Friday, July 27, 2012

Expect Significant "Medal Inequality" at the 2012 London Olympics. Should There be a "Medal Tax"?


Share of Adjusted Gross Income, 2008      Share of Olympic Medals, 2008
Top 5%34.73%36.22%
Top 10%45.77%53.11%
Top 25%67.38%71.47%
Top 50%87.25%91.03%

The table above shows a comparison of: a) the shares of Adjusted Gross Income for the top 5%, 10%, 25% and 50% of U.S. taxpayers in 2008 (IRS data here), and the shares of the Summer Olympic Medals for the top 5%, 10%, 25% and 50% of countries that earned at least one medal in 2008 (data here).   

Notice the amazing similarity between the shares of adjusted gross income earned in the U.S. in 2008 and the shares of the 1,918 Olympic medals awarded in 2008, in both cases by the top 5, 10, 25 and 50% of "participants" or "earners."
 
The "income inequality" that seems to disturb so many people in the U.S. is very closely matched with an even slightly higher degree of "Olympic medal inequality," and we'll likely get the same unequal distribution of Olympic medals this summer in London.  It's almost certain that we'll hear no objections or concerns over the next few weeks about the inevitable and significant "medal inequality," and that inequality will generate no calls for "medal taxes" on the top 5% of medal winners (e.g. U.S., China, Russia or the U.K. in 2008) or "medal redistribution" from the U.S. and China to the dozens of countries that will win no medals. 

Just imagine for a moment how "Olympic medal taxes," and especially a "progressive Olympic medal tax," with subsequent "medal redistribution" at the Final Ceremony to achieve a more "equal distribution of medals" would quickly destroy the competitive spirit of the Olympics and reduce the overall level of athletic performance, especially for the "extreme," world-class athletes at the top like Michael Phelps. If the final ceremony at the Olympics included imposing a medal tax on an "extreme athlete" like Michael Phelps, and redistributing some of his gold medals to countries that earned "too few" medals by some consensus (or no medals like Bolivia, Pakistan, Uganda and dozens of other countries in 2008), you can imagine what might happen - he might not show up at the next Olympics, or certainly wouldn't have the same incentive to train as hard.

We might get the same outcome when we attempt to tax the top, or "extreme income earners" - at some point they'll stop working or won't have the same incentive to work as hard and earn as much taxable income.

Bottom Line: The Olympic medal winners are respected and admired, despite the significant amount of "medal inequality" that results from that intense world-class competition. Instead of always vilifying them, perhaps we should pay the same respect to the world-class winners of the American free enterprise system - the successful "extreme" entrepreneurs at the top of our economic ladder who are represented in the top 1, 5 and 10% by income.

36 Comments:

At 7/27/2012 8:01 PM, Blogger Jon Murphy said...

Well, that is an interesting graphic, no?

 
At 7/27/2012 8:11 PM, Blogger arbitrage789 said...

Of course, when an athlete wins a gold medal, the government deserves most of the credit.

After all, government builds roads and bridges.

 
At 7/27/2012 8:30 PM, Blogger Larry G said...

... and the stadiums and sports venues?

 
At 7/27/2012 9:50 PM, Blogger arbitrage789 said...

This comment has been removed by the author.

 
At 7/27/2012 9:52 PM, Blogger arbitrage789 said...

Larry G.,

The point is, gold is worth more than bronze; and even the worst Olympic athlete deserves more credit than all the lazy slugs sitting on the couch watching them.

At the very least, it's a relativistic thing.

 
At 7/27/2012 10:06 PM, Blogger Larry G said...

well sure but who pays for all the Olympic "infrastructure" the athletes perform in?

do we give credit to those who pay for the Olympic infrastructure?

did the athletes "build that"?

:-)

 
At 7/27/2012 10:20 PM, Blogger arbitrage789 said...

Larry G.,

No, the athletes did not build that.

But I'm a bit more impressed with someone who can win, e.g. a gold medal in the 100 meter freestyle than I am with some grungy construction worker who happened to be working on the Olympic infrastructure.

No one is saying that we should cut government spending down to zero.

But how about cutting federal spending down to 18% of GDP...?

If Obama had his way, Federal spending would be at 50% of GDP

 
At 7/28/2012 12:00 AM, Blogger Don Culo said...

I warned you all !!!! Now Obama the socialist is taxing Olympic gold medals !!!!

We need to write our congressman NO taxes on Olympic medals !

 
At 7/28/2012 1:54 AM, Blogger PeakTrader said...

Yes, however, is the following "fair?":

1st place: $1 billion
2nd place: A new car
3rd place: A toaster
4th place and below: Nothing

 
At 7/28/2012 2:16 AM, Blogger PeakTrader said...

Of course, only destroying part of the rewards won't help everyone.

You don't want to kill the goose that lays the golden egg.

 
At 7/28/2012 2:34 AM, Blogger PeakTrader said...

That's why Obama's "experiment" failed.

Updated chart of output gap (also, notice the destruction of potential output since 2009):

http://stateofworkingamerica.org/charts/output-gap-real-gdp-compared-to-potential-gdp-2000-11/

 
At 7/28/2012 2:43 AM, Blogger PeakTrader said...

Scott Grannis also has an updated output gap chart (July 27, 2012):

http://scottgrannis.blogspot.com/

 
At 7/28/2012 8:37 AM, Blogger Ed R said...

Highly misleading comparison. The countries winning the most Olympic medals are, for the most part, countries with the most population and/or affluence: China, USA, Russia, Britain, France, Germany, etc. Many large but economically undeveloped countries: India, Indonesia, Egypt, etc. have hardly won any.

The top 5% of income earners shows the degree of concentration of wealth.

 
At 7/28/2012 9:22 AM, Blogger Jim said...

While the comparison yields eerily similar numbers, imagine what the statistics would be if governments protected established talent like they protect capital (zoning, licenses, regulation as barrier to entry, subsidy, TBTF, etc.)

 
At 7/28/2012 12:18 PM, Blogger Ron H. said...

Peak:

"Yes, however, is the following "fair?":

1st place: $1 billion
2nd place: A new car
3rd place: A toaster
4th place and below: Nothing
"

Yes it is. You forgot to mention that there are 100k 2nd place car recipients and 100 million 3rd place toaster recipients, and that what they got depended almost entirely on your own skill and effort.

Would you prefer that everyone got a toaster no matter how well they performed?

If that was the incentive, soon enough the 1st, 2nd and 3rd place performers would lose interest in playing the game, and then even toasters would become scarce.

 
At 7/28/2012 12:26 PM, Blogger Ron H. said...

"Highly misleading comparison. The countries winning the most Olympic medals are, for the most part, countries with the most population and/or affluence: China, USA, Russia, Britain, France, Germany, etc. Many large but economically undeveloped countries: India, Indonesia, Egypt, etc. have hardly won any.

The top 5% of income earners shows the degree of concentration of wealth.


Did you click 'publish' too soon? What was your point?

 
At 7/28/2012 12:30 PM, Blogger Ron H. said...

"... and the stadiums and sports venues?"

"Who's that trip-tropping on my bridge?" Larry the troll yells out.

 
At 7/28/2012 3:20 PM, Blogger Ed R said...

"What was your point?"

There is no point. That is the point.

 
At 7/28/2012 9:15 PM, Blogger Jon said...

If the medal winners get more food than they can eat and losers get no food, then yes, they should share.

 
At 7/28/2012 10:27 PM, Blogger Peter Metri said...

Is this a manifestation of power functions such as Zipf's Law? http://en.wikipedia.org/wiki/Zipf_distribution

 
At 7/29/2012 12:30 PM, Blogger hancke said...

Where would professional sports be if wealth redistribution were applied to player salaries? More exciting or boring? More competitive or indifferent?

 
At 7/29/2012 12:41 PM, Blogger Ron H. said...

"If the medal winners get more food than they can eat and losers get no food, then yes, they should share."

May I assume you are referring to their natural generosity as human beings and not some forced redistribution? :)

 
At 7/30/2012 3:53 PM, Blogger Allen said...

As an example of where this is headed, look at the gymnastics competition from last night, wherein world champion Jordan Wieber was eliminated from the all-around individual competition. Why? Because of a stupid rule under which each country can only have two such competitors, and Jordan came in third in the qualifying round. So while competitors from other countries, with lower scores than Jordan, will compete, Jordan will not. And why? Because it's "not fair" for a few countries to get most of the medals - even if they earn them?

 
At 7/30/2012 3:55 PM, Blogger Allen said...

This comment has been removed by the author.

 
At 7/30/2012 5:21 PM, Blogger Ron H. said...

Allen:

"As an example of where this is headed, look at the gymnastics competition from last night, wherein world champion Jordan Wieber was eliminated from the all-around individual competition. Why? Because of a stupid rule under which each country can only have two such competitors, and Jordan came in third in the qualifying round. So while competitors from other countries, with lower scores than Jordan, will compete, Jordan will not. And why? Because it's "not fair" for a few countries to get most of the medals - even if they earn them?"

Perhaps athletes should compete as individuals without any country affiliation.

 
At 7/30/2012 5:26 PM, Blogger Larry G said...

Perhaps athletes should compete as individuals without any country affiliation.


and athletes (and commercial supporters) would pay for the stadiums and sports venues?

No govt affiliation and no govt financial support... right?

 
At 7/30/2012 7:51 PM, Blogger Ron H. said...

"and athletes (and commercial supporters) would pay for the stadiums and sports venues?

No govt affiliation and no govt financial support... right?
"

You should know by now what my opinion is on government financial support. I am not in favor of government spending on much of anything, I certainly don't believe taxpayer money should be spent on something that provides such tremendous benefits to commercial interests.

Voluntary contributions? Fine. Commercial investment? Fine. Ticket sales? fine.

Those who stand to benefit should pay for that benefit.

I don't have a problem with athletes being affiliated with national sports organizations and representing a country, but the problem Allen hates is a result of the necessity of limiting the number of players who finally compete. Otherwise there would be Olympic qualifying rounds at all times between Olympic events.

 
At 7/30/2012 7:56 PM, Blogger Larry G said...

but the problem Allen hates


is the govt doing that?

 
At 7/31/2012 1:05 AM, Blogger Ron H. said...

"is the govt doing that?"

Doing what?

 
At 7/31/2012 5:42 AM, Blogger Larry G said...

is ANY of the medal issues due to Govt policies?

Who is actually responsible for the "inequalities"?

Isn't it a non-govt entity?

 
At 7/31/2012 11:56 AM, Blogger Ron H. said...

"is ANY of the medal issues due to Govt policies?

Who is actually responsible for the "inequalities"?

Isn't it a non-govt entity?


I'm not sure where you think you're going with this, but if it has anything to do with accusations of holding government and private entities to different standards, I can assure you we are not going there.

As you well know the IOC is a private organization, and as such can set whatever standards and impose whatever requirements it wishes.

Allen's complaint appears to be that an athlete he prefers was eliminated from competition due to his not making the cut during qualifying rounds. I doubt that there is any system that will satisfy everyone.

It's not clear what inequalities you are referring to, but inequalities in sports are almost entirely due to differences in the abilities of the athletes themselves, as it should be.

So, what is your point here?

 
At 7/31/2012 4:00 PM, Blogger Allen said...

"the problem Allen hates is a result of the necessity of limiting the number of players who finally compete."

I recognize that each Olympic athlete is a representative of their country. But we are now talking not about a team competition, but an individual competition. I don't "prefer" the specific athlete in question here; I am pointing out that her individual scores are higher than those of other nations, but she is not allowed to compete for this individual medal. Yes, the IOC must limit the number of competitors, and as a private organization, they can do so any way they like. I would "prefer" that they establish the cutoff for an individual competition on the basis of individual merit. To do otherwise is just to "spread the wealth around," as someone once famously said to a plumber....

 
At 7/31/2012 4:31 PM, Blogger Ron H. said...

Allen:

"I would "prefer" that they establish the cutoff for an individual competition on the basis of individual merit. To do otherwise is just to "spread the wealth around," as someone once famously said to a plumber...."

I too would prefer that individual merit be the sole determinant as it is in professional sports. The top performers play, everyone else doesn't. I certainly don't advocate "spreading the wealth around".

Of course in Olympic competition, participation based on merit alone could result in all the competitors in an event being from one country - hardly a crowd pleaser.

I don't know what the answer is. No matter what, not everybody will be pleased.

 
At 7/31/2012 4:39 PM, Blogger Larry G said...

part of the moral to this story is that this kind of quandary is a condition of any governance not just big G governance.

someone sets up an association.

rules are determined and inevitably oxen are gored... etc....

it's not inherent to majority-rule governance alone.

it's inherent to most all kinds of governance.

Ask Penn State.

 
At 7/31/2012 5:00 PM, Blogger Ron H. said...

"part of the moral to this story is that this kind of quandary is a condition of any governance not just big G governance."

You are absolutely correct. The BIG difference is choice. Everyone is involved voluntarily, and if unhappy can bail out. Not so with big G.

 
At 8/08/2012 1:17 PM, Blogger Wenq said...

check which nation has scored more gold medals
Olympic Medal Table 2012

 

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