
Inequality worse now than on ‘Downton Abbey’ - fraqed
http://www.marketwatch.com/story/welcome-to-downton-abbey-america-2014-02-24
======
ataggart
Strange how articles like this aren't taken as an argument against the utility
of "inequality". Does anyone think that the poor of today would be better off
in Czarist Russia? [1]

I also find it interesting that "inequality" is based solely on "share of
national income", as if there is just this big pile of _ex nihilo_ money being
apportioned out unfairly.

[1]
[http://annualletter.gatesfoundation.org/~/media/Annual%20Let...](http://annualletter.gatesfoundation.org/~/media/Annual%20Letter%202014/Myth%201/Myth1Info1_Curves_Final_EN_0122.jpg)

~~~
rbehrends
Just because the situation has improved with respect to _absolute_ poverty
doesn't mean that _relative_ poverty isn't a problem, too. It's just a
different kind of problem.

First, rising income inequality/relative poverty is economically harmful. It's
simply not sustainable forever, especially in the consumer economy that the US
has. Capital gains in particular cannot continue to exceed general economic
growth without something eventually giving.

Second, relative poverty creates social exclusion, leading to social
stratification, low social mobility, and a whole host of related problems.
This is probably best seen in the rising cost of college tuition in the US,
creating an ever higher barrier for access to the middle class (admittedly,
exacerbated by the fact that the US has no VET system worth speaking of).
Perversely, where the affluent European countries invest in the education of
their citizens, some US states seem to try and position themselves as low-wage
alternatives to Mexico and China. Especially considering the ever-increasing
levels of automation, this is all kinds of crazy.

Also, with respect to absolute poverty, while the American poor have it
generally better than serfs in Czarist Russia or most of the people in your
average third world country (not a very high bar, of course), there's still
plenty of hunger and homelessness in the US.

~~~
yummyfajitas
_Second, relative poverty creates social exclusion, leading to social
stratification, low social mobility, and a whole host of related problems.
This is probably best seen in the rising cost of college tuition in the US,
creating an ever higher barrier for access to the middle class..._

If I gave you data showing that college consumption is at an all time high and
mobility remains unchanged, in spite of a large increase in inequality, would
that convince you your beliefs are incorrect?

If not, what data (if any) would cause you to change your beliefs?

[http://obs.rc.fas.harvard.edu/chetty/mobility_trends.pdf](http://obs.rc.fas.harvard.edu/chetty/mobility_trends.pdf)

~~~
rbehrends
Maybe you want to reconsider yours? I'm contrasting the US with comparatively
affluent European countries; US social mobility has been comparatively low for
quite some time, but inequality (as measured by the after-tax Gini) hasn't
risen all that much over the past two decades, either; it's gotten slightly
worse, but not massively. I'm talking about college tuition as a symptom here,
not the primary cause (there are obviously many drivers of inequality and lack
of social mobility).

So it isn't surprising that social mobility is actually experiencing a slight
downward trend [1].

But to elaborate: A college degree has become more crucial than ever for the
chance at a middle class life in America, yet real wages have stagnated,
despite higher college attendance, and a college degree isn't worth what it
used to be, either [2], while student debt has exploded [3]. In fact, even
life expectancy is correlated with education and has even fallen for the least
educated [4].

As a result, colleges have a seller's market available to them (in part
propped up by the student loan scheme, though it likely wouldn't be all that
much different without). Conversely, people are willing to sacrifice current
and future income to essentially tread water economically (=> stagnant real
wages).

[1] [http://www.businessinsider.com/the-american-dream-is-now-
a-m...](http://www.businessinsider.com/the-american-dream-is-now-a-
myth-2012-6)

[2] [http://www.thedailybeast.com/articles/2013/03/27/why-a-ba-
is...](http://www.thedailybeast.com/articles/2013/03/27/why-a-ba-is-now-a-
ticket-to-a-job-in-a-coffee-shop.html)

[3] [http://www.theatlantic.com/business/archive/2011/08/chart-
of...](http://www.theatlantic.com/business/archive/2011/08/chart-of-the-day-
student-loans-have-grown-511-since-1999/243821/)

[4] [http://www.motherjones.com/kevin-drum/2013/01/not-
everyone-l...](http://www.motherjones.com/kevin-drum/2013/01/not-everyone-
living-longer)

~~~
yummyfajitas
_inequality (as measured by the after-tax Gini) hasn 't risen all that much
over the past two decades_

Over the relevant time period of comparison (70's to today), GINI has
increased from about 40% to 47%.

[http://upload.wikimedia.org/wikipedia/commons/e/e3/The_US_Gi...](http://upload.wikimedia.org/wikipedia/commons/e/e3/The_US_Gini_Coefficient_for_Household_Income_\(1967_-_2007_\).png)

Mobility has remained flat over this time period. Over the same time period,
college enrollment has gone from about 45% to 70%.

[http://www.bls.gov/opub/ted/2010/ted_20100428.htm](http://www.bls.gov/opub/ted/2010/ted_20100428.htm)

Based on the historical data, it looks as if inequality _increases_ college
enrollment and does not alter mobility. (Assuming of course, as most
inequality mongers tend to do, that correlation == causality. Which is silly
but whateve.r)

Your two predictions have not passed the real world test. Again: what data
would convince you that your theory is wrong?

To convince me I'm incorrect, it's very simple. I'd want to see an exogenous
change in inequality result in some measurable effect. For example, suppose
for some reason a hord of rich people to move into some locale - I'd want to
see something bad happen to the non-rich people who remain there above and
beyond regional trends.

~~~
rbehrends
_Over the relevant time period of comparison (70 's to today), GINI has
increased from about 40% to 47%._

You're confusing the Gini before taxes and transfers with the Gini after taxes
and transfers (which is the one relevant for inequality). Also, the past two
decades started in the 90s, not the 70s.

 _Based on the historical data, it looks as if inequality increases college
enrollment and does not alter mobility._

There's been a lot else going on since the 1970s (end of the Cold War, the
internet, increasing acceptance of women going to college, just to name a few
factors). I really don't know how you get the idea that there's just one
single factor affecting college enrollment (see also the Flynn effect, which
is likely a pretty huge factor). If you want to claim that increasing
inequality increases college enrollment, you'll have to provide better support
for such a claim.

More importantly, while college _enrollment_ rates have increased, college
_graduation_ rates (relative to enrollment) have decreased [1], and overall
college degree _attainment_ has shown relatively little change [2]. This is
consistent with the general experience that, while tuition does not
necessarily form an obstacle to initial enrollment, the additional financial
pressure often makes it hard to actually maintain a course of study
(especially if that requires you to work more while studying full time).

For all practical purposes, higher tuition fees _do_ create a barrier to
enrollment. That there have historically been countervailing factors does not
mean that more expensive college tuition does not functionally retard
enrollment relative to what it would be otherwise. Also, what increase there
is in college enrollment comes at the cost of an explosion in student loan
debt, where families saddle themselves with long term financial liabilities,
more and more often without a degree to show for it.

[1]
[http://en.wikipedia.org/wiki/Decreasing_graduation_completio...](http://en.wikipedia.org/wiki/Decreasing_graduation_completion_rates_in_the_United_States)

[2]
[https://www.census.gov/hhes/socdemo/education/data/cps/histo...](https://www.census.gov/hhes/socdemo/education/data/cps/historical/fig4.jpg)

~~~
yummyfajitas
If you have data on GINI after taxes/transfers, I'd love to see it.

But please recognize that you are in a minority here - most left wing sorts
don't look at data after taxes and transfers. For example, anyone who talks
about poverty is talking about pre-tax/transfer data (after taxes and
transfers, poverty is almost nonexistent).

 _I really don 't know how you get the idea that there's just one single
factor..._

I don't really get why you completely ignored the sentence right after the one
you quoted, which explicitly says I don't think correlation is causality.

You still have not clearly stated what data would falsify your theory. Should
I conclude that your claims are unfalsifiable, and therefore closer to a
religious claim than a scientific one?

~~~
rbehrends
_If you have data on GINI after taxes /transfers, I'd love to see it._

Umm, Google, Wikipedia?
[http://en.wikipedia.org/wiki/File:GiniPlots_USA.png](http://en.wikipedia.org/wiki/File:GiniPlots_USA.png)

See also [1] for a list of countries by Gini both before and after
taxes/transfers.

 _But please recognize that you are in a minority here - most left wing sorts
don 't look at data after taxes and transfers. For example, anyone who talks
about poverty is talking about pre-tax/transfer data (after taxes and
transfers, poverty is almost nonexistent)._

Say what? For example, Germany actually has higher inequality than the US
before taxes and transfers, but significantly lower inequality after taxes and
transfers [1]. And even egalitarian Finland's pre-tax Gini isn't much
different from that of the US (taxes and transfers cut it almost in half).
Inequality before taxes and transfers is practically unavoidable in a
developed countries; taxes and transfers are the difference between the
European social democracies and the US.

And no, poverty is not non-existent after taxes and transfers; about one in
six Americans lives in a food-insecure household [2]. Ever been to Gary, IN
[3], East St. Louis, or Chicago's South Side? America has not only a high
relative poverty rate, but also a high absolute poverty rate (compared to the
rest of the developed world).

Also, why do you seem to assume that I'm a "left wing sort" (other than by tea
party standards where Rockefeller Republicans are proto-communists)?

 _You still have not clearly stated what data would falsify your theory.
Should I conclude that your claims are unfalsifiable, and therefore closer to
a religious claim than a scientific one?_

Huh? Just because a random variable that is the aggregate of many other random
variables (college enrollment) is not sufficient to make statements about one
of the component random variables (college tuition) does not mean that it's
unfalsifiable. You do have to control for the other variables, though. But
there's nothing inherently unfalsifiable about a relation between tuition and
college enrollment/completion. Just because you can't find it easily on Google
doesn't mean that you couldn't design a study to examine that relation minus
confounding factors. And the evidence is strong that there is such a relation
(it's also common sense - if a good becomes more expensive, fewer people will
purchase this good, unless there are countervailing effects).

If you look at it more closely, for example, you will learn that income
affects college graduation rates and college degree attainment rates (and,
conversely, having a college degree affects income and social mobility) [4].
Higher tuition both negatively affects graduation rates and also segregates
low-income students into lower quality colleges (or kept out of college
entirely). The underlying paper by Bailey and Dynarski [5] documents pretty
clearly that income inequality translates into inequality in educational
attainment and that low-income students dropping out disproportionately often
is a major driver of this effect.

[1]
[http://en.wikipedia.org/wiki/List_of_countries_by_income_equ...](http://en.wikipedia.org/wiki/List_of_countries_by_income_equality)

[2] [http://feedingamerica.org/hunger-in-america/hunger-
facts/hun...](http://feedingamerica.org/hunger-in-america/hunger-facts/hunger-
and-poverty-statistics.aspx)

[3] [http://www.businessinsider.com/gary-indiana-
photos-2012-7](http://www.businessinsider.com/gary-indiana-photos-2012-7)

[4]
[http://money.cnn.com/2011/11/21/news/economy/income_college/](http://money.cnn.com/2011/11/21/news/economy/income_college/)

[5]
[http://users.nber.org/~dynarski/Bailey_Dynarski.pdf](http://users.nber.org/~dynarski/Bailey_Dynarski.pdf)

~~~
yummyfajitas
According to your graph, GINI went up (from 34 to 38%) after taxes and
transfers as well.

 _Just because a random variable that is the aggregate of many other random
variables (college enrollment) is not sufficient to make statements about one
of the component random variables (college tuition) does not mean that it 's
unfalsifiable._

So how do you falsify it?

Also, I didn't ask about a relation between tuition and graduation. I asked
about a relation between _inequality_ and _enrollment_.

 _The underlying paper by Bailey and Dynarski [5] documents pretty clearly
that income inequality translates into inequality in educational attainment...

Looking at educational _attainment* as opposed to _enrollment_ is a bit, um,
confusing. Is it your assertion that a higher GINI somehow makes the poor
(specifically poor women, if we go by that paper) less willing to study than
their richer counterparts?

Not that it matters, since the paper doesn't look at inequality at all. All it
shows is that higher quintiles have higher graduation rates - this is
_completely unrelated_ to the question of whether increasing the size of
quintiles effects graduation rates.

Also, if you read your source [5] (the middle, not the conclusions), you'd
discover that the strongest explanation they have of their results is that
_children of poorer parents are not as smart as children of rich parents_ ,
which explains half the gap. So unless your claim is that higher GINI makes
poor kids stupid, it's nonsensical to claim inequality has anything to do with
graduation rates.

I give up. You have unfalsifiable beliefs which are somehow supported by
academic papers on completely unrelated topics. Not anything for me to learn
here.

~~~
rbehrends
_According to your graph, GINI went up (from 34 to 38%) after taxes and
transfers as well._

I didn't say that it didn't change; I said it didn't change much.

 _So how do you falsify it?_

As with any other such case, by controlling for those variables you want to
eliminate.

 _Is it your assertion that a higher GINI somehow makes the poor (specifically
poor women, if we go by that paper) less willing to study than their richer
counterparts?_

 _Looking at educational attainment as opposed to enrollment is a bit, um,
confusing._

It was you who brought up enrollment, not I. I was speaking in general terms
about tuition as a barrier to access to postsecondary education. Enrollment is
a very poor proximate variable for success at college due to increasingly high
dropout rates.

 _Not that it matters, since the paper doesn 't look at inequality at all._

From the paper: "In this paper we document changes over time in inequality in
educational attainment by family income [...]". Differences in family income,
of course, mean income inequality.

 _So unless your claim is that higher GINI makes poor kids stupid_

As it so happens, precisely that may be the case (we'd need further
corroboration to be fully certain, but it'd hardly be surprising - stress of
all kinds is known to have a deleterious effect on IQ, so stress from poverty
shouldn't be any different): [http://www.businessinsider.com/poverty-effect-
on-intelligenc...](http://www.businessinsider.com/poverty-effect-on-
intelligence-2013-8)

It's not something I had talked about in this thread, so this is not "my
claim" in that sense, but it is another example of the pernicious effects of
inequality.

 _I give up. You have unfalsifiable beliefs which are somehow supported by
academic papers on completely unrelated topics._

I think you simply do not understand what "unfalsifiable" means. Practically
any statement that relies on observations of natural phenomena is in principle
falsifiable by making observations counter to that statement; it may just be
difficult to do that. Statistical phenomena also slightly complicate the
situation, though the principle remains the same.

That you have a different opinion or disagree is fine - the data is hardly
conclusive either way, though your interpretation does make some very
counterintuitive assumptions (in particular, that people are more likely to
pay for a good or service - namely, college – the less they can afford it);
that you try to give this disagreement a veneer of objectivity by misusing
terminology isn't so cool. Especially when you handwave away anything that
doesn't fit your preconceptions.

------
Symmetry
It's important to remember that those numbers only count taxable income, and
don't include welfare and other government services. If the world today seems
and indeed is meaningfully less unequal than the world of Downton Abbey its
partly because of those things.

And also because more of the income of the super rich these days goes into
bidding up the price of positional goods[1] rather than having the biggest
possible house or the most possible servants.

[1][http://en.wikipedia.org/wiki/Positional_good](http://en.wikipedia.org/wiki/Positional_good)

~~~
amalag
I think income of the super rich may go into positional goods, but their
wealth goes into commodities which does raise prices across the board. And
that percentage may be greater than it was in the past.

~~~
fennecfoxen
Pfft. No it doesn't. Does Bill Gates have a billion dollars' worth of soybeans
sitting around in silos somewhere? Did Steve Jobs buy up $50 million worth of
crude oil at some point and no one told me? Does Warren Buffett have a freezer
with $333,000,000 worth of pork bellies hanging in it? No. Even an ETF like
PHCU has ~$15.24 million worth of copper - a drop in the ocean next to the
wealth of a single billionaire.

The only commodity the rich put anything approaching a substantial amount of
money into... is gold. _(Oooh, no, the price of gold is too high! think of the
children!)_

No no. The super-rich put their wealth into BUSINESSES, which is why they
remain super-wealthy. Also, they put it into: taxes (incl. the estate tax),
charities, their heirs, corporate bonds, government bonds, _and_ positional
goods like fine art or NYC penthouses.

~~~
amalag
A lot of money is in hedge funds through which it goes into businesses and
commodities. So you have to see where the hedge funds have their money. I
would guess that the wealthy have more money in hedge funds than positional
goods like fine art. But this is speculation on both our parts.

------
justin_vanw
The #1 plot point that comes up again and again on Downton Abbey is that the
'rich' aristocrat family can't even afford to keep up the cost of their day to
day lifestyle, and they only manage to fund it by marrying into money from
America, miraculous unexpected wills, etc etc.

It's a show about the end of the period of great inequality, where rising
incomes made it far more expensive to employ a team of servants.

So while this article is trying to make it sound like we should all be worried
about how inequality is rising, being more unequal than 'Downton Abbey' is a
pretty meaningless criterion.

As to the substance of the article, it's using a very arbitrary definition of
inequality, looking at the % of total wealth controlled by the richest 0.01%.
That is one in ten thousand rich.

It's also meaningless to talk about what share of the total wealth the bottom
90% of people had when comparing time periods so far from each other.

A single person today in the US who is considered below the poverty line makes
around $11,000/yr before taxes. In 1911, to be in the same percentile of
income that person would have been working 11 hours per day with one 30 minute
break, 7 days per week, often in completely unregulated and dangerous
conditions. There was no Social Security or unemployment insurance any other
kind of safety net, which meant if you were injured during your mandatory 77
hour work week, which was incredibly likely sooner or later, or even if you
were just sick or unable to work for any reason, you would have had no income.
Having become sick or injured, you certainly would not be able to afford even
the rudimentary and almost completely ineffective medical care which existed
at that time.

To put it in perspective, someone working the same hours as their doppelgänger
from 1911 (77 hours per week, 51 weeks per year), that hard worker living
today, earning only minimum wage, would make around $29,000/yr. Whether they
work 77 hours or 4 hours per week, today they also have automatic insurance
should they become disabled (SSI), automatic medical coverage if they are
injured on the job (everyone has workeman's comp insurance whether or not they
have healthcare), and on and on.

I'm not trying to paint some picture of perfection, but if you look at the
realities of life then and now, it's completely absurd to try to make it seem
like one % being lower than another % means life in 2014 has somehow
regressed. The trend is clearly to more access to healthcare, better and safer
work environments, far less hours spent working despite an improving standard
of living, higher quality food, better access to education, less violence and
crime, less hunger. In fact, the condition of humans in the world today is
better than the in 1911 using literally any measure whatsoever.

So while if you could hop in a time machine, if you are in the Nth percentile
today, and you went back to be in the the same Nth percentile in 1911, in 1911
you would own a larger share of the total wealth of the entire country. I
don't think that would really make a bit of difference to you, since you would
have to work twice as many hours, face a constant threat of complete ruin from
common illnesses and likely injuries, and most almost certainly die at a far
younger age.

So that's why these types of comparisons are meaningless.

------
pswenson
don't forget poverty in the 1920s is way different than poverty in 2014.

getting the basic needs like shelter, food, water, heat are a lot easier to
come by these days (many government services). And many of the poor have TVs
(cable even), cell phones, cars, etc.

my point isn't that being poor is no big deal... my point is the rich AND poor
both have it better off than they a hundred years ago.

As I (vaguely) recall, PG made a similar point in Hackers and Painters.

