Matt Nolan

Also, careful justifying inequality

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You have seen me say that some inequality is “good”, and you have seen Shamubeel say that inequality is “natural”.  It was with this in mind that Shaz told me to post about this comment from Boris Johnson.

Despite calling for more to be done to help talented people from poor backgrounds to advance — including state-funded places at private schools — Mr Johnson said some people would always find it easier to get ahead than others.

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He said: “I don’t believe that economic equality is possible; indeed, some measure of inequality is essential for the spirit of envy and keeping up with the Joneses and so on that it is a valuable spur to economic activity.”

I fear that people think the value judgments espoused by Johnson are similar to the ones economists hold when discussing inequality – this is not the case.

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Matt Nolan

The equity-efficiency trade-off and simplifying assumptions

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Given my admission that I am now going to talk more about inequality, it is important for me to show a bit more analytical respect to the concept of the ‘equity-efficiency trade-off’.  This is a term that is often used in economics, and that we often use here, but which on the blog I have only explicitly dug into once before – back in 2008.

The reason I often prefer not digging myself into the equity-efficiency trade-off concept too much is that I fear I won’t dig myself out, and if I do I doubt much would come from it.  It is an overarching concept that exists in economics, one that we have to be sure we consider whenever we ask a specific question.  However, without reference to a question there isn’t terribly much to say.

When it comes to the equity-efficiency trade-off associated with policy and social organisation, it is clear that we cannot clearly separate individual concepts associated with fairness – ideas of inequality and poverty will be inextricably linked, one of the key reasons why I dislike to push by the Spirit Level to solely place focus on inequality.

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Matt Nolan

From a listener: Statistics NZ talk on wellbeing

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As you saw from Shamubeel’s post this morning, there was a discussion on well-being and statistics to celebrate the International Year of Statistics – an event that Shamubeel spoke at.  Donal summarised the event here.

It was good times and all, well-being is important, as is measurement.  All the speeches were good, with Phillip Walker drilling home the importance of measuring wellbeing, Mai Chen adding that we need to be more intelligent about how we consider social capital and culture (as well as measuring it), Shamubeel pushed everyone to think past aggregates and consider data in relation to the choices of individuals, and Campbell Roberts indicated that the reporting of statistics, and the narrative, are incredibly important.  Another key point that Roberts stated was that statistics offers a lens on reality and in this way they are useful – very much so.

However, we have a summary from Donal and Shamubeel’s post on his speech.  Given I was in the audience trying to eat all the food Shamubeel told me I should post something – so I thought I would point out that there were a couple of areas where I felt a touch nervous.  This isn’t to criticise anyone – it was a great day with a lot of good points raised.  However, I just felt I should add some detail on a couple of points I felt were left to the side during the day – perhaps because they were too obvious, or seen as inconsequential at the time.

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Shamubeel Eaqub

Macro data and are we doing better?

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Statistics New Zealand launched their social indicators on 26 November 2013. It is a collection of data from the General Social Survey, which supplements various ‘hard’ economic data with ‘softer’ measures of perceptions.

I was part of a panel that spoke briefly at the launch. Donal at Economics New Zealand has written about it already.

The question posed to me was: Are we doing better? It’s a loaded question. It depends on who you ask and what dimension you measure.

Putting it in the context of the economic cycle, we can describe a recession where economic activity, employment and various other indicators fell. They have subsequently recovered. But the recession and the recovery were shared unevenly, across regions, industries, age, ethnicity etc: Read more

Matt Nolan

NZ inequality statistics: Some of the research

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Donal over at Economics New Zealand posted up some OECD figures that indicate that the Gini coefficient over the OECD was the same in 2010 as it was in the mid-1990s, and that it is actually lower in New Zealand.

As I have noted earlier, I am going to start writing about inequality on the blog.  So I have been spending a little bit of time reading about it!

Given this, I’ve realised we can take this analysis a step further.  Bryan Perry from MSD discussed the Gini coefficient, and other indicators, in his introduction for the inequality conference in July.  I wasn’t there – but I know the document is here, and I know Figure D.17 (third page of the pdf) has a graph of the Gini coefficient through time, and a trend line through it.

A couple of things should stand out when we look at this:

  1. The Gini coefficient has more been “flat” rather than “falling” since the mid-1990s if we look at the trend – the drop the OECD recorded looks like it may have been from comparing direct points, which are volatile
  2. When people complain about the large increase in the Gini coefficient they are not talking about the mid-1990s to today – they are talking about the reform period.  This figure shows that there was a very sharp increase in the Gini coefficient between about 1987 and 1992.

So unlike other countries, the complaints are NOT about a creeping increase in inequality through time – but about the level shift in inequality that New Zealand experienced following the reforms.  Ultimately, there is a view by these groups that the “equity-efficiency trade-off” New Zealand decided to make at that point wasn’t the right or just one.

Now I am not sure how we are even supposed to evaluate that claim without thinking about why, and how, inequality has changed.  To give some flavour for this, I’ll comment on a few of the New Zealand specific research papers we have had about this change – if you know any other similar work, flick me a line in the comments 😉

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Matt Nolan

A bunch of interesting links

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All links via Marginal Revolution – all things I want to comment on, but do not have the time.  View this as a sort of saving space!