What sort of inequality harms growth?

The OECD recently released a working paper in which they document a negative effect of income inequality on economic growth. Describing the paper's findings, The Guardian wrote:

The West’s leading economic thinktank on Tuesday dismissed the concept of trickle-down economics as it found that the UK economy would have been more than 20% bigger had the gap between rich and poor not widened since the 1980s.

However, as Matthew Sinclair points out, the OECD paper observed no effect of top inequality on growth; only bottom inequality. To quote the paper's abstract:

Drawing on harmonised data covering the OECD countries over the past 30 years, the econometric analysis suggests that income inequality has a negative and statistically significant impact on subsequent growth. In particular, what matters most is the gap between low income households and the rest of the population. In contrast, no evidence is found that those with high incomes pulling away from the rest of the population harms growth.

The relevant table from the paper (Table 2) is shown below. This finding doesn't provide any support for what I regard as one of the most plausible mechanisms through which inequality has been postulated to harm economic performance, namely the tendency for the rich to capture and exploit the political process for their own ends. 

Incidentally, the OECD paper also carried out a systematic review of the previous literature on inequality and growth (see Table A2.1). Out of 17 studies, I count 13 that found at least one negative effect, 9 that found at least one non-significant effect, and 7 that found at least one positive effect. Quoting again from the paper, "That survey highlights that there is no consensus on the sign and strength of the relationship". On the other hand, the balance of evidence does tip slightly in favour of there being a negative effect, at least within the range of empirically observed variation.

Party affiliation and friendship in the UK

The tireless men and women of YouGov have just done an intriguing poll on the impact of party affiliation on friendship in the UK. They asked respondents from each of the four main parties (apologies to the Greens) whether their friendship with someone would be affected if that person happened to become a supporter of the Conservatives, Labour, the Lib Dems, or UKIP, respectively (they did also ask about the Greens). In the case of the Conservatives, for example, respondents from each party were asked, "How would you feel if a good friend of yours became a supporter of the Conservative Party?" The four possible response categories were:

I would agree and would find it easier to be friends with them. 

I would agree, but it wouldn't make any difference to our friendship. 

I would disagree, but it wouldn't make any difference to our friendship. 

I would disagree and would find it harder to be friends with them.

The chart below plots the percentage of respondents from each party who answered, "I would disagree and would find it harder to be friends with them." Interestingly, 40% or more of Labour and Lib Dem supporters said they would find it would harder to be friends with someone who became a UKIP supporter; among Conservative supporters, the figure was 13%. In contrast, no more than 10% of UKIP supporters said they would find it harder to be friends with someone who became a supporter of one of the other parties. The comparison between Conservative and Labour supporters is also interesting. Only 5% of Conservative supporters said they would find it harder to be friends with someone who became a Labour supporter, yet 14% of Labour supporters said they would find it harder to be friends with someone who became a Tory. 

These results are perhaps not too surprising, given that UKIP are the new "Nasty Party", while the Conservatives are the old "Nasty Party". In addition, they are consistent with the recent finding by Pew Research that Americans who identify as "consistently liberal" (meaning progressive) are the most likely to say they have hidden, blocked or de-friended someone on Facebook because they disagreed with something that person posted about politics. Though I am not a UKIP supporter, I do whole-heartedly concur with Thomas Jefferson on the matter of politics and friendship:

"I never considered a difference of opinion in politics, in religion, in philosophy, as a cause for withdrawing from a friend."

Does r - g cause inequality?

In his bestseller Capital in the Twenty-First Century, Thomas Piketty argues that a key driving force behind income and wealth inequality is r - g, the difference between the rate of return on capital and the growth rate of the economy. Because the rich hold a disproportionate share of the capital, when r is greater than g, income should accrue to the rich at a faster rate than it accrues to the middle-class and the poor, leading to ever greater concentration of income and wealth. 

Yet in a recent working paper, Daron Acemoglu and James Robinson document essentially zero empirical support for the claim that r - g is an important cause of income inequality. They examine the effect of r - g on the top 1% income share using data on a panel of up to 28 countries from 1870-2012. Across a variety of different specifications, encompassing three alternative definitions of r - g (details of which can be found on pages 13-14), they generally observe non-significant estimates of r - g; among those that are significant, the majority are negative rather than positive. Their main table is shown below. 

Acemoglu and Robinson do not deny that r - g could in principle give rise to greater inequality; they simply argue that it pales in comparison to various institutional factors, such as government corruption, labour-market regulations, and welfare arrangements. In their own words:

Though this evidence is tentative and we are not pretending to estimate any sort of causal relationship between r - g and the top 1% share, it is quite striking that such basic conditional correlations provide no support for the central thesis of Capital. This is not to say that higher r is not a force towards greater inequality in society--it very probably is. It is just that there are many other forces promoting inequality and our regressions suggest that, at least in a correlational sense, these are quantitatively more important than r - g.

Unemployment in the US since 2008

While the unemployment rate in the US has fallen over the last few years, there has been a notable decline in the labour force participation rate. As a consequence, the employment-population ratio has been largely stagnant since the depth of the recession in late 2009. Of course, part of the decline in the labour force participation rate is attributable to population ageing. In this post, I examine the potential contribution of declining labour force participation among working age adults to unemployment in the US since 2008.

The first chart displays the percentage of the working age population in the labour force for 2008-2013. This was calculated using data on population structure from the World Bank, and data on labour force participation from the Bureau of Labour Statistics. (Incidentally, because the BLS gives the labour force participation rate for the population aged 16 and above, yet the World Bank gives the young dependency ratio for the population aged 15 and above, I had to make an adjustment in order to calculate the population aged 16 and above. In particular, I subtracted 1.4% of total population, which is approximately equal to the proportion of individuals aged 15 in the US in 2008.) The labour force participation rate among working age adults declined by 1.9 percentage points (2.4%) between 2008 and 2013. By my calculation, population ageing accounts for only 1.2 percentage points (44%) of the decline in the labour force participation rate between 2008 and 2013. 

I recalculated the US unemployment rate for 2008-2013 under the assumption that every working age adult who exited the labour force over this period actually became unemployed. The second chart displays the observed unemployment rate and the recalculated unemployment rate for 2008-2013. By 2013, the recalculated unemployment rate is 2.2 percentage points (30%) higher than the observed unemployment rate. Assuming that the deficit in labour force participation among working age adults over this period represents additional unemployment, cumulative unemployment from 2008 to 2013 was 18% higher than the observed unemployment rate suggests.  

Narrative-friendly rhetoric and good public policy

The blogger Scott Alexander recently posted about the conflicting Red and Blue narratives in US politics, whereby every issue (even Ebola) seems to immediately become polarised along partisan lines. In the post, he discusses the application of moral foundations theory to environmental attitudes, noting that conservatives might be persuaded to take action on global warming if the issue were couched in such a way as to be consistent with the Red narrative. Specifically, he recommends deploying the following kind of rhetoric:

In the 1950s, brave American scientists shunned by the climate establishment of the day discovered that the Earth was warming as a result of greenhouse gas emissions, leading to potentially devastating natural disasters that could destroy American agriculture and flood American cities. As a result, the country mobilized against the threat. Strong government action by the Bush administration outlawed the worst of these gases, and brilliant entrepreneurs were able to discover and manufacture new cleaner energy sources. As a result of these brave decisions, our emissions stabilized and are currently declining. 

Unfortunately, even as we do our part, the authoritarian governments of Russia and China continue to industralize and militarize rapidly as part of their bid to challenge American supremacy. As a result, Communist China is now by far the world’s largest greenhouse gas producer, with the Russians close behind. Many analysts believe Putin secretly welcomes global warming as a way to gain access to frozen Siberian resources and weaken the more temperate United States at the same time. These countries blow off huge disgusting globs of toxic gas, which effortlessly cross American borders and disrupt the climate of the United States. Although we have asked them to stop several times, they refuse, perhaps egged on by major oil producers like Iran and Venezuela who have the most to gain by keeping the world dependent on the fossil fuels they produce and sell to prop up their dictatorships. 

We need to take immediate action. While we cannot rule out the threat of military force, we should start by using our diplomatic muscle to push for firm action at top-level summits like the Kyoto Protocol. Second, we should fight back against the liberals who are trying to hold up this important work, from big government bureaucrats trying to regulate clean energy to celebrities accusing people who believe in global warming of being ‘racist’. Third, we need to continue working with American industries to set an example for the world by decreasing our own emissions in order to protect ourselves and our allies. Finally, we need to punish people and institutions who, instead of cleaning up their own carbon, try to parasitize off the rest of us and expect the federal government to do it for them. 

Please join our brave men and women in uniform in pushing for an end to climate change now.

Today I came across a real-life example of narrative-friendly rhetoric, though this time aimed at progressives. In a moderately decent TED talk on why we should end the war on drugs, Ethan Nadelmann frames the issue of drug prohibition in a manner that accords whole-heartedly with the Blue narrative:

People tend to think of prohibition as the ultimate form of regulation when in fact it represents the abdication of regulation with criminals filling the void. Which is why putting criminal laws and police front and center in trying to control a dynamic global commodities market is a recipe for disaster. And what we really need to do is to bring the underground drug markets as much as possible aboveground and regulate them as intelligently as we can to minimize both the harms of drugs and the harms of prohibitionist policies.

Rather than arguing that the illegality of drugs implies there is too much regulation, he suggests that the criminal nature of drug markets implies there is too little regulation, thereby turning conventional libertarian rhetoric on its head. This kind of argument appeals to progressives because, in the Blue narrative, regulation is seen as good and the absence of regulation is seen as bad. Nadelmann brings the point home by describing how various government interventions were successfully used to reduce the incidence of smoking: 

When researchers ask heroin addicts what's the toughest drug to quit, most say cigarettes. Yet in my country and many others, half of all the people who were ever addicted to cigarettes have quit without anyone being arrested or put in jail or sent to a "treatment program" by a prosecutor or a judge. What did it were higher taxes and time and place restrictions on sale and use and effective anti-smoking campaigns.

In an age of increasing political polarisation (at least in the US), narrative-friendly rhetoric may be the best available tool for achieving bipartisan co-operation, which is likely to be a precondition for good public policy. 

An update to my post about longevity and healthcare spending

A few days ago, I posted about the relationship between longevity and healthcare spending among developed countries, finding it to be negative. Scatterplots suggested that most of the variation in longevity across developed countries is between regions; citizens of East Asia and the Mediterranean appear to live longer than citizens of North West Europe and the former colonies. Here I check this intuition by running some simple regression models.

For the sake of brevity, I focus on healthy life expectancy since that is arguably the measure we should care more about. Rather than arbitrarily selecting advanced countries, I simply take all 33 countries with a healthy life expectancy of 70 or higher from the WHO database. This adds 8 more countries to my original sample of 25, namely: Andorra, Chile, Iceland, Luxembourg, Malta, Monaco, San Marino, and Slovenia. I group the countries into four regions: Northern Europe, the former colonies, the Mediterranean, and East Asia. In addition, I control for the percentage of the population older than 65, using figures from the World Bank and the CIA World Factbook.

The first table displays the results for total healthcare spending per capita (measured at PPP). The second displays the results for government healthcare spending per capita (also measured at PPP). In both cases, the effect of healthcare spending is non-significant in all three models; it does, however, switch from negative to positive when region is introduced. As expected, region explains a considerable proportion of the variation in longevity (~50%). East Asians live longest, followed by Mediterraneans, while Northern Europeans and the citizens of former colonies live shortest. Interestingly, percentage older than 64 doesn't account for the negative effect of healthcare spending on longevity.    

Incidentally, the results in the third column were practically identical when percentage older than 64 was omitted, as well as when the sample was restricted to the original 25 countries.

Changes in the British class structure at age 38

Yesterday I plotted the distribution of men and women by class at age 27 in four British birth cohorts, using data from a recently published paper. However, many individuals will not have reached their final class position by age 27 (as a friend of mine points out), meaning that the proportion of people eventually ending up in Classes 1 and 2 will have been underestimated. Accordingly, below I plot the distributions of men and women by class at age 38 in each of the first three birth cohorts (data for this age on members of the 1980-84 cohort are obviously not yet available). 

In the case of men, there has been a rise in membership of Classes 1 and 4, along with a decline in membership of Classes 2 and 7. In the case of women, there has again been a rise in membership of Classes 1, 2 and 6, along with a decline in membership of Classes 3, 5 and 7.

How has the British class structure changed over the last half century?

Some sociologists at the college where I study (Nuffield) have just published a new paper on how social class mobility in Britain has changed over time. The paper got media coverage in at least four different newspapers, not all of which spun the findings in the same way. (I recommend reading the paper for yourself, or if you can't get access to it, at least the abstract.)

Bukodi et al. (the authors) analysed mobility within four birth cohorts: the 1946 cohort, the 1958 cohort, the 1970 cohort, and the 1980-84 cohort. Building on previous work by Nuffield sociologists, they defined social class in terms of employment relations. In particular, they classified individuals into seven occupational classes, using a modified version of the well known NS-SEC schema:

Classes 1 and 2 of NS-SEC refer primarily to positions in which, to a greater (Class 1) or lesser (Class 2) degree, professional and managerial employees provide service to an employing organization, on the basis of an at least implicitly continuing contract, in return for salaries on an incremental scale, structured career opportunities, and a range of fringe benefits. In contrast, Classes 6 and 7 refer to positions in which, to a greater (Class 7) or lesser (Class 6) degree, employees engaged in more routine tasks sell their labour to an employing organization, on the basis of a contract subject to short-term discontinuation, in return for wages that are related to output or time worked. Classes 3 and 5 then refer to positions defined by employment relations that are ‘mixed’ in the above respects, while Class 4 refers to the obviously quite different positions of self-employed workers and small employers.

Below I plot, for and men and women separately, the distribution of individuals by class at age 27 in each of the four birth cohorts (if you can get past the paywall, see their Tables I-II). Individuals who were not employed at age 27 were classified by Bukodi et al. on the basis of their most recent employment stint.

In the case of men, there has evidently been a rise in membership of Classes 1 and 6, along with a decline in membership of Classes 5 and 7. In the case of women, there has evidently been a rise in membership of Classes 1, 2 and 6, along with a decline in membership of Classes 3, 5 and 7; women's rise in membership of Class 1, and decline in membership of Class 3, are particularly striking.

How much should we spend on healthcare?

This post investigates the relationship between longevity and healthcare spending among developed countries. The sample comprises 25 countries from North America, Western Europe, and the Pacific; those with a population of less than 1 million (e.g., Luxembourg) were not included. To measure longevity, I use life expectancy and healthy life expectancy. To measure healthcare spending, I use total healthcare spending per capita at PPP, government healthcare spending per capita at PPP, and non-government healthcare spending per capita at PPP (total spending - government spending). All data, which were obtained from the WHO database, are for 2012 (the latest available year). 

The table below displays simple, bivariate correlations between the two measures of longevity and the three measures of healthcare spending. Surprisingly, all six correlations are negative: longevity tends to be lower in the countries with higher healthcare spending. Two of the correlations are significant at p < 0.05, and one is significant at p < 0.1. Scatterplots of the relationships significant at p < 0.05 are displayed further down the page.

When all rich and poor countries are considered together, there is a positive logarithmic relationship between GDP per capita (a proxy for healthcare spending) and longevity; this is termed the Preston curve. Yet it has long been known that, above a certain point, average income (at least within the range of empirically observed variation) has almost zero impact on population longevity. For example, Costa Rica (with a GDP per capita of around $13,000) has a slightly higher life expectancy than Denmark (with a GDP per capita of around $38,000). 

As the charts below indicate, much of the variation in healthy life expectancy across developed countries is attributable to differences in lifestyle. Most of the relatively long-lived countries are found in East Asia or the Mediterranean (regions known for balanced diets and moderate alcohol consumption), while most of the relatively short-lived countries are found in North West Europe or North America (regions known for excessive consumption of food and alcohol). In addition, average longevity in the US is pulled down by the unusually large number of homicides and fatal car accidents there.

One possible explanation for why the countries with higher government healthcare spending tend to have lower longevity is that individuals take less care of themselves when they know the government will pay their medical expenses. However, evidence for this hypothesis is weak at best, given the small sample size, the lack of controls, and the fact that the correlation is significant for only one of the two longevity measures. The main point is that it there doesn't seem to be any evidence of a significant positive relationship between longevity and healthcare spending.

One conclusion that is perhaps more reasonable to draw from the present analysis is that, in developed countries, funding healthcare is a relatively ineffective form of public spending. Beyond the first couple of thousand dollars per person, money spent on healthcare might be better allocated to education, infrastructure, scientific research, or poverty relief. This is not to say that the government shouldn't provide healthcare or that we should move toward the highly inefficient US system, but simply that once people's basic needs have been taken care of, the return to additional expenditure may be quite low.

This conclusion obviously requires a number of qualifications. First, it might be that, due to our unhealthy lifestyles, longevity in a country like the UK would be much lower if not for our moderate level of healthcare spending. Second, longevity is only one aspect of health. It is possible that, despite living long, healthy lives, the citizens of countries like Singapore, Cyprus and Israel experience considerable psychological distress. Third, some of the variation in healthcare spending across developed countries may be attributable to the fact that citizens from countries with low levels of spending (e.g., Israel) tend to purchase healthcare in countries with high levels of spending (e.g., the US). Fourth, reallocating money away from healthcare might force us to make trade-offs that would be widely regarded as repugnant, such as withholding funding to extend an elderly person's life by a few months (though NICE already does this). Fifth, it is undoubtedly true, at least to some extent, that the absence of price controls on drugs in the US benefits the citizens of every other country. Therefore, it may not be possible for all countries to simultaneously reallocate money away from healthcare without there being some decline in pharmaceutical innovation.    

Breakdown of UK public spending

Yesterday, it was reported that the UK Treasury has started sending out letters to British taxpayers which detail exactly how their taxes will be spent. While I thoroughly approve of this idea, the categorisation scheme used by the Treasury has come under fire from critics. In particular, it has been argued that the Treasury employed a misleadingly broad definition of welfare, possibly in an attempt to weaken public support for welfare spending.

I decided to graph the numbers myself, which were taken from Public Expenditure Statistical Analysis 2014. Social protection, the single largest category, has been disaggregated into Benefits, Pensions, and Other social protection (as recommended by the IFS); General public services, the fourth largest category, has been disaggregated into Debt interest and Other general public services. Incidentally, I find it remarkable that Law and order comprises only 4.4% of spending. It is also surprising to me how much goes toward Debt interest, and how little goes toward the EU.

Has the UK been under secular stagnation since the early 1960s?

Yesterday, Gavyn Davies at the Financial Times posted about the idea of secular stagnation, writing:

The slowdown in long run growth in the developed economies therefore seems to have become a permanent fact of life, rather than a temporary result of the financial crash that will disappear over time.

In the post, he discusses a new research paper, which shows that long-run GDP growth rates in the G7 countries have been decreasing monotonically since the early 1960s. And in this vein, he notes that:

Averaged across the G7, the slowdown can be traced to trend declines in both population growth and (especially) labour productivity growth, which together have resulted in a halving in long run GDP growth from over 4 per cent in 1970 to 2 per cent now.

However, looking at data from the UK in particular, there doesn't seem to be much evidence of secular stagnation in GDP per capita. As the chart below indicates, the linear trend in the growth rate of real GDP per capita between 1961 and 2007 is essentially flat; only when the post-crisis years are included does the slope of the line fall below zero. One possible response is that growth was artificially elevated during the pre-recession boom period. Yet the dashed line would not look any different if it only went up to 2001 or 2002; growth during the mid-2000s was about equal to average growth over 1961-2007.

To be fair to Mr Davies, he does admit that the slowdown "looks more persistent for the G7 as a whole than it does for individual countries, where there is more variation in the pattern through time." 

Total expenditures at the 2014 Nuffield Art Auction

To celebrate a highly successful Art Auction in the Nuffield JCR last night, I thought it was time for another college-themed post. In particular, I thought a quick graphical description of individuals' total expenditure was the order of the day! Data, which were obtained via this afternoon's email to the social list, are of course strictly confidential. The first chart plots the percentage distribution of individuals' total expenditure (figures were only available on those who spent >£0). As expected based on casual observation, it is strongly right-skewed; most of our bidders spent a small-to-moderate amount, while a few high rollers splashed out rather more. The second chart plots the cumulative distribution of individuals' total expenditure. This allows us to see that, for example, our single biggest patron accounted for 11% of overall expenditure, while our top three accounted for nearly 25%.

The Guardian gets it wrong on absolute poverty

Having criticised The Economist for slipping into error on precisely two previous occasions, it only seems fair that I hold The Guardian to the same standard. Specifically, in an article published today about a new report from the Social Mobility and Child Poverty Commission, Patrick Wintour writes:

It also predicts that 2010-2020 will be the first decade since records began that saw a rise in absolute poverty – defined as a household in which income is below 60% of median earnings. A rise from 2.6 million households in absolute poverty to 3.5 million is now expected.

Unless I am mistaken, absolute poverty is not and has never been defined as "a household in which income is below 60% of median earnings". According to the United Nations, absolute poverty "measures poverty in relation to the amount of money necessary to meet basic needs such as food, clothing, and shelter", whereas relative poverty "defines poverty in relation to the economic status of other members of the society". Thus, "a household in which income is below 60% of median earnings" is quite clearly a definition of relative poverty. (The distinction between absolute and relative poverty is also recognised by the Joseph Rowntree Foundation.)

Incidentally, it is not obvious whether this error was originally made by the authors of the report themselves and then reproduced by Mr Wintour, or whether it was introduced by Mr Wintour de novo.

What sorts of people think comedians should be censored?

In recent years, a number of high-profile British comedians have been criticised or actively reprimanded for telling offensive jokes. Examples include: Jimmy Carr, Frankie Boyle, Rob Brydon, Sacha Baron Cohen, Ricky Gervais, Russel Brand & Johnathan Ross, Jack Whitehall and even Stephen Fry. As it so happens, the relentlessly inquiring minds at YouGov have done a poll on attitudes to offensive-joke-telling, which grants us an opportunity to discern what the British public thinks about these incidents.

In April of 2011, YouGov posed the following question to approximately 2,000 respondents:

Some people think too much comedy on the TV and radio these days is offensive, while other people think that reacting to complaints is stifling the artistic freedom of comedians. Which of the following best reflects your view?

The possible responses were:

Radio and TV comedians no longer have enough freedom to tell jokes that some people would find risky or offensive. Broadcasters should back comedians against these sort of complaints and if people find them offensive they shouldn't watch. 

Making jokes about subjects that would offend a large proportion of the general public is unacceptable on the television or radio. Broadcasters should listen to public complaints and make sure that comedy that is liable to offend people is not shown. 

Television and radio broadcasters currently get the balance between artistic freedom and not causing offence about right.

Overall: 41% said that "comedians no longer have enough freedom", 32% said that "making jokes about subjects that would offend a large proportion of the general public is unacceptable", and 22% said that "broadcasters currently get the balance between artistic freedom and not causing offence about right". Interestingly, while differences by social grade and party affiliation were relatively minor, differences by age and gender were quite substantial. Specifically, as the two charts below indicate, both young people and men were considerably more likely to say that comedians no longer have enough freedom. (Answers of "don't know" are omitted from the charts.)

Concern about unemployment and actual unemployment among OECD countries

Yesterday's post dealt with the relationship between concern about inequality and actual inequality among OECD countries. Today's post examines the relationship between concern about unemployment and actual unemployment among OECD countries. As before, data on concern about unemployment are from the recent Pew survey, while data on actual unemployment are from the OECD database.

Concern about unemployment is calculated the same way as concern about inequality. The specific question Pew asked was, "Do you think a lack of employment opportunities is a very big problem, a moderately big problem, a small problem, or not a problem at all in our country?" Each value is for Spring 2014. The measure of unemployment used is simply the harmonised unemployment rate for the first quarter of 2014. Because Spain and Greece, with unemployment rates of 25% and 27% respectively, skew the distribution considerably, I apply the log transformation.

The chart below shows the relationship between concern about unemployment and actual unemployment. In contrast to the case of inequality, the correlation here is both large and statistically significant, namely r = .70 (p = 0.005). And it is essentially identical when the non-log-transformed unemployment rate is used, namely r = .67 (p = 0.009). Moreover, it is even stronger when Germany, which appears to be something of an outlier, is excluded from the analysis, namely r = .80 (p = 0.001).

Concern about inequality and actual inequality among OECD countries

This post examines the relationship between concern about inequality and actual inequality among OECD countries. Data on concern about inequality were taken from a recent international survey conducted by Pew Research. Data on actual inequality were taken from the OECD statistics database.

In their survey, Pew asked respondents in 14 OECD countries (as well as a number of non-OECD countries), "Do you think the gap between the rich and the poor is a very big problem, a moderately big problem, a small problem, or not a problem at all in our country?" To measure concern about inequality, I take the weighted average percentage of respondents who think inequality is a problem, assigning the weight '3' to answers of "a very big problem", the weight '2' to answers of "a moderately big problem", and the weight '1' to answers of "a small problem". Each value is for the year 2013.

I utilise two measures of actual inequality: the post-tax, post-transfer Gini index, and the ratio of disposable income at the 90th percentile to disposable income at the 10th percentile (the 90/10 ratio). Each value is for the latest available year (typically 2011 or 2012). The correlation between the two measures is very strong, namely r = .95 (p < 0.001).

The first chart shows the relationship between concern about inequality and the Gini index. The correlation is positive but very small and non-significant, namely r = .14 (p = 0.6). The second chart shows the relationship between concern about inequality and the 90/10 ratio. Again, the correlation is positive but very small and non-significant, namely r = .12 (p = 0.7). A major caveat, of course, is that rather few countries are included in the sample. On the other hand, the sample does encompass almost the full range of inequality among OECD countries, from Germany near one end of the spectrum to Chile and Mexico at the other.

The Economist gets it wrong on capital punishment

While I do have a something of a soft spot for The Economist, I feel obliged to point out another rather careless factual error. In particular, a recent article about capital punishment claims that:

Japan is one of 22 nations and the only developed country--Apart from America, where it is falling out of favour--that retains capital punishment.

Contrary to this statement, I count at least four other developed countries that retain capital punishment, namely: Singapore, Taiwan, South Korea, and Qatar. Whilst Qatar and South Korea may have not have used the death penalty for some years, it remains a legal form of criminal punishment in those countries. Both Singapore and Taiwan have reportedly executed people as recently as this year.

The UN rates all three of Singapore, South Korea and Qatar as having "very high" human development; indeed in the latest index, Singapore and South Korea are ranked above Japan. Taiwan is reportedly not included in the HDI, but the Taiwanese government has calculated that if it were, it too would would have "very high" human development.

Cameron and Miliband: head-to-head

A month ago I noted that in spite of Labour's poll lead over the Tories, Ed Miliband's popularity among voters continues to trail that of his Conservative counterpart David Cameron. Not only do Brits believe Mr Cameron would make the better leader, but--at least according to one poll--actually see him as cooler than the guy who supports the Red Sox. Thankfully, the ever inquisitive people at YouGov have just completed a new poll that allows us to look at public perception of the two party leaders in even greater detail than before.

This time YouGov asked respondents to identify which terms from a list of 14 they thought best applied to each of the two men; they were allowed to pick up to three for Mr Cameron, and up to three for Mr Miliband. Results are presented in the two charts below. In the spirit of beginning with the bad news, results for the 7 negative terms are presented first. Mr Cameron is viewed as substantially more privileged, somewhat less caring, and slightly more artificial and dishonest. Comparatively, Mr Miliband is regarded as considerably weirder and substantially more out-of-his-depth.

Turning now to the good news, results for the 7 positive terms are presented in the second chart. Here the differences are generally smaller, yet the two men are still by no means identical. Mr Cameron is thought to be somewhat more statesmanlike, somewhat more competent, and somewhat more intelligent. In comparison, Mr Miliband is considered slightly more moderate, somewhat more genuine, and somewhat more in-touch. Neither man would be wise to bank on his looks. 

Bagehot gets it wrong on support for state intervention

The Economist's British politics blog, Bagehot, features a new article about the Labour leader Ed Miliband. One of the points advanced in the article is that Mr Miliband's social democratic agenda is at odds with British public opinion:

He anticipated rising demand for a bigger state role in the economy, in the form of regulation, public ownership and a thousand other of the social-democratic interventions he had always hankered after. Yet most Britons, even members of the hard-working “squeezed middle” whose problems he aptly describes, are suspicious of an agenda that appears hostile to free enterprise and personal responsibility

Personally, I am not aware of any evidence that "most Britons" are "suspicious of an agenda that appears hostile to free enterprise". For example, YouGov polls indicate that a majority of British people favour: public ownership of the NHS, public ownership of energy companies, public ownership of Royal Mail, public ownership of the railways, price controls in the transportation sector, price controls in the energy sector, and raising the top rate of income tax to 50%.

Though no doubt enthused by these figures, readers of a progressive disposition will be unhappy to learn that a majority of British people apparently also favour: cutting welfare benefits, reintroducing the death penalty for certain offences, trimming foreign aid, banning the burqa, and reducing net migration to zero. Overall, it would appear that the British public has a rather statist-authoritarian streak.

Climate science is probably not a conspiracy for more research funding

Yesterday I ran across an interesting essay in the Wall Street Journal written by former Obama administration science official Steven Koonin, which was entitled Climate Science is Not Settled. Koonin begins his essay by acknowledging the role human activity has played in climate change:

There is little doubt in the scientific community that continually growing amounts of greenhouse gases in the atmosphere, due largely to carbon-dioxide emissions from the conventional use of fossil fuels, are influencing the climate. There is also little doubt that the carbon dioxide will persist in the atmosphere for several centuries.

However, he goes on to expostulate the notion that scientists have a clear and comprehensive understanding of future climate change:

We often hear that there is a "scientific consensus" about climate change. But as far as the computer models go, there isn't a useful consensus at the level of detail relevant to assessing human influences.

Toward the end of the essay, he stresses the need for further research:

An international commitment to a sustained global climate observation system would generate an ever-lengthening record of more precise observations. And increasingly powerful computers can allow a better understanding of the uncertainties in our models, finer model grids and more sophisticated descriptions of the processes that occur within them. The science is urgent, since we could be caught flat-footed if our understanding does not improve more rapidly than the climate itself changes. 

I have no idea whether Koonin's scepticism about climate models is representative of current scientific thinking. However, his essay got me thinking about the oft-heard claim that the only reason why some scientists have raised the alarm over climate change is to make safe their own funding. In particular, it made me realise how difficult it is to square this claim with the facts. If climate scientists were simply trying to secure more money for themselves, the rational thing for them to do would be to promote the idea that there was little scientific consensus over climate change. After all, the case for shuttling additional research dollars into climate science would be much weaker if there wasn't any argument left to settle.

What are the political views of influential U.S. billionaires?

Darrel West, a scholar at the respected Democrat-leaning think-tank The Brookings Institution, has recently compiled a ranking of the 19 most politically influential billionaires in the United States. (I'm not quite sure why he chose the top 19, rather than say the top 20.) Using a combination of the information given in West's original article, the pertinent individuals' Wikipedia and Forbes pages, as well as Google searches, I have identified the political views of each individual on the list.

Interestingly, nearly as many lean left as lean right. Now of course, it seems rather unlikely that any of the left-leaning billionaires are dyed-in-the-wool, sickle wielding, raise-the-red-flag communists; here we are presumably talking about the centre-left. Nevertheless, it is noteworthy that well-to-do activists with a left-of-centre disposition are over-represented at the top of West's ranking. In terms of absolute fractions, 47% lean right and 32% lean left. But if each person is weighted by the inverse of his rank (i.e., the Koch brothers get '19'), then 42% lean right, while 44% lean left.

Incidentally, I assigned centrist to Alice Walton because, although she has reportedly backed the Ready for Hilary super-PAC, most of her previous political contributions have been to Republicans. (Please let me know if you disagree with one my of assignments.)

Republicans' and Democrats' views on Republicans and Democrats

It being late 2014, time to start thinking about the next U.S. presidential election is of course rapidly approaching. With only a year-and-a-half to go, all the bells, whistles and melodrama of that event are now practically imminent. And while it is not yet clear which Democrat and which Republican will battle it out on the final furlong for presidency, a number of individuals have been put forward as potential competitors.

Helpfully, several of these individuals featured in a recent poll where YouGov asked Americans to voice their opinion on a selection of prominent U.S. politicians. The list of politicians was twelvefold, comprising nine Republicans and three Democrats. The nine Republicans were: Rand Paul, Chris Christie, Jeb Bush, Mike Huckabee, Marco Rubio, Ted Cruz, Scott Walker, and Rick Perry. The three Democrats were: Hilary Clinton, Elizabeth Warren, and Brian Schweitzer.

In each case, respondents were required to state whether they had a "very favourable", "somewhat favourable", "somewhat unfavourable", or "very unfavourable" opinion of the politician under scrutiny; they were also given the option of replying "don't know". The results are broken down along a number of dimensions, one of which happens to be party identification (Republican, Democrat, or Independent). We can therefore get some insight into the following questions. Do politicians who are loved by members of one party tend to be hated less or hated more by members of the other? And conversely, do politicians who are reviled by members of one party tend to be adored more or adored less by members of the other?

The most obvious answer is that if an aspiring candidate is loved by members of one party, she will surely be hated more by members of the other, while if she is reviled by members of one party, she will surely be adored more by members of the other. However, a not-implausible alternative is that objectively better candidates are liked more by members of both parties, meaning that the candidate who is seen as ideal by members of one party will be the one who is seen as least-bad by members of the other.

But according to YouGov's numbers, it is the obvious answer that is correct. The two charts below display, respectively for Republican politicians and Democratic politicians, the relationship between politicians' average rating from Republican respondents and their average rating from Democratic respondents. Average rating was computed by: first assigning '5' to "very favourable", '4' to "somewhat favourable", '2' to "somewhat unfavourable", and '1' to "very unfavourable"; then calculating a weighted average; next dividing by the percentage of respondents who gave a response (as opposed to saying "don't know"); and finally re-scaling as a percentage of the rating of top-rated politician among the particular party's respondents.

The correlation for the first graph is –.85 (p < 0.01); the correlation for the second graph is –.97 (p > 0.1). A rather important caveat is that an inference from n = 9 is at best questionable, while an inference from n = 3 is bordering on criminal! Incidentally, the reason for dividing by the percentage of respondents who gave a response is to make the figure conditional on having heard of the individual. While some respondents may respond "don't know" because they genuinely hold a neutral opinion, it seems likely that most do so because they have not actually heard of the person in question. For example, in the case of Brian Schweitzer, nearly 70% of both parties' members replied "don't know", presumably because (like me), they didn't know who he was. In terms of the unconditional ratings, Mr Huckabee is the top-rated among Republicans, and Mrs Clinton is still the top-rated among Democrats.