March 14, 2012
Posted by Jay Livingston
You’ve probably already seen or heard about the Times op-ed piece that’s getting a lot of attention: “Why I’m Leaving Goldman.” A guy who has worked for Goldman for many years, has risen to a fairly high position, and has probably made a lot of money along the way says that in its greed for profits, Goldman has turned away from its original, admirable principles.
You might not have come across this blog post: “Why I Left Google.” A guy who has worked for Google for many years, has risen to a fairly high position, and has probably made a lot of money along the way says that in its greed for profits, Google has turned away from its original, admirable principles.
Makes you wonder if maybe structural forces and not just greed have something to do with these changes.
The Wall Street Journal Or Your Lying Eyes
March 13, 2012
Posted by Jay Livingston
This graph tracks the share of income going to the top 1% in seven countries. It’s from a paper by two Swedish economists, Jesper Roine and Daniel Waldenström (pdf here).
In fact, Allan Meltzer in the Wall Street Journal takes precisely that view. He stretches out the graph to de-emphasize the vertical differences, and adds a title implying that all countries are “together” in this shift of income to the top 1%.
Meltzer’s main point in the article is that we should not raise taxes on the very wealthy. However, as Bruce Barlett points out (here), if the rich are getting just as rich in high-tax countries like Sweden and the Netherlands as they are in low-tax countries like the US, we may as well raise taxes on them. They’ll be doing just as well, like their Swedish and Dutch counterparts, and the nation will have more revenue to put towards Medicare, education, deficit-reduction, etc.
But Meltzer is wrong. Sweden and the Netherlands are very different from the US. As the graph shows, the income share of the 1% in the US is twice that of the 1% in Sweden and 3 times that of the 1% in the Netherlands. And it has risen more rapidly. Yet Meltzer claims that inequality trends are similar everywhere.
So who are you going to believe - the Wall Street Journal or your lying eyes?
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* Big hat tip to Andrew Perrin at Scatterplot. Several economics blogs have also looked at the Meltzer article.
UPDATE March 16: Gwen Sharp at Sociological Images posted this link to a database of income data from various countries. You can to create your own graphs of income shares.
Posted by Jay Livingston
This graph tracks the share of income going to the top 1% in seven countries. It’s from a paper by two Swedish economists, Jesper Roine and Daniel Waldenström (pdf here).
(Click on the graph for a larger view.)
The trend was towards greater equality up to 1980 – the share of the 1% was shrinking. Since then, the 1% have increased their share of the income pie in all seven countries. But the graph seems to show important differences, especially in recent decades. Here is a cropped version of the graph showing the 1980-2004 years. I have added straight lines connecting those two points for Sweden and for the US.
Both changes are increases, but are they the same or are they different? The answer is crucial. The US and Sweden have different economic policies. If the changes are no different between countries, then inequality is just one of those inevitable things that’s happening no matter what governments do. But if the growth of inequality in the US is much greater than in Sweden, maybe government policy can in fact mitigate the trend towards inequality.
The Swedish 1% share went from a little under 5% to about 7.5%. In the US, the 1% share increased from about 7% to 16%.* You might see those increases as very similar.
He adds this explanation:
As the . . . chart . . . shows, the share of income for the top 1% in these seven countries generally follows the same trend line. That means domestic policy can’t be the principal reason for the current spread between high earners and others. Since the 1980s, that spread has increased in nearly all seven countries. The U.S. and Sweden, countries with very different systems of redistribution, along with the U.K. and Canada show the largest increase in the share of income for the top 1%. [emphasis added]
If your pay went from $5 an hour to $7.50 an hour while your co-worker’s went from $7 to $16, you might think that your co-worker had gotten a substantially heftier raise. But if so, that’s because you’re not the Wall Street Journal.
Meltzer’s main point in the article is that we should not raise taxes on the very wealthy. However, as Bruce Barlett points out (here), if the rich are getting just as rich in high-tax countries like Sweden and the Netherlands as they are in low-tax countries like the US, we may as well raise taxes on them. They’ll be doing just as well, like their Swedish and Dutch counterparts, and the nation will have more revenue to put towards Medicare, education, deficit-reduction, etc.
But Meltzer is wrong. Sweden and the Netherlands are very different from the US. As the graph shows, the income share of the 1% in the US is twice that of the 1% in Sweden and 3 times that of the 1% in the Netherlands. And it has risen more rapidly. Yet Meltzer claims that inequality trends are similar everywhere.
So who are you going to believe - the Wall Street Journal or your lying eyes?
--------------
* Big hat tip to Andrew Perrin at Scatterplot. Several economics blogs have also looked at the Meltzer article.
UPDATE March 16: Gwen Sharp at Sociological Images posted this link to a database of income data from various countries. You can to create your own graphs of income shares.
Deep Change in the Deep South?
March 12, 2012
Posted by Jay Livingston
The polling news today is that very few Republicans in Alabama and Mississippi (14% and 12%, respectively) think that President Obama is a Christian. Three times as many think he’s a Muslim. (A pdf of the entire survey is here.)
The poll also finds that only about one in four Republicans in those states believe in evolution. Five times that many flatly reject evolution, with about 10% “not sure.”
The results I found most curious were the opinions on interracial marriage. Alabama 21% thought it should be illegal, 67% thought it should be legal; in Mississippi, 29% illegal, 54% legal. None of the news stories I looked on this noted that when the same pollsters (Public Policy Polling) asked the same question of Mississippi Republicans less than a year ago, the results were very different. A plurality thought it should be illegal. (My post on that poll is here.)
The margin of error is 4% (N = 600), so the 15-point swing supposedly reflects a real change. But I’m skeptical. What could account for such a large change if not sampling variation? Did the GOP organize mass screenings of “The Help” and shame some of their number into allowing that maybe Loving v. Virginia wasn’t a mistake after all? Did the Heidi Klum - Seal breakup make it OK? I can’t come up with even a dubiously speculative explanation.
Posted by Jay Livingston
The polling news today is that very few Republicans in Alabama and Mississippi (14% and 12%, respectively) think that President Obama is a Christian. Three times as many think he’s a Muslim. (A pdf of the entire survey is here.)
The poll also finds that only about one in four Republicans in those states believe in evolution. Five times that many flatly reject evolution, with about 10% “not sure.”
The results I found most curious were the opinions on interracial marriage. Alabama 21% thought it should be illegal, 67% thought it should be legal; in Mississippi, 29% illegal, 54% legal. None of the news stories I looked on this noted that when the same pollsters (Public Policy Polling) asked the same question of Mississippi Republicans less than a year ago, the results were very different. A plurality thought it should be illegal. (My post on that poll is here.)
The margin of error is 4% (N = 600), so the 15-point swing supposedly reflects a real change. But I’m skeptical. What could account for such a large change if not sampling variation? Did the GOP organize mass screenings of “The Help” and shame some of their number into allowing that maybe Loving v. Virginia wasn’t a mistake after all? Did the Heidi Klum - Seal breakup make it OK? I can’t come up with even a dubiously speculative explanation.
The Wisdom of Crowds - Jersey Cow Edition
March 11, 2012
Posted by Jay Livingston
James Surowiecki begins The Wisdom of Crowds* with the true fable of Francis Galton and the ox. Galton was at a country fair where an ox was on display, and the locals could submit guesses as to what the weight of the ox would be when it was slaughtered and dressed. Galton, a statistician and a bit of a eugenics fan, figured that the guesses of the less savvy would dilute the accuracy of the smart money guesses. So he kept track of the roughly 800 entries.
No individual guess had the exact weight – 1198 pounds. But when Galton caculated the mean of all guesses, it turned out to be 1197 pounds, much closer than the best individual guess. That was in 1906, and while Surowiecki presents other examples of successful crowd-sourcing, I’m not sure if there has been an exact repeat of the Galton-ox scenario.
We’re many months away from county fair season in New Jersey, so we have no oxen to be weight-guessed. But The New Republic has come close to replication: crowd sourcing the weight of the governor.**
Unfortunately, TNR closed the contest with only 19 entries, a far cry from Galton’s 800. But for what it’s worth, the mean was 334 pounds.
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* The SocioBlog has had several posts on this topic. See this one for an example and for links to others.
** I didn’t know whether I should put the photo of the Governor behind an NSFW gate. I even hesitated to use it, but then, Galton’s fairgoers too had to guess the weight of the ox before it was dressed. (I found the photo here. That site credits Wonkette.)
Posted by Jay Livingston
James Surowiecki begins The Wisdom of Crowds* with the true fable of Francis Galton and the ox. Galton was at a country fair where an ox was on display, and the locals could submit guesses as to what the weight of the ox would be when it was slaughtered and dressed. Galton, a statistician and a bit of a eugenics fan, figured that the guesses of the less savvy would dilute the accuracy of the smart money guesses. So he kept track of the roughly 800 entries.
No individual guess had the exact weight – 1198 pounds. But when Galton caculated the mean of all guesses, it turned out to be 1197 pounds, much closer than the best individual guess. That was in 1906, and while Surowiecki presents other examples of successful crowd-sourcing, I’m not sure if there has been an exact repeat of the Galton-ox scenario.
We’re many months away from county fair season in New Jersey, so we have no oxen to be weight-guessed. But The New Republic has come close to replication: crowd sourcing the weight of the governor.**
(The ox is on the left. For a larger view, click on the image.)
Unfortunately, TNR closed the contest with only 19 entries, a far cry from Galton’s 800. But for what it’s worth, the mean was 334 pounds.
-----------------------------
* The SocioBlog has had several posts on this topic. See this one for an example and for links to others.
** I didn’t know whether I should put the photo of the Governor behind an NSFW gate. I even hesitated to use it, but then, Galton’s fairgoers too had to guess the weight of the ox before it was dressed. (I found the photo here. That site credits Wonkette.)
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