The Tipping Point: Fascinating but mythological?

William Easterly, 13 July 2009

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The “tipping point” is a popular concept covering a whole range of phenomena (and a best-selling book by Malcolm Gladwell) where individual behaviour depends on the behaviour of the herd.

Its original application was to racial segregation. Nobel Laureate Thomas Schelling developed a beautifully simple model for this. Suppose that whites have different degrees of racism – some would “tolerate” higher shares of non-whites in their local neighbourhood than others. Schelling showed that even the less racist whites would still wind up exiting during tipping because of a chain reaction.

Here’s how it happens – at first only the most extreme racist whites exit. But their departure causes the white share to go down, making the second most extreme racist whites uncomfortable, so they also exit. The white share goes down some more, and so now even less racist whites will be uncomfortable being a white minority, and they will wind up exiting too. So the remarkable prediction of the tipping point model is that just a little bit of integration that directly bothered only the most racist whites wound up causing all of the whites to exit. So even if the typical white were perfectly happy with an integrated neighbourhood, these neighbourhoods would be so unstable that the final outcome would be extreme racial segregation. The segregated non-white neighbourhood will remain permanently non-white. Segregated white neighbourhoods (with a white share above the tipping point) will also be stable, because virtually all whites will tolerate a very small non-white share. So segregation happens through a chain reaction, even though the average white person did not want such extreme segregation.

It’s easy to imagine development applications for the tipping point idea. Suppose that people decide to become highly educated based on the share of highly educated people in the population. After all, it’s only worthwhile being educated if you can talk to and work with a lot of other highly educated people. If the share of educated people falls below a tipping point, a lot of people will stop becoming highly educated, which decreases even further the incentive to attain educated, and we get the same kind of chain reaction that happened in segregation. So a whole society can tip from high education to low education, below a certain “tipping point” of the share of the highly educated in the population. Assuming that low education causes poverty, this is a “poverty trap” story of low education and underdevelopment.

Tipping point stories are fascinating, but do we observe them in the real world? I became intrigued with this question a while ago and eventually published a paper testing the predictions of the tipping point story for its original application – racial segregation of US neighbourhoods (Easterly 2009).

The basic prediction is that mixed neighbourhood are unstable but segregated neighbourhood are stable. Data on American neighbourhoods from 1970 to 2000 rejected these predictions – it was the segregated neighbourhood that were unstable. There was as much “white flight” out of all-white neighbourhoods as there was out of mixed neighbourhoods, and there was a white influx into segregated non-white neighbourhoods. Neighbourhoods are still very segregated in the year 2000, but not because of tipping. Maybe segregation exists because most whites really do want segregation, not because of a chain reaction due to herd behaviour.

Of course, this is only one test of the tipping point for racial segregation over one time period. Maybe the tipping point is real in other contexts. But think twice and check for evidence before you accept popular stories like the tipping point.

References

Easterly, William (2009), “Empirics of Strategic Interdependence: The Case of the Racial Tipping Point” NBER Working Paper 15069 and The B.E. Journal of Macroeconomics Vol 9, Issue 1, Article 25.

Gladwell, Malcolm (2001), The Tipping Point: How Little Things Can Make a Big Difference.

Topics: Frontiers of economic research
Tags: racial segregation, Tipping point

Professor of Economics at New York University, joint with Africa House, and Co-Director of NYU's Development Research Institute

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