Tax Day Post - Taxes On Parade

April 15, 2010
Posted by Jay Livingston

Greg Mankiw opened his copy of Parade on Sunday, and he didn’t much like what he saw. It was the “Annual Salary Survey,” and – surprise, surprise – readers saw a lot more rich celebs than they would have seen just by walking around their neighborhoods. Yes Parade was guilty – it “oversampled” the rich and the famous.

about 14 percent of the people in Parade's sample earn more than $1 million a year. In the real world, the actual percentage is about 0.2 percent.

Even worse than Parade’s methodology was its pernicious effect.

There is a common perception in some circles that we can solve all our fiscal problems if only we were willing to tax the rich some more. Yet, in reality, there are not enough rich for this to work. By presenting such a skewed cross-section of incomes, Parade inadvertently feeds an all-too-common misperception.

Now Greg Mankiw is a respected (and rich) economist, and I’m sure he doesn’t go making statements that can’t be supported by evidence. But this one seems awfully vague. These unidentified “circles”– what are they, and how large are they? Just how common is this “all-too common misperception.”

I also wonder how much power Parade has over public perceptions. Mankiw notes that Parade has a circulation of 32 million – all those folks who, just like Greg himself, find it folded into their Sunday newspaper along with the coupons for Pop Tarts and Fabreze. Do we really know what impact Walter Scott and Marilyn and the rest have had in shaping the American consciousness? (Surely someone has done this research. I just wish Greg had linked to it.)

Justin Wolfers at Freakonomics has the more important criticism: when you are deciding who to tax, the important variable is not numbers of people but numbers of dollars. So maybe the “misperception” is not really amiss.

Families earning more than $1 million probably do represent close to 14 percent of total income, and maybe more. By arguing that only 0.2 percent of families are this rich, Mankiw risks distracting his readers from the fact that increasing the taxes paid by the rich can be a big part of the solution to our fiscal woes.

Visualizing TV Viewers - Sports and Politics

April 14, 2010
Posted by Jay Livingston

How do you turn data into a good graph? Of course you could ask flâneuse . But suppose you wanted to do it yourself.

Here are the results of a study on preferences in TV sports and in politics – 218,000 interviews conducted over a 13-month period. I’m not sure what the questions were that determined the Democratic and Republican index. The other variables, “Likelihood of voting” and being “very interested” in watching the sport on TV, are fairly straightforward.

The data in the table are sorted on the politics column (R-minus-D Index). PGA golf has the most Republican audience, WNBA the most Democratic.

(Click on the image for a larger view.)

How would you graph the data?

Here’s one possibility, found at dqydj (which stands for “Don’t quit your day job,” but you knew that already, didn’t you?).

(Click on the image for a slightly larger view.)

Blue bars represent political leaning – the difference between the GOP and Democratic indices. Green bars show likelihood of voting. Sports are listed on the x-axis.

I prefer this one, found here.

(Click on the image for a larger view.)

For more on creating visualizations, go to Many Eyes , which has a ton of data sets to play around with.

(Hat tip: Andrew Gelman)

Do I Call You “Doctor” or “Professor”?

April 11, 2010
Posted by Jay Livingston

Fabio had a great post a few days ago at orgtheory about how authority structures in a hospital can be hazardous to your health. Even fatal. In the incident Fabio recounts, an anaesthesiologist could see that the patient was having a bad reaction to the surgeon’s latex gloves. But the surgeon refused to switch to non-latex gloves. Surgeons outrank anaesthesiologists, and if the anaesthesiologist had not resorted to extreme measures (threatening to disrupt the surgery in order to call the hospital administrators), the patient would have died.

My first reaction on reading this was: What an incredible asshole the surgeon must be. But Fabio’s point is that the problem is organizational not personal.* The authority structure of the hospital creates an institutionalized arrogance among doctors. The hazardous result is that information doesn’t flow upward from those “on the ground.” (Fabio’s post is here. The comments are also well worth reading.)

Then Fabio asks:

On a deeper level, what sort of organization would allow people to develop such toxic relationships?

And his speculative answer is:

. . . .a combination of high professional autonomy and a garbage can structure. Hospitals, as far as I can tell, aren’t organizations that make one product with a centrally controlled assembly line. Instead, they are a place were “problems” (patients) drift from place to place (ICU, regular, OR, etc) where they might be “solved” (stop showing symptoms) by some random assortment of people who have limited attention (the physicians, nurses, and surgeons). Each physician isn’t in charge of a patient, they do specific procedures and pass the problem along to other people.

Hmmm. Something about that description sounded familiar. So I tried a few “global replace” edits, and it came out like this:

. . . a combination of high professional autonomy and a garbage can structure. Universities are not organizations that make one product with a centrally controlled assembly line. Instead, they are a place were “students” drift from course to course where they might be “taught” by some random assortment of people who have limited attention. Each professor isn’t in charge of a student; they teach specific courses and pass the student along to other people.

I am not saying that universities are necessarily like this. But they do have the potential to resemble what Fabio calls a “toxic culture.”

* The book this anecdote comes from is Safe Patients, Smart Hospitals by Peter Pronovost. Note – not Safe Patients, Good Doctors. The problem lies in the institutional arrangements, not the individuals who work in the institution.

In Da Household

April 9, 2010

Posted by Jay Livingston

In my classes about inequality, I often use income data, and I don’t usually think too much about what “income” is. Much of the data is on “household income.” “Median household income” presumably reflects the economic well-being of the typical person in that category. It’s often used to compare different groups or regions or trends over time. In the last Presidential campaign, Democrats often pointed out that in the Bush years while the rich had gotten much richer, real median household income had fallen.

Since then, the economy has gotten worse. But it’s possible that household income may rise. The problem is in the denominator of the fraction.

Imagine two siblings, each with a home, each with an income of $100,000. So their average personal income and their average household income are both $100,000 Suppose that one of them loses his job, his house is foreclosed, and he moves in with his sister’s family. Eventually he finds a job paying $50,000 – not enough for him to move out.

Their average personal income in this family has decreased – it’s now $75,000. But since they now have only one household, their average household income has increased to $150,000.

I don’t know how economists deal with this sort of thing. Surely they must have some way of adjusting for it so that we have a fuller picture of what’s happening with the typical American. And one of the things that is happening is that people are doubling up in their houses.

The number of households is shrinking. Many owners who lose their homes are not moving to rentals. Despite the three million foreclosures, rental vacancy rates – nearly 11% – are higher than they’ve been in at least 50 years. Instead, people are moving in with someone else. The number of people per household is increasing.

The trend started in the latter part of the Bush era. Between 2005 and 2008, 1.2 million households disappeared (study commissioned by the Mortgage Bankers Association reported at CNN). So the decline in household income was even worse than the Democrats were making it out to be. In 2009, the trend has no doubt continued.

It’s something to keep in mind when we look at data on household incomes.