Income Inequality!!!!!

[Jason McCullough]

I know everyone's excited when this comes up! Hoo boy!

I finally found something I'd been wondering about for a while:

http://ideas.repec.org/a/aea/aecrev/v82y1992i3p393-408.html

Edit: stupid URL code


New estimates based on intergenerational data from the Panel Study of Income Dynamics imply that the intergenerational correlation in long-run income is at least 0.4, indicating dramatically less mobility than suggested by earlier research.

Quick stat backgrounder: a correlation coefficient of 1 means "a is always present when b is present", 0 means never, and .5 means about half the time.

In a perfect meritocracy, children's income would be completely uncorrelated to parent's income (a correlation of zero). I'm surprised by the result of this study; I was expecting a lower coefficient. Ways to go on equality of opportunity, I guess.

[Desslock]

In a perfect meritocracy, children's income would be completely uncorrelated to parent's income (a correlation of zero). I'm surprised by the result of this study; I was expecting a lower coefficient. Ways to go on equality of opportunity, I guess.

You're excited to discover that the world isn't a level playing field? How insightful.

The point of striving to have a meritocracy is not to take away everything that might be advantageous from everyone (like parents who live in an area with better schools, or parents who have intelligence, or siblings that can provide guidance), but to try to prevent individuals who are skilled, who have drive, ambition and ability, from being arbitrarily prevented from achievements as a result of factors beyond their control.

I'd love to hear your examples of societies that are better "meritocracies" than the U.S., and not handicapped by cultural, racial, sexual and/or caste prejudices.

[Anders Hallin]

Sweden 75-85. Every damn parent was college-educated middle class ;)

[Jason McCullough]

I posted it because there are people who think the US is a meritocracy; hell, I was expecting that number to be around .2.

[Jakub]

Your favorite target, El Presidente Dubya of the USA, is pure and concrete proof that it's not what you know, not what you do, but who you know and who your family is.

[Lizard_King]

I posted it because there are people who think the US is a meritocracy; hell, I was expecting that number to be around .2.

I think the US is a successful meritocracy, relative to the rest of the world (surprise!). And I think it is inequality that drives real, material progress, so long as there is room for ambition to flourish. There is a lot to be said for seeking to raise those on the lowest level of the spectrum to certain minimums, but there is not a whole lot of substance to arguments premised on inequality as an objectively bad thing.

Also, maybe I just missed it, but could you include a link to the whole article rather than just the part that pleased you the most?

Also, re: Sweden: I am always glad to see how pleased Swedes are with their situation. Just the same, I am equally glad I am not Swedish, because the compromises required to attain such a state are not acceptable to me. Just as the American model should not be wished on others with abandon, comparisons to Sweden only have so much value beyond a curiousity; a large part of why they "succeed" has to do with the participants of their society being Swedes.

[Chris Nahr]

In a perfect meritocracy, children's income would be completely uncorrelated to parent's income (a correlation of zero).

Maybe in a perfect ultra-communist meritocracy that takes children away from their parents at the age of 4, brainwashes them to erase their memories, and puts them in centralised kindergarten camps.

Meanwhile back in the real world, the opportunity to give one's children a better chance to succeed in their professional life is a big part of an individual's motivation to acquire material wealth. Successful parents will try to defy any equalising force of the state so as to improve their children's chances, and if that proves impossible they may lose interest in their own carreer.

You can't have your "perfect meritocracy" without abolishing merit itself. In fact, I wouldn't be surprised if any number of socialist states, going by your index, would be far better "meritocracies" than the USA. When you can't do much for yourself to succeed because jobs and salaries are distributed by the state, and you can't help your children effectively for the same reason, then you should have a flat zero as the correlation between parents' and children's income! Wouldn't that be great?

[Machfive]

Maybe in a perfect ultra-communist meritocracy that takes children away from their parents at the age of 4, brainwashes them to erase their memories, and puts them in centralised kindergarten camps.


Welcome to Plato's Republic! Would you like some man-boy love with that, too? :D

[Brad Grenz]

See, Jason's a complete pinko idiot, just like we've all been saying. Listen to the German, he's got the idea. It's so amusing to see people propose a complete subversion of the fundemental life processes. Wow, parents want their children to be more successful than them, and will do what they can to ensure it. How evil. I wonder if this trend has spread outside our species. Imagine, and entire planet of competing organisms vying for dominance. Will the madness ever end?!?!

[Jason McCullough]

In a perfect meritocracy, children's income would be completely uncorrelated to parent's income (a correlation of zero).

Maybe in a perfect ultra-communist meritocracy that takes children away from their parents at the age of 4, brainwashes them to erase their memories, and puts them in centralised kindergarten camps.

Meanwhile back in the real world, the opportunity to give one's children a better chance to succeed in their professional life is a big part of an individual's motivation to acquire material wealth. Successful parents will try to defy any equalising force of the state so as to improve their children's chances, and if that proves impossible they may lose interest in their own carreer.

You can't have your "perfect meritocracy" without abolishing merit itself. In fact, I wouldn't be surprised if any number of socialist states, going by your index, would be far better "meritocracies" than the USA. When you can't do much for yourself to succeed because jobs and salaries are distributed by the state, and you can't help your children effectively for the same reason, then you should have a flat zero as the correlation between parents' and children's income! Wouldn't that be great?

What the hell? My point was that initial endowments (parent's wealth level, race, quality of schooling, quality of parenting) affect the outcome quite a bit; the "self-made man" thing is overblown.

I like the paint on your straw sculpture of Atlus, though.

[Anders Hallin]

Also, re: Sweden: I am always glad to see how pleased Swedes are with their situation. Just the same, I am equally glad I am not Swedish, because the compromises required to attain such a state are not acceptable to me. Just as the American model should not be wished on others with abandon, comparisons to Sweden only have so much value beyond a curiousity; a large part of why they "succeed" has to do with the participants of their society being Swedes.
I'm pleased? I never said I was pleased. I was just pointing out a period where a majority was on equal footing (actually, it might have been the generation before, where there was a lot of inequality in money, but education was open to everyone). I'm not pleased at all. In fact, I'm pretty sure we're teetering on the brink of... uh, badness.
And the Swedish problem is that while we pretty much managed to make it possible for anyone to get educated and up to middle class, becoming rich is something else all together. For many there is a roof on class mobility, obviously negative, in addition to our floor, obviously positive (:)). There are a bit too much stratification in possibility the way I see it, and hopefully we will be able to ride through this situation with our heads held high, and not fall to economic shambles nor lose our regard for human dignity.

[Idar Thorvaldsen]

...but there is not a whole lot of substance to arguments premised on inequality as an objectively bad thing.

How about: "We've all just got one life to life, so it should be as good as possible for everyone"?

Of course, that depends on what you mean by "objectively."

[Chris Nahr]

What the hell? My point was that initial endowments (parent's wealth level, race, quality of schooling, quality of parenting) affect the outcome quite a bit; the "self-made man" thing is overblown.

I like the paint on your straw sculpture of Atlus, though.

Eh? I'm not a libertarian anyway but I thought you would appreciate a correlation of zero between material success of children and their parents. If you don't then my bad.

On an unrelated note, the whole "let's move everyone to middle class" idea is kind of funny. So who's gonna pick up the trash and work at construction sites when everyone's a well-educated teacher? Nobody? Poor immigrants? Or do we just redefine "middle class" to include them?

[bmulligan]

Or do we just redefine "middle class" to include them?

Why not? the poor are constantly being redefined to include more people. It give more credence to the notion that there is so many of them.

[Jason McCullough]

Well, theoretically, you could provide enough benefits (health care, child care, whatever) that being a trashman wouldn't be that bad of a job. It wouldn't be something people aspire to, but it wouldn't be pitiable like it is now.

The long term solution: friendly robots! Though there is the slavery issue if we make them sentient.....

[Machfive]

Well, theoretically, you could provide enough benefits (health care, child care, whatever) that being a trashman wouldn't be that bad of a job. It wouldn't be something people aspire to, but it wouldn't be pitiable like it is now.

The long term solution: friendly robots! Though there is the slavery issue if we make them sentient.....

Not if one of the key tenents of their programming is that they want to help humanity (www.singinst.org/CFAI/).

[Sharpe]

Jason - I have four questions about this info as the link you supplied was not real informative.

First - what, numerically does the coefficient mean? Does a .4 mean the average offspring will vary from the mean by .4 of the variance of the parent? (IE if the parent made $100K more than avg, the offspring will make $40K more than average?)

Second, what makes you think that .4 is high? I would personally (with academic grounding in the subject) have expected the number to be around .5 on the theory that roughly half the influence on a person's success comes from the environment, with parental environment being a huge factor (the other half being innate, genetic abilities & personal character/choices IMO). You said you expected a .2 - based on what? and why?

Third, over what time frame was the .4 measured? Last 10 years, 20 years, what? How does this compare to the co-efficient over time in American history. Is the number rising or falling.

Fourth, how does this compare to the current and historical numbers for other countries. And is there any correlation between the economic and political systems and the co-efficient. What statistical role does culture play?

Right now, its just a number. To have a meaningful discussion, I'd like some more info.

Dan

[Lizard_King]

I'm pleased? I never said I was pleased. I was just pointing out a period where a majority was on equal footing (actually, it might have been the generation before, where there was a lot of inequality in money, but education was open to everyone). I'm not pleased at all. In fact, I'm pretty sure we're teetering on the brink of... uh, badness.
And the Swedish problem is that while we pretty much managed to make it possible for anyone to get educated and up to middle class, becoming rich is something else all together. For many there is a roof on class mobility, obviously negative, in addition to our floor, obviously positive (:)). There are a bit too much stratification in possibility the way I see it, and hopefully we will be able to ride through this situation with our heads held high, and not fall to economic shambles nor lose our regard for human dignity.

My bad. I superimposed the impression I am usually given by Swedes on your perfectly neutral statement.
I agree with your analysis of the Swedish situation, and I am possibly more pessimistic about it since I don't see much room for halfway measures to fix it.



...but there is not a whole lot of substance to arguments premised on inequality as an objectively bad thing.
How about: "We've all just got one life to life, so it should be as good as possible for everyone"?

Of course, that depends on what you mean by "objectively."

Often, when the issue of inequality is brought up, it is brought up by someone that opposes its existence on principle. I think that is an absurd and unrealistic way of criticizing an economy.
As to your hypothetical, the devil is in the details. If by "should" you mean "forced income redistribution to achieve egalitarian goal", we're not likely to agree. If you mean that as a long term ideal, I would say that is what reasonably regulated capitalism offers as a result (not in spite of) of inequality: the bottom of the barrel is continually being raised. Any other system results in the sort of stagnation you note in Sweden.

Now, you can have a situation like El Salvador where the inequality is irrationally and often criminally maintained, but that has very little in common with most of what goes on in the US on a macroeconomic scale. Even Enron-level foolishness can't undo the benefits in the aggregate.

EDIT: thought Idar's quote was Anders'

[Jason McCullough]

Man, those singularity people don't fuck around.

I can't find the link, but apparently intergenerational income mobility in the US is about the same as in Sweden.

A couple related papers:

http://216.239.33.104/search?q=cache:JPrrOWxkcFkJ:www.econ.ubc.ca/nfortin/chapt4a.pdf+intergenerational+income+correlation&hl=en&ie=UTF-8

http://216.239.33.104/search?q=cache:G1y2Yq-nYNgJ:www.wam.umd.edu/~bastos/SheaCompAug2002.pdf+intergenerational+income+corre lation&hl=en&ie=UTF-8

It looks like the correlation measure is "how far is the father's income from the average compared to the son's"; I think distance is measured in standard deviations from the mean (although technically it shouldn't matter too much what the units are). 0 is uncorrelated (the son's income distribution has no relation at all to their father's), 1 is perfect correlation (same position).

http://www.psychstat.smsu.edu/introbook/sbk17.htm

Using the scatterplots there as a reference, imagine the father's position in the income distribution on the x axis and the son's on the right. IF they're the same (1 correlation coefficient), you see a 45% straight line. As the correlation becomes weaker, the cloud of data points "opens up" from the line, until at 0 a scatterplot of father/son income looks like random noise. This paper talks about very high correlations at the upper end of the income spectrum ( . 8 ) and very low ( 0 , for the lowest income) at the other end.

http://216.239.53.104/search?q=cache:UpKSDfmcmTsJ:www.statcan.ca/english/research/11F0019MIE/11F0019MIE1998113.pdf+oecd+intergenerational+incom e+mobility&hl=en&ie=UTF-8

I don't know, I just wasn't expecting close to half correlation.

I can't find anything talking about if the number's changed, but apparently the old consensus used to be that it was .2; then a bunch of papers came out criticizing various methodological issues and suggested revised numbers in the .4-.6 range, and a different set in the .1-.2 range. That Canadian paper gives a .2 number for Canada.

The non-linear nature of the correlation is the most interesting thing; the Canadian paper talks about the 95th percentile having a very strong likelihood to move even farther up, and the 5th percentile having a likelihood to move even farther down.

[Desslock]

I can't find the link, but apparently intergenerational income mobility in the US is about the same as in Sweden..

Sure, because it's just random, meaningless numbers. You can do a lot when you're not handicapped by logic or scientific method.

[Jason McCullough]

Christ, who pissed in your cornflakes Desslock?

[voltaic]

Maybe in a perfect ultra-communist meritocracy that takes children away from their parents at the age of 4, brainwashes them to erase their memories, and puts them in centralised kindergarten camps.
Soviet Commie-Pinko Russia had the highest percentage of literacy in the whole world (99% literate) and the highest rate of secondary school completion.

[Anders Hallin]

The Soviets weren't Pinko! They were redder than blood, they were!

Say, anyone want to hear some theories on how true freedom only can be reached under a totalitarian government?

[Rywill]

Maybe in a perfect ultra-communist meritocracy that takes children away from their parents at the age of 4, brainwashes them to erase their memories, and puts them in centralised kindergarten camps.
Soviet Commie-Pinko Russia had the highest percentage of literacy in the whole world (99% literate) and the highest rate of secondary school completion.
Who measured that? Them? Did you know that Saddam Hussein won 100% of the votes cast in the last Iraqi election?

[Kalle]

The Soviets weren't Pinko! They were redder than blood, they were!

Say, anyone want to hear some theories on how true freedom only can be reached under a totalitarian government?

Sounds similar to something I thought up a couple of years ago. Basically, the freedom to not have to make your own decisions at all.

[Kalle]

Maybe in a perfect ultra-communist meritocracy that takes children away from their parents at the age of 4, brainwashes them to erase their memories, and puts them in centralised kindergarten camps.
Soviet Commie-Pinko Russia had the highest percentage of literacy in the whole world (99% literate) and the highest rate of secondary school completion.
Who measured that? Them? Did you know that Saddam Hussein won 100% of the votes cast in the last Iraqi election?

Wasn't it 99,6%? :)

[JeffL]

The opportunites in America are amazing. Ask many of those who have moved here specifically due to those opportunities. Is it harder to make it if you come from a poor family? Sure. But I looked at those stats (I do a lot of stat analysis professionally) and I'm not sure the causal relationships are really there.

Anecdotally - I work with several folks who came from incredibily disadvantaged families and environments, welfare families, who took advantage of educational opportunities, worked their ass off, and are now company executives. In my own personal family, my father came from a VERY poor family of 11 kids, decided that the best opportunity was to join the Air Force, worked his way up, both of his kids ended up with advance degrees (through a lot of damned hard work) and as fairly high level folks in their companies. Of the 11 kids from this VERY poor family, 8 found a way to work their way up the ladders, in very different career choices, all of their kids making huge leaps (one of them ending up one of the top 50 folks in IBM) - all of this a leap in a single generation.

I've been to and lived in other countries - in spite of the tough situations a lot of kids face, there's nowhere else IMO that offers the opportunites this country does to leap above your parent's state. Whether you actually avail yourself of those opportunities is a different manner. And no, I'm not so naive as to think that every kid can easily make the jumps - no one ever said it was easy, and certainly no one ever said life was fair.

[Jason McCullough]

Oh, I'm sure the US has better mobility than other countries; in my quick spin of the papers they all agreed it does. It's just not as huge as everyone thinks.

[bmulligan]

no one ever said it was easy, and certainly no one ever said life was fair.

Life isn't fair. That's why the 'social engineers' have a problem with it and have the luxury of spending their lives doing studies of income correlation. I'm not sure what's worse, those that 'find' the correlations or those that spend too much time reading and analyzing them.

[bago]

Income inequality is an inherently good thing. You can't get poorer than zero. You CAN become richer than billg. Because inequality is always measured from zero, and growth tends to always occur, inequality as measured in realitive or absolute terms will always increase.

And that's a good thing.

[Desslock]

Oh, I'm sure the US has better mobility than other countries; in my quick spin of the papers they all agreed it does. It's just not as huge as everyone thinks.

But, huger than any other country in the history of the world. We could all improve, however.

[Jason McCullough]

Income inequality is an inherently good thing. You can't get poorer than zero. You CAN become richer than billg. Because inequality is always measured from zero, and growth tends to always occur, inequality as measured in realitive or absolute terms will always increase.

And that's a good thing.

Uh, is that why inequality goes in cycles? We're back to 1920s levels; the nadir was in the 1950s.

Edit: oops, forgot to quote. Not responding to Desslock.

[Desslock]

Uh, is that why inequality goes in cycles? We're back to 1920s levels; the nadir was in the 1950s.

Sure, right after Mars came for our women. Seriously, this is one of the goofiest arguments you've ever tried to make.

[voltaic]

Maybe in a perfect ultra-communist meritocracy that takes children away from their parents at the age of 4, brainwashes them to erase their memories, and puts them in centralised kindergarten camps.
Soviet Commie-Pinko Russia had the highest percentage of literacy in the whole world (99% literate) and the highest rate of secondary school completion.
Who measured that? Them? Did you know that Saddam Hussein won 100% of the votes cast in the last Iraqi election?
A fair question. It is well documented in Sovietological literature both from during and since that era in Russia. Foreign (i.e. Western) spies and non-covert agencies all discovered the same thing.

It only makes sense if you think about it. Communist society did not coddle the worthless and they didn't have a bunch of post-modern idiots running some social services in schools. The nation as a whole went from pre-industrial to on par with (sometimes surpassing) western technology in 40 years and very little of that was through espionage, as one example of their focus on learning.