The Top 1% is Stalling the Economy

[bush_cheney2004]

...But hey, if you think it's reasonable to compare social and health indicators in nations like the US, UK, Canada, Germany, France, etc. to North Korea, Somalia, and Haiti, then I don't think you're really ready to be discussing these things.

Don't really care what you think either way, just wanted to point out the logical weakness of relying on GINI or other indexes that presume certain conditions. Those "developing" countries have less "inequality"...more get to "suffer" equally...so isn't that a good thing ?

[bush_cheney2004]

...The GINI does not provide any information that would allow us to answer those questions because a dropping GINI could be good or bad depending on where society is compared to the optimum. Finding the optimum requires that one look at other metrics - metrics which do not require the meaningless GINI figure.

Agreed...GINI champions are stuck in logical trap...but they will never admit it. See example above.

[Moonlight Graham]

The GINI does not provide any information that would allow us to answer those questions because a dropping GINI could be good or bad depending on where society is compared to the optimum. Finding the optimum requires that one look at other metrics - metrics which do not require the GINI figure which means the GINI is irrelevant. It is just a talking point used by social activists to rationalize increased taxation.

Saying GINI is irrelevant for your reasons is like saying the GDP stat is irrelevant because it doesn't show how that wealth/income is distributed among citizens, ie: 5% of the population could own 90% of the wealth.

You point that GINI shouldn't be used alone as a conclusion in itself is a good one, but I don't think that makes the GINI stat irrelevant. It's 1 stat of many.

[Michael Hardner]

Maybe it's better to consider where a country is vs where they think they are. Canada is right in the middle btw.

[nwontariohunter]

Your a dumbass. You know nothing about economics. Go back to rapping.....Shady.

Edited December 26, 2013 by nwontariohunter

[TimG]

Saying GINI is irrelevant for your reasons is like saying the GDP stat is irrelevant because it doesn't show how that wealth/income is distributed among citizens, ie: 5% of the population could own 90% of the wealth.

Yet there are few scenarios where a falling GDP is good or a rising one is is bad so it makes sense to look at GDP as a measure of progress even if it is not everything. OTOH - changes in GINI could be good or bad depending on what else is going on so it makes no sense to look at the GINI as a measure of progress. There are other measures which are more useful. For example, measures of social mobility - if mobility is decreasing then there is a problem that needs addressing. A relatively equal society with a permanent underclass is worse than an unequal society where people are constantly moving between the income tiers. Edited December 26, 2013 by TimG

[bush_cheney2004]

The limitations of the Gini coefficient as a true indicator of wealth or income distribution are well understood. Other measures certainly must be employed to demonstrate "inequality", a dubious task indeed.

...However, whether any specific level or specific change in the Gini coefficient, either closer to or farther from equality, is "good" or "bad" cannot be inferred from the Gini coefficient number alone. This crucial inference depends on what accounts for the Gini coefficient inequality number.

...This mixed picture reinforces the basic takeaway point: it is more important to know the underlying explanations for inequality across countries and within them, rather than the amount of inequality or changes in it. The inequality debate should focus more on the sources and reasons for inequality, and less on how much inequality there is, or how much it has changed; more on explaining inequality, and less on deploring it.

http://www.rand.org/blog/2012/06/the-inequality-debate.html

[cybercoma]

But this contradicts your earlier statement that complete equality is not desirable. IOW - if too much equality is bad AND too much inequality is bad then how do we determine the optimum level of inequality? If there is an optimum level is it reasonable to assume it will be constant over time? Even then changes to the GINI could occur for different reasons - a dropping GINI is a bad thing if everyone is getting poorer due to a financial collapse.

The GINI does not provide any information that would allow us to answer those questions because a dropping GINI could be good or bad depending on where society is compared to the optimum. Finding the optimum requires that one look at other metrics - metrics which do not require the GINI figure which means the GINI is irrelevant. It is just a talking point used by social activists to rationalize increased taxation.

It's not good or bad. A dropping GINI is good where we are now. We're not even remotely approaching absolute equality. The relationship is really quite simple. It's parabolic. Absolute equality means the CEO would make the exact same as the cashier. That's not even remotely ideal for obvious reasons, which are different from the problems associated with high GINI. Edited December 26, 2013 by cybercoma

[cybercoma]

Yet there are few scenarios where a falling GDP is good or a rising one is is bad so it makes sense to look at GDP as a measure of progress even if it is not everything. OTOH - changes in GINI could be good or bad depending on what else is going on so it makes no sense to look at the GINI as a measure of progress. There are other measures which are more useful. For example, measures of social mobility - if mobility is decreasing then there is a problem that needs addressing. A relatively equal society with a permanent underclass is worse than an unequal society where people are constantly moving between the income tiers.

Like I already said, a steadily rising GDP is irrelevant to a society's health in the OECD when there is greater inequality. In fact, there is little to no relationship between health and social welfare metrics and a country's GDP past a certain point, which all of the OECD nations have surpassed. Meanwhile, we can see a strong connection between their inequality coefficient and social/health metrics. THere's really no two ways about it. In the OECD, GDP is completely irrelevant.

Now, if our GDP fell to the point that we were in the same boat as Somalia or some other developing nations, which is completely beside the point, then we would have cause for concern when it comes to GDP. Even then, it's unclear how things would relate, since our infrastructure has already been developed. Our GDP would have to collapse so much that we would be unable to support even the most basic infrastructure. We wouldn't be able to run schools or hospitals, have clean drinking water, or be able to pay firefighters and police. This isn't a situation we're going to be in, realistically speaking.

Edited December 26, 2013 by cybercoma

[cybercoma]

Don't really care what you think either way, just wanted to point out the logical weakness of relying on GINI or other indexes that presume certain conditions. Those "developing" countries have less "inequality"...more get to "suffer" equally...so isn't that a good thing ?

Your perception of a logical weakness in my argument here is solely due to your poor reading comprehension. I've explained clearly why your comparisons are irrelevant. Essentially, I already explained why OECD nations are different than developing nations in my original post. If you continue to think comparing the economy and social health of the United States to that of Somalia is appropriate or even informative, then the logical weakness here is yours alone.

[cybercoma]

The limitations of the Gini coefficient as a true indicator of wealth or income distribution are well understood. Other measures certainly must be employed to demonstrate "inequality", a dubious task indeed.

The weaknesses of the GINI are well known, but that doesn't make it any less true that it is clearly associated with social health and wellbeing. Everything from crime to infant mortality are strongly associated with it. While it may not perfectly measure inequality, it gives us a standardized measurement for comparison between countries and states.

[Shady]

Yes....we can prove this theory by looking at North Korea...or Somalia....or Haiti. No "GINI" index problem in those and other very poor countries, and that's why so many people emigrate there, right ?

Don't forget about the socialist paradise of Cuba. Very little so-called income inequality there either.

[TimG]

Like I already said, a steadily rising GDP is irrelevant to a society's health in the OECD when there is greater inequality.

Complete nonsense. A falling GDP means rising unemployment and falling tax revenue (meaning less money to spend on programs). Social conditions get worse no matter what the inequality levels when GDP falls. You cannot make the same claim about GINI which could rise and while social conditions improve - even in OECD countries. The problems we have been having the last five years are better attributed to the slow in GDP than to the rise in GINI.

One thing the GINI does not take into account is that many at the top end of the income spectrum benefit from the global economy while those in the middle depend on their country's economy. i.e. a single country going into a recession does not affect the super rich if other countries are growing. This means globalization should increase the GINI in OECD countries and that is not necessarily a bad thing.

OTOH, slow GDP growth in OECD countries in indisputably a bad thing.

Edited December 26, 2013 by TimG

[cybercoma]

Who's talking about falling and rising GDPs? What I was saying is that there's no relationship between GDP and a country's health and social metrics. When you plot the OECD nations on a graph with GDP on one axis and health or social metrics on the other axis, you get a random mess. I'm not talking about longitudinal designs where GDP is rising or falling. What's clear from plotting OECD nations this way is that there is a very weak, if any, relationship between a nations GDP at any given moment and their health and social metrics. When you plot the exact same graph with GINI instead, there is a very strong relationship. The countries clearly line up. Health and social metrics are a function of GINI in the OECD.

I've already posted the video before and I know you've watched it because we discussed it before. However, the graphs are shown in it, so perhaps you should watch it again.

[TimG]

What I was saying is that there's no relationship between GDP and a country's health and social metrics.

I watched the video. I was not sure how to respond to it. I think this cartoon captures my thoughts: http://xkcd.com/882/

i.e. if you mine enough data you will find a random collection of stats with 'correlate' with about anything. What is missing is a real discussion of why there would be any causal relationship. Mental health diagnoses as a measure of social well being? Give me break. Mental heath diagnoses are more a function of a social taboos and whether such a diagnosis is necessary to get access to care.

If we came up with a metric that measured the quality of schools that the poor had access to you would probably find it correlates better to social well being than GINI. It would also be a better metric to look at because there is a more obvious causal relationship between the perceived ills and the metric.

The premise behind the GINI is basically that people are jealous and no matter how wealthy they are if there are people that have more they get depressed and can't perform. It sounds absurd because it is absurd - and that is what you are suggesting when you say the GINI a useful measure. As it stands your argument is like saying the number of pirates inversely correlates with temperature so we should reduce temperatures by increasing the number of pirates: http://en.wikipedia.org/wiki/File:PiratesVsTemp(en).svg

Edited January 6, 2014 by TimG

[cybercoma]

So your argument now is that the number are bunk because one can find anything to correlate with anything else?

The problem with what you're saying is that we're not comparing just anything. We're comparing the exact same outcome measures and seeing whether GDP or GINI is a better predictor of those measures. What the video clearly illustrates is that GINI is a far better predictor of social and health outcomes in the OECD than GDP. This isn't a case of throwing a bunch of crap against the wall and seeing what sticks. You seem quite ready to dismiss GINI, but aren't even remotely as critical about GDP, despite the evidence. I don't know how much clearer it can be made.

Edited January 6, 2014 by cybercoma

[TimG]

That the video clearly illustrates is that GINI is a far better predictor of social and health outcomes the grab bag of random stats that happen to correlate with GINI in the OECD than GDP.

Fixed it for you. What I am saying there is a plausible causal relationship between rising GDP and better social well being even if other factors counter act this effect some of the time. There is no plausible causal relationship between GINI and the various health and social well being stats listed - it is an after the fact statistical exercise that does not provide any useful information. Edited January 7, 2014 by TimG

[Moonlight Graham]

The premise behind the GINI is basically that people are jealous and no matter how wealthy they are if there are people that have more they get depressed and can't perform. It sounds absurd because it is absurd - and that is what you are suggesting when you say the GINI a useful measure.

Just because GINI could be used to threaten your conservative ideology doesn't mean it's not a useful, valid statistic. GINI is a statistic, nothing more. It has its uses, and it has its limitations just like any statistic. As long as those who use it acknowledge its limitations, it still has its valid uses no matter what you argue...and no GINI isn't some left-wing socialist conspiracy you have to fear. The premise behind your objection to GINI as a useful measure is that its been used in studies that threaten your conservative economic philosophy. You don't think economic equality within nations is in itself important, ya we get it.

Edited January 7, 2014 by Moonlight Graham

[Moonlight Graham]

There is no plausible causal relationship between GINI and the various health and social well being stats listed - it is an after the fact statistical exercise that does not provide any useful information.

Do you have any academic evidence to support this claim? Do you have any evidence to refute that economic/income inequality correlates (or has a causal relationship) to better health/social well-being? Personally I haven't seen anything near enough evidence from either you or Cybercoma to convince me of either side of the argument. Cybercoma's TED video was interesting but a powerpoint presentation with vague measures (that ya, could have been cherry-picked) isn't convincing enough.

[TimG]

Do you have any evidence to refute that economic/income inequality correlates (or has a causal relationship) to better health/social well-being?

For starters correlation is NOT causation. So simply showing a correlation proves nothing and that is all that is being discussed. If you wish to claim that there is causal relationship then you need to present it. It is not for me to prove a negative.

[cybercoma]

Fixed it for you. What I am saying there is a plausible causal relationship between rising GDP and better social well being even if other factors counter act this effect some of the time. There is no plausible causal relationship between GINI and the various health and social well being stats listed - it is an after the fact statistical exercise that does not provide any useful information.

I didn't say anything about a causal relationship and neither did Wilkinson. What I've said is that there is a relationship between the two. I've said they're associated as well. I never said inequality causes these problems. That's not been proven yet. You would need long-term longitudinal analysis to even approach that kind of claim.

What I also said is that the GINI predicts those social and health metrics. If you know what a country's GINI index is, you can make predictions about where their health and social metrics are. Predictions that are far more accurate than if you only know what the nation's GDP is. That is also true, if you look at the charts in that video I showed you. This doesn't necessarily mean GINI causes poor social and health metrics; however, it does mean that they occur together for whatever reason (which I have not made any claims whatsoever to knowing).

What you cannot do is make predictions about social and health metrics based on GDP when you're comparing OECD nations. That was also clearly illustrated in the graphs presented by Wilkinson. There is no relationship between the two. When you plot GDP on one of the axes and those other social and health metrics on the other (Mish mash? He showed crime, infant mortality, education, and life expectancy among other things. That's hardly random garbage) the points do not line up in any pattern. It's a scattered mess with GDP. Yet when you use GINI, the points line up quite nicely. They line up so well in fact that we rarely see such strong relationships in the social sciences because of all the various influences on these things.

So like I've been saying, but you seem bafflingly insistent on contradicting, GINI is a far better predictor for those social indicators than GDP in OECD nations. It has been researched and I've shown you a presentation of one of the key studies on the topic. If you want to continue to say that GINI has absolutely no relationship with those factors and GDP does, you're going to have to accept that it has been proven that you're absolutely wrong.

[cybercoma]

More information on the OP about how the Top 1% is stalling the economy by influencing governments to give them the benefits, while the middle and lower class are burdened.

Edited January 7, 2014 by cybercoma

[Michael Hardner]

Is the answer to the GINI vs GDP question obvious ? GINI measures the distribution of wealth, which is reflected by the GDP. And economists do feel that the GINI number says something about the economy, and causes problems at either extreme, ie. too much equality or not enough opportunity...

[dre]

Is the answer to the GINI vs GDP question obvious ? GINI measures the distribution of wealth, which is reflected by the GDP. And economists do feel that the GINI number says something about the economy, and causes problems at either extreme, ie. too much equality or not enough opportunity...

Too much equality isnt a problem as long as your means to get there isnt overly coercive. Post WW2, there was very high income taxation, and estate taxation in order to keep cycling money back into the pool for everyone to compete for and tons of economic growth, rapid increases in standard of life, lots of social progress, and skyrocketing GDP.

This whole idea that we need a few wealthy "job creators" to privately hold all the wealth so they can put the rest of to work and an absolute outright fallacy. The exact opposite is true.

People have the wrong idea about money and wealth in a lot of ways. A dollar isnt just a dollar, it will eventually buy millions of dollars worth of goods and services, and be spent over and over and over again. From an economic standpoint the best "distribution" is the one that keeps those dollars changing hands as fast as possible and underwriting as many transactions as possible. The best way to do this in an economy based on consumption is to have a relatively egalitarian economic framework.

Edited January 7, 2014 by dre

[TimG]

Too much equality isnt a problem as long as its not forced. Post WW2, there was very high income taxation, and estate taxation

Those two statements contradict each other - equality through excessive taxation levels IS forced. More importantly, the world economy was very different 50 years ago - industries in the developed world had no need to compete with the developing world. We can't go back to the 50s.

This whole idea that we need a few wealthy "job creators" to privately hold all the wealth so they can put the rest of to work and an absolute outright fallacy. The exact opposite is true.

A bigger fallacy is the belief that our social problems could be solved if we only gave our wise and benevolent politicians more money to spend. Bigger government is never the solution - it is the problem. Edited January 7, 2014 by TimG