Category Archives: wealth

Big purses v.s. unbanked

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Possibly last posting about the World Household Wealth Distirbution study.

First off I’m bemused by two articles in the New York Times.  One about giant purses:

“…clients old and new staggering under the weight of huge purses and griping about neck pain. “It’s an epidemic,” Ms. Ehrlich said. “We’re busier than ever before right now and big bags are the reason.”

A common side effect is that one shoulder becomes slightly higher than the other, she said. “A lot of women talk on their cellphones while they’re carrying these bags, which only intensifies the problem, because in addition to balancing too much weight on one side, they’re lifting the shoulder at the same time.”

Ms. Ehrlich recommends weekly massages for the pain. Gentle stretching and warm baths with Epsom salts can help bag abusers, too, she said. But she would never tell a client to ditch her Mulberry Elgin tote.

“It’s like telling a woman, ‘You cannot wear Manolo Blahniks,’ ” she said. “It’s just not realistic.”…”

One about giant planes.

“… private jet much like Air Force One, which is a 747. Each plane carries a list price of about $275 million. Boeing will not identify the customers, … personal use.”

Finally there is a note in the report that points out that zero is, of course, not the bottom of the household wealth distribution.  Debt allows household’s wealth to be negative.  Because most of the worlds poor are “unbanked” you need to go into the developed world to find the absolutely poorest households.  How’s that for a triggering a worry-some eye brow raising moment?  Since, the currently popular fad in this problem space is micro-finance.

Polarization and Paralysis

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Here’s another interesting point from Polarized America.

When your designing your governance scheme one of the levers you can adjust is how much consensus is required before it’s possible to make major changes to the rules. For example here in the US it’s is very tedious to change the constitution. Another example is the Senate’s rules that make it impossible for a contentious issues to pass with a slim majority. There are lots and lots of these schemes; for example all the checks and balances built into the system.

So it’s no surprise that if the nation becomes polarized then the Congress becomes is paralyzed. That’s how the system was designed and it’s one of the patterns the authors of Polarized America illustrate that with data.

So then what happens? A few things. The two sides in the argument trash around looking for other means to achieve their goals. This model has something to say about the president’s repeated efforts (largely successful) to expand the power of the executive branch. This thrashing around attempting to find alternate ways get control of the government’s power is inherently dangerous because they skirt the boundaries of what is legal. The frustration of polarization creates an emotional climate where the political actors can self justify falling off the edge.

Because many of the programs that are designed to temper the concentration of wealth (i.e. programs that redistribute wealth) like the minimum wage, social services, education funding, health care funding, are not indexed to inflation this paralysis has the side effect of eroding their effect. Since this time around the primary poles of the division are about wealth that reinforces the polarization.

One notable thing about the models underlying Polarized America is the counter intuitive result that when you look at the actual votes in congress the social conservative dimension is a extremely weak predictor compared to the economic one. That’s counter intuitive because most of the rhetoric about American politics is about ethical and moral issues; e.g. stem cells, minor rights (race, gay, women), and the degree of separation between secular and religious institutions.

That too can be explained by this the realization that the architecture of our government means that a polarized you can’t make major changes.

The irony here is that the architecture is probably protecting the right from getting tossed out on its ear. The data is clear. The electorate has broad deep support for the redistribution programs that temper the corrosive effect of concentrated wealth. They also are an extremely tolerant bunch with little interest in the socal-right’s conservative agenda. The architecture has allowed the right to avoid the blame for eroding the redistribution schemes of economic liberals, and prevented them from the most socially conservative acts.

Polarized America

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I’ve been awaiting this book for months; and I finally got a copy. Polarized America: The Dance of Ideology and Unequal Riches by Nolan McCarty, Keith T. Poole, and Howard Rosenthal. I paid full price, which is both totally out of character and an indication of how very important I think this book is, but you don’t have to.

This book’s big picture is that very key statistics have all move near lock step very rapidly over the last 25 years in: income distribution, political polarization, percentage foriegn born, declining local government services, and others. These are connected in a complex dance.

Here’s something I didn’t realize. While the Republican party has been moving rapidly right; the Democratic party has on the one hand abandoned their advocacy of general welfare platforms and shifted toward a what they notably refer to as issues of ascription. These are direct decendents of the civil rights movement. These are issues about ascriptive characteristics (race, gender, sexual preference) of individuals. We should reclaim the general welfare issues!

Honor Societies

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A year or two ago I read just a little about honor cultures and came away quite dissatisfied. The dissatisfaction has been stewing in my head.  Most of the literature about honor cultures is extremely dismissive or romantic, and mostly none of it talks about what problem the culture is solving.

So here’s a little model.  I think honor societies arise to solve a problem the elite have when the wealth distribution becomes extreme.   As this happens their position becomes increasingly risky.  The number of slots at the top keep shrinking.  The chance they will get back a slot if they lose it becomes vanishingly small.

Honor societies put a lot of calories into reputation management.  Stains on your reputation create substantial risk that you might fall out of the elite.  So the elite seek ways to formalize the reputation management.  That creates demand and the market will fulfill that demand with products, rituals, certification, etc. etc.   And, of course, the elite provide models for how to behave that are followed by everybody else.

Which sums up my guess about honor societies.

Much of what I read about honor societies confuses two things which we might describe as supply and demand. The problem outlined above is the demand – members of the elite desire things which will help to reduce the risk that they lose their status/reputation.   The rituals that arise; e.g. dueling, killing your daughters, fastidious adherence to this seasons fashion in manners, test prep services, etc. etc. are the supply.  Middlemen arise to fill this demand; and it seems to me that the literature about honor societies takes far too seriously the marketing brochures of these vendors.

There are plenty consequences of this model.  It predicts that the honor societies ebb and flow with the distribution of wealth.

The effect should be stronger in societies with large families; because only some of your offspring are going to survive into the next round.   If the family unit becomes the atomic economic unit rather than the individual; then honor killings (and the old French syndrome where a family can have their members thron in prison to protect the family’s honor) make more sense.

Note that increasing social mobility only makes things worse.  As long as the option space is shrinking and the wealth distribution is extreme mobility only makes the chance of a long hard permanent fall greater.

Note the perverse way that as the rich strive to capture a larger share of the total economic pie the risks to their positions only increase.

A society undergoing a transition, as the US has been for the last 35 years, toward a more severe wealth distribution should see some members of the elite figure out the new rules before others. I.e. some members of the elite will lobby the government to get tools that protect their social standing sooner than other.

Pool

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The Boston Globe has a story this morning about MIT students who have trouble graduating due to the University’s insistance on a swim test as part of their graduating requirements. Meanwhile this weekend I chatted with a woman who taught art history at MIT and reported that it was a regular occurance in her classes that not one of the students had ever set foot in a mueseum.

It makes me wonder how many people appreciate what a forced march of achievement some parents put their offspring thru? How many of the students at top teir universities are at the end of these gauntlets? It’s very odd, and I see it as deeply disfunctional.

I sometimes joke when people say I have good children that it’s easy if you know the trick. The trick is to have a diverse portfolio. Have a lot of kids. Discard the lousy ones. As s an added bonus the culling has the positive of side effect of incentivizing the survivors.

While that’s a horrible joke it used be common practice. In traditional scarcity based economies parents would pass all their estate onto only one of their children. In a society where power arises from capital, and the returns are disproportionately skewed so that those with more capital are significantly more powerful than those with less a tradition of primogenitor, is totally rational.

While the universities bear some of the responsiblity for encouraing the forced march child rearing so common these days (as does the fetish for high stakes test based assesment) is the unbelievable network effects that rebound on those at the top of the pile is the central problem. Regresive taxation, increasing concentration of wealth, the privitization of all club goods, makes the loveless behavior of these parents totally rational.

Concentration of Wealth

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This just makes me sick. The report linked to below followed the money back to figure out who was funding the campaign to repeal the estate tax.

…the families identified in this report and their companies’ political action committees have, since 1999, made at least $27.7 million in contributions to candidates and federally focused political committees, largely to unregulated Section 527 committees.
…
Collectively, these super-wealthy families have a net worth of at least $185.5 billion. They include 23 billionaires, each of whom is listed in the Forbes 400. They stand to save $71.6 billion if their repeal campaign succeeds.

Nice return on investment.

Health Care Coverage for Uninsured Americans ($34 to $69 billion).

More here (pdf).

Meanwhile in California:

The top 3 percent of the returns, those with incomes exceeding $200,000, paid about 60 percent of all state taxes. “What happens to the top 1 percent is of great interest to the Department of Finance,”

As we can see the feeling is mutual.

Typing Injury.

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I’d not seen this before.

JWZ’s essay on RSI, or typing injury. “… it terrified me. … my career being over”

I have one of my own written years and years ago. “… a friend who lost the ability to pick up a piece of paper …”

And I see that Bill Clementson recently joined this miserable club.

It’s a puzzle how until it happens one isn’t particularly interested; and even if you were interested getting advise isn’t straight forward. The advice is largely the wisdom of crowds. I.e. it’s hearsay, rumor, and stories like the ones above. The best you can hope for is to pick out the better of the old wive’s tails. It’s not often you get to refer to JWZ as an old wife! There is very little hard science and what exists seems to me to be very lame and often self serving.

It amazes me that an industry that has generated so much wealth hasn’t found a way to fund some substantial research into the affliction that forces the retirement of it’s most productive labor. Of course all minority groups have trouble getting attention for their problems. But in this case the minority group has actually got money. Still, it says something about who captures the wealth.

Gini For Various Nations

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This table shows recent entries from the data reported here.

Nation Gini Year
Austria 23.7 2001
Sweden 25.7 2002
Netherlands 25.8 2001
Bosnia and Herzegovina 26.1 2001
Luxembourg 26.6 2001
Hungary 26.7 2002
Slovak Republic 26.7 2002
France 27.0 2002
Czech Republic 27.3 2002
Germany 28.0 2003
Albania 28.1 2002
Ireland 28.9 2001
Belgium 29.3 2001
Ethiopia 29.7 2000
Finland 30.3 2003
Slovenia 30.7 2002
Australia 30.9 2002
Croatia 31.0 2001
Switzerland 31.1 2002
Kazakhstan 31.3 2001
Bangladesh 31.7 2000
Greece 32.3 2001
Macedonia, FYR 33.2 2002
Taiwan 33.9 2003
Indonesia 34.1 2002
Belarus 34.2 2002
Spain 34.6 2002
United Kingdom 35.0 2003
Poland 35.3 2002
Estonia 35.5 2003
Latvia 35.8 2002
Armenia 35.9 2002
Italy 36.4 2002
Canada 36.5 2000
Tanzania 36.7 2001
Bulgaria 37.0 2002
Norway 37.0 2002
Portugal 37.1 2001
Egypt 37.8 2000
Serbia and Montenegro 37.8 2001
Jamaica 38.6 2000
Israel 38.9 2001
Denmark 39.0 2002
Lithuania 39.0 2002
Mauritania 39.0 2000
Romania 39.1 2002
Turkey 39.8 2000
Tunisia 40.6 2000
Ukraine 41.8 2002
Thailand 42.7 2001
Moldova 43.6 2002
Cameroon 44.2 2001
Uruguay 44.5 2000
China 44.9 2003
Georgia 45.4 2002
Venezuela 45.8 2000
United States 46.4 2003
Sri Lanka 46.9 2002
Madagascar 47.4 2001
Singapore 48.1 2000
Uzbekistan 48.1 2001
Kyrgyz Republic 49.0 2002
Russian Federation 49.1 2002
Peru 49.3 2000
Philippines 49.5 2000
Costa Rica 50.1 2000
Azerbaijan 50.8 2002
Mexico 51.1 2002
Argentina 52.3 2001
El Salvador 53.8 2000
Nicaragua 54.2 2001
Uganda 54.6 2000
Ecuador 56.0 2000
Colombia 57.4 2000
Panama 57.8 2000
Chile 59.5 2000
Guatemala 59.8 2000
Brazil 61.2 2001
Bolivia 63.3 2000

Gini is a metric of wealth inequality. Wikipedia has a description though the curves it shows are more symetric than the real world distribution. Gini is a percentage. In a nation with perfectly equitable distribution of income it is zero and in a nation where one household controls all the wealth it is 100. It is the percentage of the income dollars (or what ever) shifted from lower to higher incomes.

Good practice demands that this table be taken with a great deal of care. The methods used to sample the populations of the various countries are so diverse and the quality of the samples taken vary widely. There is a very good overview of how hard it is to get good data like this in the discussion materials that come with the data here.

It amazes me that a statistic so central to economic analysis can be so hard to find.

Weath Distribution

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I’ve written quite a few posts about the wealth distribution over the years. It was one of the four things that forced my attention to power-law distributions and the processes behind them. (The others were: the PL distribution in the performance and modularity data of the software systems I studied; the PL distribution of the linking and traffic statistics for web sites; and finally my interest in way that network effects and public goods which started crossing over into PL issues again and again.)

Writing about the wealth distribution is damn depressing. Not because the because the facts are stark, the trends are horrific. Not because the solutions are reasonably straight forward but remain unexercised. No, what makes it depressing is that the typical intelligent person is is totally unaware. You can expect an intelligent person to know a few facts about global warming, a few facts about peak oil, a few facts about planetary species diversity, etc. etc. But you can never every assume that a smart person knows anything about the distribution of wealth. Sample a typical smart person and they don’t know what the trends is, or the shape of the curve. And there is no hope they will have the slightest bit of informed opinion on simple seeming questions like how it effects economic growth, political stability, or the chances for their children. I find it bizarre that smart people can accept that the state should strive to manage inflation but have don’t realize that the state actors can and do manage the distribution of wealth.

So it is a pleasing to see both the Wall Street Journal and the New York Times notice the issue.