Sunday, March 14, 2010

Premature evaluation - The Spirit Level

Richard Wilkinson and Kate Pickett's The Spirit Level is a vigorous polemic for social democracy, something we're probably in need of as the neo-liberals recover from the 2008 experience.

Unlike most such, this one is based on data - specifically, a whole battery of socioeconomic indicators that turn out to be strongly correlated with income inequality. In fact, the paperback comes with a handy table of the R-squareds and p-values of all the indicators used, which range across life expectancy, imprisonment per capita, patents issued per capita and much else. Everywhere, it seems, more egalitarian societies tend to do better.

This observation is rather more impressive than quite a bit of the book - there's too much back-of-a-fag-packet neuroscience of the sort that actual neuroscientists run a mile to avoid about mirror neurons and such, as well as a fair bit of 1970s-ish romanticisation of the supposedly ideal status of hunter-gatherer societies. Steven Pinker's work on the history of violence hasn't landed here; in places it's almost nostalgically sweet.

The data, however, speaks for itself. It's true that quite a few of the charts derive a lot of their correlation from a few outliers, but the outliers invariably point to the same results - specifically the United States, which reliably turns out to have truly awful results for many, many tests - and also very high inequality. Similarly, there are a whole string of statistics that are driven by a group of post-Soviet states that turn out to be dramatically unhappy, conflicted, violent, unhealthy, etc for their level of income; of course, these societies underwent a historic explosion of inequality.

Many of the results have been checked by carrying out the same analyses with the 51 US states, which gives rise to the same conclusion and another crop of interesting outliers. The states of the Deep South are reliably terrible. They are highly unequal, and they get the effects - but they are far off to the top right of the trendline. In a sense, their marginal productivity in terms of inequality is unusually high - for every extra point on the Gini coefficient, they manage to produce a sharply higher degree of suffering than the national average.

On the other hand, there's the importance of being urban. The more metropolitan the state, the less it suffers from the impact of inequality - New York has the social problems of the average, despite being very unequal. And there's the Alaskan question.

The Alaskan question? Many people on the left are keen on the idea of a citizens' basic income, and oddly enough, there is one territory with one in this study. Alaska, famously, distributes its oil revenues equally among the citizenry, and is therefore the most equal society in the United States. However, it also succeeds in being reliably among the worst on every other measure you can think of. Clearly, the statecraft of Sarah Palin must have some impact, but it's equally clear that it can't be the whole explanation.

Unless there is some huge missing factor that invalidates the whole data set, we have to consider that this particular basic income experiment has failed to deliver the benefits of equality. Alaska is, of course, a very special and atypical place - but it's not that different to, say, Norway, another sparsely populated, mountainous, northern territory bordering on Russia whose economy is heavily influenced by oil and gas, forestry, fishing, and metals and whose government decided to take a radical approach to the oil revenues, and where a lot of people own guns. And Norway is both very egalitarian and reliably in the very top of all the metrics in The Spirit Level.

Perhaps the answer is precisely that the Alaskan basic income is free money? Despite all the stuff about mirror neurons, etc, etc, it seems that the trade secret of equality is - equality. It takes a long time for Wilkinson and Pickett to get to this, but the difference between handing out oil windfalls and real egalitarianism is that only one of them is founded on a different balance of power between classes. A lasting reduction of income inequality must be founded in a lasting reduction in the inequality of political power - otherwise it may not last, and it may not even have much effect.

Another interesting point is that changes in relative economic success among nations seem to have little effect on human happiness or security. Obviously, a total crash will do it. But once a certain threshold level of per-capita GDP is passed, Wilkinson and Pickett argue, pushing into the G8 doesn't change much. They therefore argue that economic growth is useless. However, they then note that a whole range of their metrics, like life expectancy, do seem to go up a percentage point or two a year in the rich nations anyway. Which sounds a lot like growth.

It might be more accurate to say that growth relative to other industrialised states is not particularly important within the normal range of variation, although in absolute terms it is. However, the chart in question is quite heavily driven by the US outlier - which suggests that the costs of enough inequality will essentially swallow all your economic growth.

Eventually, the upshot of TSL is that the world, and especially China, needs trade unions.


Nick said...
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Tim Worstall said...

"same analyses with the 51 US states"

Eh? 51?

Laban said...

Correlation and causation re Gini...

Might it not be that some other factor - culture, for example - produces both greater unhappiness and greater inequality ?

I just have a feeling that, say, changing UK tax rates to 1950s (relative) levels would not necessarily produce 1950s levels of wellbeing - any more than restoring sentencing to 1950s policies (and nearly quadrupling the prison population) would produce 1950s crime levels. Too much cultural damage has been done in the meantime.

Steven Pinker ? Lawrence Keeley.

Charlie said...

Re the 51 states question: I don't have the book with me, but my guess is that DC is counted as a state. It has 600,000 inhabitants, which would make it one of the smallest states, population-wise, but would nonetheless put it on a par with Wyoming, Alaska and a few others.

Tomjay said...
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Laban said...

Thomas Hardy on Gini, describing a christening party in 'The Three Strangers' :

"Absolute confidence in each other’s good opinion begat perfect ease, while the finishing stroke of manner, amounting to a truly princely serenity, was lent to the majority by the absence of any expression or trait denoting that they wished to get on in the world, enlarge their minds, or do any eclipsing thing whatever — which nowadays so generally nips the bloom and bonhomie of all except the two extremes of the social scale."

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