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>"Inequality has grown in the United States since the 1970's too and poverty has increased there since 2000." Inequality is not a good metric for whether or no

by hodwik 11y ago

>"Inequality has grown in the United States since the 1970's too and poverty has increased there since 2000." Inequality is not a good metric for whether or not things are getting better. As Thomas Sowell said, “Now the history of the United States in the 20th century shows an incredible increase in prosperity over that century, and it was brought about not because [the poor]’s slice of the pie got bigger — the whole pie got bigger. And so everybody had an increase in prosperity.” And anyway, "income inequality" actually increases the more your government has subsidies for the poor. The more the poor are subsidized, the less incentive they have to work longer hours, the less they receive in income. It's not a coincidence that income inequality was lowest when countries had no government welfare programs at all.

Synaesthesia 11y ago
But Europe has more subsidies for the poor and less inequality, whereas the USA has more inequality. Cuba has much less than the rest of South America.
- hodwik 11y ago
  Do you have data on inequality across the EU? I would wager it is much larger than in the US, as you have very wealthy states like Norway and very poor states like Bulgaria. If you only look at inequality PER COUNTRY it will look lower than the US. Of course, the same would be true if you broke up Connecticut and Mississippi in your income statistics. Cuba is a totally different story, they have a maximum income law that says you cannot legally make more than $20 USD per month (except for doctors, who are allowed to make $30 USD per month). Can't really compare incomes in a country which artificially sets the legal income.
  - dragonwriter 11y ago
    Actually, EU-wide measures of inequality (e.g., Gini coefficient) are lower than those for the US; the EU briefly reached US-like levels when some of the Eastern European countries first joined, but had fallen back to levels much lower than the US.
    - hodwik2 11y ago
      I would wager that if you're seeing data that makes the US look like we have greater income inequality you're looking at one of two things. Possibility one -- you have good data, but you're looking at post-tax income data, which would be skewed because of our flatter tax structure, fewer transfers, low long-term capital gains tax rate, and our relatively high income tax as percentage of total tax burden. Possibility two -- the Gini coefficient you're looking at took national rates and then averaged them, rather than actually comparing incomes of specific people across the EU. I believe that if you compared pre-tax data across the EU (rather than national data, averaged) you would see the EU having considerably more income inequality. Just speaking from first hand experience, I've seen the difference between the lives of the wealthy and poor in the US (from Connecticut to Mississippi), and the wealthy and poor in the EU (from Bulgaria to Norway). The difference is much starker in the EU. I'm sure it probably doesn't sound very scientific, but I'm inclined to trust my own eyes over statistics. If the data shows otherwise, I have to imagine the data is skewed in some way.
      - dragonwriter 11y ago
        The problem is your eyes are measuring something different than what Gini coefficient measures: your eyes are measuring the visible difference between the extremes that you have encountered, Gini measures the overall tightness of the distribution. Unless you have the same "shape" of distribution, the two aren't going to be equivalent.
- dragonwriter 11y ago
  > But Europe has more subsidies for the poor and less inequality As one would expect; in the short term those subsidies produce less post-transfer inequality of outcome, but that also equates to less inequality of opportunity, and therefore long-term less pre-transfer inequality of outcome, as well.
dragonwriter 11y ago
> Inequality is not a good metric for whether or not things are getting better. That depends on your definition of "better". Given the fact that relative deprivation has a demonstrably very strong negative subjective disutility, demonstrated in many studies, its pretty darned important if you want to understand increases or decreases in actual suffering. This doesn't fit the simplistic way lots of people would like to think economic indicators should map to human experience, but that's a problem with the simplistic models.

by hodwik 11y ago

Synaesthesia 11y ago

But Europe has more subsidies for the poor and less inequality, whereas the USA has more inequality. Cuba has much less than the rest of South America.

hodwik 11y ago
Do you have data on inequality across the EU? I would wager it is much larger than in the US, as you have very wealthy states like Norway and very poor states like Bulgaria. If you only look at inequality PER COUNTRY it will look lower than the US. Of course, the same would be true if you broke up Connecticut and Mississippi in your income statistics. Cuba is a totally different story, they have a maximum income law that says you cannot legally make more than $20 USD per month (except for doctors, who are allowed to make $30 USD per month). Can't really compare incomes in a country which artificially sets the legal income.
- dragonwriter 11y ago
  Actually, EU-wide measures of inequality (e.g., Gini coefficient) are lower than those for the US; the EU briefly reached US-like levels when some of the Eastern European countries first joined, but had fallen back to levels much lower than the US.
  - hodwik2 11y ago
    I would wager that if you're seeing data that makes the US look like we have greater income inequality you're looking at one of two things. Possibility one -- you have good data, but you're looking at post-tax income data, which would be skewed because of our flatter tax structure, fewer transfers, low long-term capital gains tax rate, and our relatively high income tax as percentage of total tax burden. Possibility two -- the Gini coefficient you're looking at took national rates and then averaged them, rather than actually comparing incomes of specific people across the EU. I believe that if you compared pre-tax data across the EU (rather than national data, averaged) you would see the EU having considerably more income inequality. Just speaking from first hand experience, I've seen the difference between the lives of the wealthy and poor in the US (from Connecticut to Mississippi), and the wealthy and poor in the EU (from Bulgaria to Norway). The difference is much starker in the EU. I'm sure it probably doesn't sound very scientific, but I'm inclined to trust my own eyes over statistics. If the data shows otherwise, I have to imagine the data is skewed in some way.
    - dragonwriter 11y ago
      The problem is your eyes are measuring something different than what Gini coefficient measures: your eyes are measuring the visible difference between the extremes that you have encountered, Gini measures the overall tightness of the distribution. Unless you have the same "shape" of distribution, the two aren't going to be equivalent.
dragonwriter 11y ago
> But Europe has more subsidies for the poor and less inequality As one would expect; in the short term those subsidies produce less post-transfer inequality of outcome, but that also equates to less inequality of opportunity, and therefore long-term less pre-transfer inequality of outcome, as well.

dragonwriter 11y ago

> Inequality is not a good metric for whether or not things are getting better. That depends on your definition of "better". Given the fact that relative deprivation has a demonstrably very strong negative subjective disutility, demonstrated in many studies, its pretty darned important if you want to understand increases or decreases in actual suffering. This doesn't fit the simplistic way lots of people would like to think economic indicators should map to human experience, but that's a problem with the simplistic models.