researchers.

If women, minorities, and children from low-income families were to invent at the same rate as white men from top-quintile families, the total number of inventors in the economy would quadruple, the study found.

Importantly, living in a neighborhood with a high concentration of inventors directly affects a child's likelihood of becoming an inventor later in life.

"Hence, there are many 'lost Einsteins,'" the economists wrote in their report, entitled: "Who Becomes an Inventor in America? The Importance of Exposure to Innovation."

Harvard's Alexander Bell told CNBC: "It seems like that family background and the environment seem to matter a lot in terms of these disparities."

He added: "There are kids out there who have the skills to become inventors, but aren't due to their family's background. And that's concerning."

Source: Bell, Chetty, et al. (2017)

The economists — including Stanford luminary Raj Chetty — studied 1.2 million inventors (defined as an individual who holds or applied for a patent between 1996 and 2014), by linking de-identified tax records to patent filings.

The researchers even found the environment had a direct effect on the types of inventions children eventually produce. Those who grew up in the tech-saturated Silicon Valley areas are likely to invent something related to computers, while those from the Minneapolis area, home to many medical device manufacturers, are likely to invent new medical devices.

The economists estimate that moving a child from a commuting zone with a high rate of innovation would boost their chances of becoming an inventor by at least 17 percent.

These results are consistent with Stanford economist Chetty's recent work on neighborhoods that documents effects on earnings and college attendance. Chetty is widely recognized among economists with a wide body of publication, according to IDEAS/RePEc rankings.

Source: Bell, Chetty, et al (2017).

But while neighborhood effects have typically been attributed to better schools or residential segregation, Bell said it's unlikely those factors are at play with inventors since the effects seem to be specific to the type of invention.

It's unlikely that some neighborhoods or schools prepare kids to innovate in one particular technology. Instead, Chetty and Bell argue that their findings point to mentoring or internship networks that lead children to pursue certain careers.

The findings could have a significant impact on policy. Governments often try to drive innovation with generous tax incentives or subsidies for technical education, but policies that increase exposure may be a better bet in increasing invention. Financial incentives in the form of tax cuts are less likely to spur additional star inventors as the private financial returns are already quite large, according to Bell and Chetty.

The researchers suggest that mentoring programs by current inventors or internship programs could have the desired effects.

By targeting those programs toward women, minorities, and those of low-income backgrounds, governments would be able to not only shrink the innovation disparities, but guarantee a faster rate of innovation, the economists say.