Monday, October 14, 2013

Income inequality update

Scott Lincicome highlights this short video discussing income inequality from a global perspective:

Among other factoids mentioned: the median US household earns more than 93 percent of the world's households. Something to chew on next time someone claims to be part of the victimized 99 percent.

And while we're on the subject of global income inequality, The Washington Post's Max Fisher produces this world map based on a new metric, the Palma ratio, which some economists evidently believe is superior to the Gini coefficient as a measurement of inequality:

Click to enlarge

While there are a number of countries with worse inequality than the US that few Americans would want to collectively trade places with -- Bolivia, Namibia, Zambia, Central African Republic and Nicaragua readily spring to mind -- be sure to also note some of those with greater equality than the US. Among them: Pakistan, Egypt, Ethiopia, Mali, Bulgaria and Kyrgyzstan. This would appear to lend support to the theory that income inequality is neither necessarily a good thing or bad thing, but rather just a thing. 

Lastly, UMass-Amherst economics professor Nancy Folbre has a new post on the New York Times' Economix blog which attempts to link inequality to the government shutdown. Among the column's assertions:
Cross-national comparisons suggest that inequality can literally undermine democratic institutions, perhaps because the very rich find them inconvenient. The political scientist Christian Houle finds that inequality is associated with an increased “probability of backsliding from democracy to dictatorship.”
"Associated with" basically means that that the author found some correlation but no causal relationship, so the notion that inequality undermines democratic institutions remains without foundation. Folbre continues:
Many of the causal links are obvious. Those with money to invest in campaign contributions and lobbying exercise a disproportionate influence on political outcomes. Apparently, a few super-rich individuals can supersede the influence of a business community that has more to gain from political compromise.
Folbre's first link is to a Charles Blow opinion column whose only seemingly fact-based reference to a causal link is this sentence:
As The New York Times pointed out this weekend, Republicans — financed by the billionaire Koch brothers — began plotting this government shutdown over Obamacare soon after the president began his second term.
That's great, except Slate's Dave Weigel has already pointed out that the Koch brothers don't seem to actually want a government shutdown and that Americans for Prosperity, which is chaired by David Koch, "has been absent from the shutdown fight, from rallies in support of it."

Folbre's second sentence, meanwhile, which cites the influence of "a few super-rich individuals" contains a link to a story which says nothing about the influence of individual donors. Indeed, it actually appears to suggest the opposite through its statement that "business lobbyists acknowledged that the mere suggestion they were considering backing primary challenges next year could enhance grass-roots support [emphasis mine] for the very lawmakers they want to defeat." In any case, that a progressive like Folbre is mourning the demise of corporate influence in the GOP is equal parts funny and strange. 

Like Paul Krugman, Folbre then decides to engage in some armchair psychological analysis:
Furthermore, what people feel may be at least as important as what they think. The shutdown is fueled more by anger than by analysis. Its hot-tempered, intransigent mood seems entirely consistent with a new wave of social science research documenting the relevance of phenomena below the surface of the conscious mind, like loss of trust, emotional frustration and displaced aggression. 
Richard Wilkinson and Kate Pickett provide a broad summary in “The Spirit Level: Why Greater Equality Makes Societies Stronger,” showing that income inequality across states within the United States, as well as across countries, is associated with a higher level of socially dysfunctional outcomes in a variety of domains, including health, education, obesity and incarceration. 
They contend that increased inequality intensifies social stress, making it difficult for individuals to successfully collaborate. While they don’t insist this dynamic is biologically hard-wired, they mention evidence that primates and monkeys living in strict social hierarchies often behave more aggressively than others, attacking their inferiors and seeking to appease their superiors.
Newsflash about The Spirit Level: its conclusions are garbage as The Economist noted last year:
“The Spirit Level” caused a sensation when it was first published in Britain, probably because it reflected the post-crash Zeitgeist. Its conclusions, however, have been largely debunked. In a devastating critique, published by the Democracy Institute, Christopher Snowdon showed that Mr Wilkinson and Ms Pickett made highly selective use of statistics.
Tino Sanandaji has also comprehensively debunked the book. How can Folbre, a professional economist, be unaware of this? Perhaps with little other evidence around to support her preferred narrative, she simply must grasp at any straw available. Par for the course with the income inequality doom-mongerers. 

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