22/10/2010

Economic Inequality

1. If you're interested in health, and/or economic inequality, and/or simply like a spirited yet measured takedown, you definitely ought to read pj's critique of The Spirit Level by Richard Wilkinson and Kate Pickett (parts 1, 1.5, 1.75, 2). Not having read the book, which argues that inequality has various negative consequences in society, I can't vouch for the posts' accuracy, but they're sure a good read.

2. But at least Richard Wilkinson has a good concept of why one might be concerned about economic inequality: negative consequences, for example in terms of life expectancy or homicide rates.* Will Wilkinson, on the other hand, keeps dismissing concern about inequality while apparently ignorant of the two main reasons for such concern: (a) The negative consequences of relative deprivation; (b) the decreasing utility of money. Item: His 28-page paper "Thinking Clearly about Economic Inequality".

3. While it is perhaps too much to ask that such a paper address my favourite points, another way in which W. Wilkinson could have avoided a misnomer (apart from changing the paper's title) would have been to mention fun facts such as that income inequality statistics for the US are usually (always?) based on Census data, and the Census measures income only before tax, i.e., before the main mechanism for redressing inequality kicks in. (In case you don't trust me, check out page B-17 of this concise little document.) I daresay this reduces the trust you should put into any conclusions you draw based on that data. I don't know about international data, but that is certainly the first question to ask if you work with inequality stats: Are we talking before or after transfers?

4. Also, this post is a welcome opportunity to link to the introductory paper "Inequality Analysis: The Gini Index" by Lorenzo Giovanni Bell├╣, which contains a handy step-by-step method for calculating the Gini coefficient.

5. Never shy to take a lesson from rock bands, I've saved the biggest hit for last. Brace yourselves, people: Contrary to popular stereotype, the Gini coefficient can take on values bigger than 1. Ka-wooosh!
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*I haven't read The Spirit Level, but I have read the article the abstract of which you can find here. I am guessing it is very much in the spirit of the book.

2 comments:

Steve Sailer said...

Whenever I read about "The Spirit Level," I initially assume that Will Wilkinson has finally had his Road to Damascus experience.

wreaver said...

One thing to keep in mind with libertarians (including Will Wilkinson) is that for them being against forced equality is a moral issue.

To them, things such as taxation (including taxation that would redistribute wealth) is stealing, and stealing is an act of harm. Therefore, to them, taxation is an act of harm.

Yes many libertarians make economic and social arguments against taxation and redistribution. (And many of their economic and social arguments are correct.) However, their underlying motivation tends to be a moral one.

This is similar to how left-liberals and progressives want redistribution for (different) moral reasons. I.e., Left-liberals and progressives tend to see it as being "unfair" if a person has "more" than someone else.