Category: Social World

Distribution of Wealth

One of our economics assignments this cycle asks students to divvy up $200,000 among a group of ten people. One is a divorced mom, another a playboy, a third a bank manager, you get the gist. The purpose is to compare what students think it should be, to what a socialist might believe, to students’ estimation of reality. I’m really curious to see what they come up with.

Michael Norton and Dan Ariely have some actual data on the wealth distribution in the United States that might really challenge some assumptions (Norton and Ariely, 2011 pdf). They asked survey respondents what percentage of wealth they thought was owned by the poorest 20% of U.S. citizens, the next 20% and so on. They also asked what kind of wealth distribution people though would be ideal. Finally, they compared what people thought to what was actually there.

The actual distribution of wealth in the U.S. (top), what people think is the case (middle), and people's ideal distribution (bottom). Figure from Norton and Ariely (2011).

People, apparently, really underestimate the income inequality in the U.S..

A second part of the same study gave people pie charts of wealth distribution in different societies and asked them to pick out which one they would prefer to live in if they were dropped at random into one of these societies. They compared the more socialist-like Sweden, to the U.S., and to a perfectly even distribution. People greatly preferred societies with a more equal sharing of wealth.

How wealth is shared in the U.S. compared to and equal distribution (middle), compared to Sweden. Image adapted from Norton and Aireli (2011).

I think I’m going to have to modify this assignment to use these graphs. I’ll also have to use their definition of wealth:

Wealth, also known as net worth, is defined as the total value of everything someone owns minus any debt that he or she owes. A person’s net worth includes his or her bank account savings plus the value of other things such as property, stocks, bonds, art, collections, etc., minus the value of things like loans and mortgages.

–Norton and Arieli (2011): Building a Better America – One Wealth Quintile at a Time in Perspectives on Psychological Science

Too many Young Adults: Reasons for Revolution

A successful democratic revolution may well need a relatively wealthy and educated population, however, one of the main things that seem to drive revolutions themselves is just how many young adults there are in a country.

… countries in which 60 percent or more of the population is under the age of 30 are more likely to experience outbreaks of civil conflict than those where age structures are more balanced.
— Madsen (2011): The Demographics of Revolt

When there are lots of young people getting to the age when they are just trying to find jobs and start families, but the country’s economy can’t grow fast enough to provide all the jobs they need, then you have a lot of dissatisfied, disaffected people with time on their hands; it’s a tinderbox ready for any spark.

I recently attended a talk by Jennifer Scuibba where she laid out the case. Scuibba’s blog, also has a
a very good set of links that look at the age demographics of the current revolutions in the Arab world.

One of the links goes to a report by Richard Cincotta and others (Cincotta et al., 2003) that used this type of demographic analysis to figure out which countries were most likely to end up in conflict.

Countries at risk of civil war (Cincotta et al., 2003).

They talk about the demographic transition, “a population’s shift from high to low rates of birth and death,” as being a key factor in reducing the likelihood of conflicts. Therefore, they suggest:

… a range of policies promoting small, healthy and better educated families and long lives among populations in developing countries seems likely to encourage greater political stability
— Cincotta et al., 2003: The Security Demographic – Population and Civil Conflict After the Cold War

If civil conflict leads to a successful democratic transition, then political stability is probably not a net benefit.

However, once there is a democratic revolution, the same large cohort of young people still exists, which could make a country like Egypt unstable for quite a while, until it goes through the demographic transition. After all:

…countries do not become mature democracies overnight. They usually go through a rocky transition, where mass politics mixes with authoritarian elete politics in a volatile way. Statistical evidence covering the past two centuries shows that in this transitional phase of democratization, countries become more aggressive and war-prone, not less …
— Mansfield and Snyder (1995): Democratization and War

Crossing the Bering Land Bridge

NPR reports on the discovery of a 11,500 year old house in Alaska that probably belonged to some of the first people to migrate to the Americas over the Bearing Land Bridge during the last Ice Age. Just 500 years later the Land Bridge was submerged by rising sea levels.

It’s a good article to go to for our discussion of human migration patterns. It also has the added poignancy of the fact that, at the end, the home was turned into a burial crypt for a young member of the family.

The Economy and Revolution

Vali Nasr’s interview on NPR’s Morning Edition talks about what it takes to make a successful revolution. Particularly, they focus on the need for a vibrant, educated, middle-class for a successful transition to democracy.

Another key, and I think essential point, is that the Egyptian protesters share the same global-citizenship values that Brazilians, South Koreans, and even Europeans and American, share. That they have these values, from years of communication with the outside world, offers the best chance that this revolution will be successful.

Edmund Burke supported the American Revolution, but opposed the French Revolution because the former was a conservative revolution, the colonists were fighting to regain rights that had lost, while the latter were trying to impose an ideal of democracy and equality that they had no experience with. He was right; the French revolution lead to the Terror then eventually to Napoleon and the restoration of the aristocracy.

Haiku by an economist

Economist Stephen T. Ziliak’s reflections on poetry are quite appropriate for the moment, since we’re doing both poetry and economics this cycle.

Invisible hand;
Mother of inflated hope,
Mistress of despair!
–Stephen T. Ziliak: Haiku Economics

Zilak says that, “Poetry can fill the gap between reason and emotion, adding feelings to economics.”

He particularly loves the haiku, because it is such a wonderful metaphor for economics: “less is more, and more is better.”

Each poem is the length of about one human breath. This constraint, though severe, is more than offset by a boundless freedom to feel.
–Stephen T. Ziliak: Haiku Economics

Creativity is said to lie at the intersection on disciplines. This is an excellent example of it.

Global Warming Refugees

NPR’s Brian Reed has an excellent two-part series on the small island nation of Kiribati‘s preparations to adapt to global warming.

Kiribati. (Map from the U.S. Congress via Wikimedia Commons).

Small island nations are the most sensitive to the effects of global warming. Rising sea levels will substantially affect places where the land is just a few meters above sea level. But small islands also have limited capacity to adapt to significant changes.

These articles tie in to our questions of modern migration, which we discussed last cycle (C3) and environmental change.

[googleMap name=”Tarawa Island, Kiribati” description=”Tarawa is the capital of the Kiribati Islands” width=”480″ height=”480″ mapzoom=”10″ mousewheel=”false” directions_to=”false”]Tarawa Island, Kiribati[/googleMap]