Does Americans really want Sweden’s wealth distribution?

Last September or so there was a lot of headlines about a survey that claimed people in the US wanted a wealth distribution more like Sweden’s. OK, that was maybe not so surprising.

I recently got a reason to read the survey, and  it is interesting. It asked a couple of questions, in the first one they got to choose between three unlabeled wealth distributions, where one was a perfectly even distribution (obvious even when unlabeled) with every quintile having 20% of the wealth, one was a wealth distribution where the bottom quintile had 0.1% of the wealth and the top quintile 84% of the wealth. And the third was a wealth distribution where the bottom quintile had 11% and the top 36%. They asked people which one they preferred.

Well, which one would you choose, if you don’t know anything about economics? Right, the middle one. The one with a completely equal wealth distribution is obviously one extreme. If you don’t know anything about the subject, you will automatically assume the 84% – 0.1% to be extreme as well. But it isn’t. That would be having 100% for the top quintile and 0%for all the others. They didn’t show any such chart, making the question completely biased from the start.

To make matters worse, of these three distributions, only one was real, the 84% – 0.1% distribution. It was the US wealth distribution. The perfectly equal one was obviously unreal, but the third one is also fictional. In the survey they claim it’s Sweden’s wealth distribution, but that is not true. In a footnote (yes a footnote) they admit that it’s not. It is Sweden’s income distribution. Although possibly that isn’t true either. According to data from SCB, the top 20% have 40% of the income and the bottom 20% have 4%of the income. Not 36% and 11% as Norton and Ariely claims.

However, the big problem here is of course that income and wealth distributions are completely different beasts and will look very different. They claim they chose the income distribution to have a bigger contrast, because although Sweden’s wealth distribution is more equal the the US wealth distribution it is still, according to them ”extremely top heavy”. Yes, because that’s how wealth distribution works. Sweden’s wealth distribution is 73% in the top quintile and 0% in the bottom one. And that’s the worlds most equal country.

So Norton and Ariely showed one real and two completely fictional and unrealistic income distributions and asked which one they preferred. The 8% that preferred the US income distribution to the fictional Swedish one are likely the 8% of people that know enough about economy or maths to notice the flaw.

What should Norton and Ariely have done here if they were serious? Well, they probably should have shown them several different income distributions taken from real countries, with two fictional (but not wildly unrealistic) extremes. Why income distributions? Because wealth distributions are by nature extreme. The people in the bottom quintile will not tend to save money, but to spend their income. They don’t really have money over to save. Hence, they will always fall close to zero. That looks much more unequal than what it really is. Income distribution is less unintuitive in that way. Maybe they could have had Sweden, US and Namibias income distributions, for example. There will likely always be a bias towards the middle in such a question, so it’s important to have US as the middle of the road to avoid a bias, and see when people then prefer, more or less income distribution.

Then they got asked what they though the US income distribution was, and then of course put the numbers somewhere in the middle of the option they choose (the unrealistic fabricated option) and the one they thought was extreme (US), proving that they didn’t know what they were being asked. And then they asked what they wanted it to be, and then wanted in average a slightly more equal distribution than they thought they had. In fact, slightly more equal than the completely unrealistic center option they had got, with the top quintile earning 36% of the total and the bottom quintile 11%.

These choices are both influenced by the false data they were fed in the first question, and an effect of the unintuitive maths here. This survey got Americans to claim that the average guy on the top 20% should earn about three times as much as the average guy in the bottom 20%, while in the most equal country in the world, Sweden, he in fact currently earns around ten times as much. This is not an expression of what people really want in a society, it’s an expression of that people won’t understand the issues if they are expressed in unclear maths after being feed misleading information.

I think this survey is interesting and you can learn a lot from it. It would be an excellent case study in how to not make surveys as they pretty much did everything wrong.

So what did this survey show? It shows that the maths involved are unintuitive. Most people in the lower 20% doesn’t save money. They will have very little of the wealth, because even if they have money over at the end of the month they spend it. That’s normal and expected, and every country will work like that, always. It also shows that people in the US believe that the US is more unequal than they would like. That’s it. But it doesn’t show any of the things they claim it shows, much less that Americans prefer Sweden’s income distribution. Maybe they do, maybe they don’t. But this survey doesn’t show it.

Paul Clarke and the shotgun.

I completely agree that it’s wrong to carry concealed weapens without a license. I also agree that if you find a shutgun (or are in possession of one, and want to stop being in possession of it) it’s reasonable to call the police to ask them to pick it up. But there can be millions of reasons why you don’t want the police to pick it up. Maybe you have nosy neighbours. Maybe you simply don’t want to explain to your kids that somebody for some reason put a gun into your trash.

So the behaviour of Paul Clarke, taking a shotgun to the police and handing it in, is perfectly normal and understandable. Yet he got arrested and found guilty of possessing a firearm, a crime that carries a minimum of a five year prison sentence. And that is utterly insane.

What we have here is a case of somebody taking an illegal gun off the streets, and being arrested for it. In other words, he is facing five years of jail for no longer wanting to engage in an illegal activity.

In the twitter storm that resulted some people linked to an article about somebody called Paul Clarke that threatened someone for no reason. Also they point out that his story seems unlikely, and that he probably had the shotgun in possession a long time before, instead of just finding it as he claimed. Let me clarify that this is completely irrelevant. It may be true, and in there was proof of him having the gun in possesion for a long time, then possibly he should have been arrested. But there is no proof of that. Also what he did before should not enter in to this. He is not arrested for being a jerk or an aggressive man.

What is the result of this kind of interpretation of the law? Well, let us look at a question Lee Griffin asked me on twitter: What if Paul Clarke had been mugged on the way to the station and then later used to kill 5 people. Would Paul Clarke still innocent of wrongdoing? Well, in the eyes fo the law, he would. Because he would then have been out of possession of the gun, and not arrested and not convicted of any wrongdoings. Also, continuing to hide the gun from the police would also have been rather safe, unless the police have a habit iof raiding his house. Another good safe bet would be to sell it to some criminal. All of these alternative actions would have kept the illegal gun out there on the streets, and Paul Clarke wouldn’t have been arrested.

His only cause of action if he wants to do the right thing is to tell the police about the weapon. And if he does not want the neighbors excited or the kids worried his only possible action is the go with it to the police station. Which got him arrested. A moral cause of action got him arrested, where an immoral one would not have, even if he had made nothing wrong from the start.

So this is a case where Paul Clarke is convicted of doing the right thing, when doing something wrong would have kept him safe. And that’s why this is insane. It tells people that handing in guns is dangerous. It tells people to not invoke the police. If you get involved or see anything criminal, go home, keep your mouth shut and if you should happen to have anything illegal in your possession, on no account tell the police. Just chuck it in a lake. That’s what it tells people.

Crime may not pay. But if being legal doesn’t pay either, then the base of the law has been undermined.

Some random thoughts on the Fall of the Wall

I do remember the pictures on the TV so clearly. And I remember that I couldn’t really believe them. Surely it was a temporary glitch. Surely the people of east Berlin had not just forced the gates and crossed the border. Surely the might of Russia would come crashing down. But days passed, and nothing happened. And people was chipping away on the Berlin wall. And after a while, the East German military started actually dismantling it, and my skepticism and fear slowly lifted into a euphoria that lasted almost a year, and a lingering happiness that lasted longer. A great weight had been lifted from my shoulders. The world had been changed.

And the world changed a lot. And that’s probably why this state of happiness I was in lasted for so long. When the wall fell, and the the Soviet union, the world I grew up in disappeared completely. Because in that world, nuclear war was not a risk, it was a certainty. There was never a doubt the world would end in a nuclear war, it was just a question of when, and what would be best: Getting burned to death by radiation, or be forced to live through the Mad Max-hell that surely was how the post apocalyptic world would look. That dark, gloomy and doomed world was changed to a globalized, peaceful world. And it was a world that had a soundtrack, and the soundtrack was called MTV Europe.

Because something that propelled me through this state of happiness that lasted years was the constant reminder from MTV Europe. MTV Europe was only two years old when the wall fell, and in some sense probably still finding it’s feet and it’s audience. And to my constant joy, a large part of that audience turned out to be the youth of eastern Europe. The MTV of the early 90’s would with great fanfare welcome new countries of eastern Europe as they gained coverage there. In 1992 Ray Cokes started the show MTV’s Most Wanted, where people could call in and wish for songs. And armed with only a handful of words in English, people would call in on crappy telephone lines from what then seemed to be remote parts of Europe we hardly have heard of, and ask songs for they loved ones. The youth of Europe was united to a single rhythm.

But in 1993 I moved, and for various reasons I didn’t have MTV until 1997, when to my dismay I found MTV Nordic on my TV instead of MTV Europe. The magic bond to the youth of Europe had broken, and the sense of freedom and globalization I had in the early 90’s had disappeared, as the new Europe had become normality. But if I ever despair about the state of the world, I only have to remember back to those early 90’s and the nervous teenagers that was using Ray Cokes as an expression of their newfound freedom.

It’s getting better. Peoples thirst for freedom will win in the end. Sometimes it goes slowly, sometimes fast, sometimes it may go a bit backwards. But it is getting better.

Democracy vs Hunger

Professor R J Rummel is complaining about IFPRIs Global Hunger Index, because they exclude ”developed countries” from their data, simply because there is no hunger there. I agree with him, it makes the data much harder to use. It also, more specifically, makes it hard to know if a country missing from the data is there because they don’t think the country is big or significant enough to be in there, or because they have decided that it is a ”developed country”.

However, I may make Professor Rummel happy by noticing that it doesn’t matter when it comes to showing what he wants to show. Even though developed countries (and thereby most democracies) are excluded, the data that exists are still so overwhelmingly clear that it is almost scary.

”Hunger” in this graph measured on the IFPRI hunger index and ”Democracy” is a measure on how free/democratic countries are on a scale from one to twelve, with the data coming from Freedom house. I simply grouped all countries that had a particular democracy level, and took an average of the hunger index for these countries.

So, simply speaking, if a country is extremely totalitarian or just averagely oppressive doesn’t matter, people will still starve. But when countries are moving out from what Freedomhouse calls ”Partly Free” into what they call ”Free” countries (8-12 on my scale above) we see a significant drop in hunger, that directly follows the level of freedom!

It couldn’t be much clearer than that, really. Freedom, baby, yeah.


Kanske intressanta bloggar om: , , ,

I vouch for vouchers.

In Florida, a school voucher system that already have given seven hundred students from poor areas with poor schools a chance to get an education has been shot down by the Florida supreme school. Why? Well, you see, Florida’s state constitution guarantees a “uniform, efficient, safe, secure and high quality system of free public schools”. Now, the schools in poor areas are neither efficient, safe, secure or high quality, meaning that the states system is in no way uniform. The are however, free and public. A voucher system can give kids access to uniform, efficient, safe, secure, high quality, free private schools. And the Florida supreme court evidently decided that it’s OK to sacrifice all the other parts of that sentence, just to make sure the schools remain public.

Anybody else smell a tail wagging a dog here?

Voucher systems basically mean that kids that normally would be forced to go in public schools get the possibility to go in private schools. Sweden has had a general voucher system for everyone since the start of the 90s, and the result has been a general increase in school quality (in Florida too). Also, since more schools now are privately owned, it means teachers now have a choice of employer, which has increased tecaher salaries a bit, and increased teacher freedom a lot. By letting people choose their schools, the bad schools have to either get good, or get lost. Most problem schools in Sweden (in Sweden the problem schools are in the suburbs and the nice schools in the inner city) has cleaned up their act. And it costs very little. It’s a win-win scenario.

At least, things are looking up in the rest of th US. Although Florida now will shut down their voucher system, six other states are extending or introducing systems of their own. We can either hope for better judges or an amendment to the Florida constitution.

Dominique De Villepin avoids answers on CNN

The French Prime Minister and presidential hopeful, Dominique De Villepin was interviewed on CNN yesterday. It was a brilliant display of how to not say anything substantial, something French politicians and philosophers excel at. Most significantly, De Villepin avoids all kinds of answers. He avoids answering questions, and he ducks any answers to the French problems. I can only hope that France will not reward his unsubstantial bullshitting by making him a president.

His statements on what do do are either platitudes, like ”we want to make a very special effort in direction of the young people of these neighborhoods”; or saying that he will do the same thing as before (i.e. nothing), ”we have created tax free zones, we want to increase the numbers of these tax free zones”; and most significantly, more state meddling: ”we’ve decided to have our national agency of employment to receive all the young people in these neighborhood during the next month”.

De Villepin can also not resist blaming others. The immigrants themselves get a little blame, of course; ”we also want the people of these neighborhoods being able to accept the jobs outside of these neighborhoods”. I personally am pretty sure they are very able to accept jobs outside the suburbs. The problem is that they aren’t offered any. And the primary scapegoat of French politicians come up; ”whatever happened in France can happen as well in other countries, in Europe or else where. It is a part of a new phenomenon of globalization.” No, it’s not a part of globalization. Many countries that have embraced globalization have no such problems. In fact, the problems are rather a direct effect of protectionism.

The attitude is ”these people need help”. No, they don’t. They need jobs.

The answers that De Villepin is avoiding are not even particularily painful. France comes in 142nd place out of 154 countries when it comes to ease of hiring and firing people. Yes, France is the 12th most difficiult country in the world, only 11 other countries make it more difficult to hire people. How exactly does Dominique De Villepin expect poorly educated, muslim, black immigrants to get a job in that situation? Hiring somebody takes a lot of effort. Firing them if you made a misjudgment (either about how much work was needed or about the person) is even harder. Would you be willing to take a risk in that situation? Of course not. You’ll hire somebody with the same education, looks and values as you, because that is what you trust. Preferrably somebody that has recommendations from somebody you know.

The result is that getting a job relies almost solely on contacts. You can’t get a job, unless you know somebody who knows somebody. And poor kids in the suburbs don’t.

There is only one solution to the problems France has; get the economy running so more jobs are created and simplify the process of hiring and firing people. A lot. Most of the difficult in doing this is hidden in a notoriously complicated French bureaucracy. This bureaucracy is full of people whose only interest is in creating more job for themselves.

Here is a completely true story about how you get a paper from the French goverment:

  1. You go to the sécurité social and ask for the paper. After one hour of waiting, they give you a completely different paper. When you point out that this is not the paper you asked for, they say the computers are broken, and ask you to come back another day.
  2. You come back another day and ask for the paper. They tell you that they can’t give you this paper at your normal office, and that you need to go to a special office.
  3. You go to the special office. After one hour of waiting, they refuse to give you the paper, and say you should not have it.
  4. You print out the european regulation on the matter, and read through it, making sure you should have the paper.
  5. You go back, and ask for the paper again. This time, when they refuse to give you the paper, you read the law to them, having highlighted the required parts of the law with a handy flourescent pen. They agree that you should have the paper, and then as for a list of 10 different papers you have to give them, first, to prove that you should have the paper, several of which comes from other parts of the French administration.
  6. Rinse, repeat.

All this requires not only knowledge of French, of course, but knowledge of French and european law. And you need to know it better than the French administration knows it.

Do you really want to hire anybody in those circumstances? I know of several young europeans who came to Paris for a year, to have fun and see the world. Most of them work. Few of them pay any taxes. It’s easy to see why, and it’s not because the taxes are high. It’s just too darn difficult to pay them.

The only painful part of this solution, is that the unions are running France, and French unions will stop anything that sounds like ”liberalisation” or ”deregulation”. We need, therefore, to come up with an alternative name for these policies. Suggestions are welcome.

The integrated and the rejected: The deeper causes of the French riots.

The integrated and the rejected. The whole fucking universe is split into two…

– From the movie ”Immortal”

So, it seems I was wrong. I thought this whole debacle would not end until the French minister of interior, Nicolas Sarkozy, resigned. But he has played high political stakes and won before, and he seems to do that this time around as well. He first put more fuel on the fire by calling rioters ”rabble” and telling the police to arrest more, and coming with obviously bogus claims that the riots were centrally organized. But then, he pulled a card from his sleeve: The state of emergency. This has never been used on mainland France before. Not even during the riots of 1968, which took place in central Paris.

Let us ponder that again. France is in a state of emergency. This feels rather bizarre. States of emergency is something usually used by oppressive governments to shut up the opposition. And when you go about your shopping, where is the emergency, you say? It is slightly otherworldly. But it seems to have worked, the riots are cooling down. The Parisian suburbs are reportedly back to normal. The sickly stench of burning rubber that blanketed the nights of Parisian suburbs are gone, no doubt thanks the the drop in car burning. During the riots several hundred cars were torched every night. Yesterday, the number was 76, which according the police is “almost normal”.

So, it might be time to sit down and look at what really happened. And I will start with a whole host of selected statistics to show the situation in France.

  • In France, only 24% of the youth works. Compare to for example Sweden, where the number is 46%.

  • 10% of all who lives in France are born outside France. But only 6.2% of the workforce is born outside of France.

  • The unemployment rate for university graduates is 5%. The unemployment rate for university graduates of north-African origin is 26.5%

  • Around 40% of the unemployment in France is long-term.

The non-working class

Frances unemployment is as you see, big. And it’s long-term, for the most part. People who for years and years go without a job, and live on unemployment. And remember, this numbers only include those who actively look for work. If you, after looking for job for a couple of years, give up, you are no longer counted as being unemployed. The result is obvious. France has become a modern class-society. But instead of the working class struggling against the oppression of the bourgeoisie, we now have a society split along the lines of the workers and the unemployed. France has a large group unemployed youths of mainly non-French origin. They don’t feel French. They feel excluded and alienated from society. If you are a young northAfrican in France, no matter if you were born here or immigrated, you chance of ever getting a job is desperately close to zero.

How come unemployment, and especially longterm unemployment is such a problem in France? Here we come into more statistics.

  • On average, startup companies in the US 1992-97 expanded their staff by 161 percent within two years. During the same time, the much fewer French startups expanded their staff by 13 percent.

  • On a scale from 0 to 100, the difficulty of hiring people in France is rated as 78, which places them as the 10th most difficult country, out of 151 (tying the place with Iran, Iraq, but also Greece). This can be compared to Sweden, with a difficulty index of 28, or Denmark and UK with a difficulty index of 11, or Hong Kong, Switzerland, Australia and US, who together with 24 other countries ties the first place as the country that is most easy to hire people with 0 as the index.

  • The share of low-skilled jobs dropped from 28% to 20% between 1983 and 2000. This is partly because:

  • The minimum wage in France was in 1997 52% of the median wage i France. It has since then risen to 61%.

In short, it is very difficult to hire people in France, at it makes no sense in hiring somebody unless you know for sure that this somebody is going to be able to make you quite a lot of money. French companies will only hire people if they are desperate. This makes for a slow moving market, where the best way to get a job is to already have one. If you don’t have a job, and have no education, you are in big trouble. If you in addition to that are not French, well, then you are completely out of luck, and can look ahead at a long life on handouts from the government.

Add a dose of prejudice

The French work market is highly segregated. Go into a McDonald’s, and you see a French boss, arab or asian people behind the counters and black people making the hamburgers. You might see a security guard as well. He is always black, unless he has a dog, in which case he is French. I assume that black security guards are seen as scarier. In a bank or any other kind of office environment, arabs and blacks are simply missing. They are allowed on the streets, but not in an office.

When I took a night train in southern France a couple of years ago, a group of three pick pockets of French or Arab origin combed the train for sleeping passangers with their wallets in reach. The train personell was alerted and the police boarded the train, quickly arrested three black africans and left. The pick-pockets continued to walk around the train, until they jumped off in Marseille.

What should be done?

People, especially immigrants and their kids, need to get jobs. Now. French politicians will look stern and take a deep gaze into the TV cameras where they say that the work market is the most important problem in France now, which is correct. Then they will continue with that it is important to protect the work market from a diverse set of horrors, from the 150 polish plumbers that work in France, to the evils of the immigrants in the suburbs. And this is a political lie.

The most important thing France can do is to create new jobs. And doing that is not magic. It’s easy. And here is the recipie:

  1. Scrap the 35 hour work week. This is already happening in France, but the process can be sped up. People working less is not good for the economy. The idea of a 35 hour work week is that the unemployed were to fill up the missing 5 hours. Of course, that doesn’t happen. Instead, people work less, less money gets created, and the country actually get poorer. The best would be if we could create a work market with a large flexibility and individual choice, so everybody could work as much or as little as they liked, but that is difficult.

  2. Remove the minimum wage laws. France already have a social security net, and a minimum income rule that gives unemployed the money they need to live. This is all the minimum wage law you need. Nobody is going to take a job if it earns less money than being on the dole.

  3. Remove all the bureaucratic obstacles to hiring people. Hiring somebody should just be a case of signing a paper.

  4. Remove all efforts of “protecting” the work market. The only thing you protect by that is the unemployment.

These are the most important parts. If necessary, I’d like to see more efforts towards minimizing the racism when hiring, but that is a difficult question. These four are easy and effective.

Sources:
http://www.cerc.gouv.fr/rapports/summary-cserc6.PDF
http://www.cerc.gouv.fr/rapports/report1cerc.pdf
http://www.insee.fr/en/indicateur/smic.htm
http://www.oecd.org/dataoecd/23/47/34641829.xls
http://www.oecd.org/dataoecd/24/2/34642361.xls

Olaf Gersemann: Cowboy Capitalism, p 198, via Johan Norberg
Jennifer Buckingham, ed. State of the Nation, 2004, p 112, via Johan Norberg