Quotation of the Day: Comparing Abstractions
"Sports statistics are kept in a much more rational way than statistics about political issues. Have you ever seen statistics on what percentage of the home runs over the years have been hit by batters hitting in the .320s versus batters hitting in the .280s or the .340s? Not very likely."
"Such statistics would make no sense, because different batters are in these brackets from one year to the next. You wouldn't be comparing people, you would be comparing abstractions and mistaking those abstractions for people."
"But, in politics and in commentaries on political issues, people talk incessantly about how "the top one percent" of income earners are getting more money or how the "bottom 20 percent" are falling behind. Yet the turnover in income brackets over a decade is at least as great as the turnover in batting average brackets."
~Thomas Sowell
Update: "Comparing the top income bracket with the bottom income bracket over a period of years tells you nothing about what is happening to the actual flesh-and-blood human beings who are moving between brackets during those years. Following trends among income brackets over the years creates the illusion of following people over time. But the only way to follow people is to follow people."
~Thomas Sowell's 2007 column on Income Confusion
Update: “Only by focusing on the income brackets, instead of the actual people moving between those brackets, have the intelligentsia been able to verbally create a "problem" for which a "solution" is necessary. They have created a powerful vision of "classes" with "disparities" and "inequities" in income, caused by "barriers" created by "society." But the routine rise of millions of people out of the lowest quintile over time makes a mockery of the "barriers" assumed by many, if not most, of the intelligentsia.”
~Thomas Sowell
52 Comments:
Let me get this straight.
So if you're the Red Sox and you continually get beat by the Yankees, who have a rotating collection of players over the years who hit in the .300s, then you shouldn't mind because it's not the same players beating you every year?
Or if you live in a country run by a succession of ruthless dictators, it's not so bad because it's not the same dictator every year?
Or if you are a social conservative and there's a liberal Congress — made up of a rotating bunch of different liberal members of Congress every few years — their agenda isn't so bad because it's not the exact same bunch of liberals making laws?
This has to be the goofiest Republican talking point I've ever heard. Groups — even groups with a rotating membership — can have power for good or ill. That's obvious, right? If you think it's a good idea for huge amounts of wealth to be concentrated in the hands of a tiny percentage of people, why not just say it? Or justify it because theoretically others may have the opportunity to strive and work and make it into that elite group? But countering arguments against it by saying it's okay because it's not always the same 1% isn't very convincing.
Let me get this straight.
Swing and a miss
Gordon Young commenting on Sowell's "Income Confusion":
"Or if you live in a country run by a succession of ruthless dictators, it's not so bad because it's not the same dictator every year?"
Confusion gone amok.
Jon and Buddy, you're not really doing much to counter my argument. And by the way, I'm not even contesting the premise. Just the lame attempt to justify it.
Or if you live in a country run by a succession of ruthless dictators, it's not so bad because it's not the same dictator every year?
Or if you are a social conservative and there's a liberal Congress — made up of a rotating bunch of different liberal members of Congress every few years — their agenda isn't so bad because it's not the exact same bunch of liberals making laws?
I think those cases are completely different than comparing income quintiles over time, because in the cases above we are following a changing group of people in a fixed group, and we automatically recognize that the people in those groups are different from year to year.
When we discuss income categories over time for millions of Americans most people make the mistake of NOT comparing people over time, but comparing statistical abstractions over time, like the “top or bottom” 1/10/20%, which is Sowell’s point I think. To talk about the top or bottom 20% in two different time periods and make conclusions or propose policy solutions, often hides the fact many PEOPLE in the bottom 20% in 1970 could be in the top 20% in 1990 and then back in the bottom 20% in 2010. People are moving among the statistical income categories, and therefore comparing the top 20% in one year to the top 20% in another year decades later is comparing abstractions and not comparing people.
It’s much more difficult and expensive to track people over time, so we mostly only hear about the “top 1%” or the “bottom 20%” in one period compared to another period, which compare statistical abstractions over time and not people over time.
When we do track and compare the people over time, we find significant income mobility, see this post.
Why should you mind if it's your free choice to go play for the Sox or at least stop playing for the Yankees? The pitches are opportunity and there isn't a mythical restriction on the bats. In fact you can make your own bat if you choose. You can either spend years practicing swinging and keeping your eye on the ball or you can decide to be a spectator. Enjoy the beer and peanuts if that's the preferred view, but please stop whining about watching the game.
Hey, I understand that income mobility is a worthy goal, and that it often results in income disparity. Americans may disagree on how much of a safety net is needed, but surveys show that most Americans endorse the fundaments of the country's economic system. Income mobility, and the disparity that comes with it, have played a huge role in defining what America is today. It's part of our national character.
But Americans are famous for being positive thinkers. That's a good thing, except when they ignore reality. And the reality is that income mobility is diminishing in the United States.
Timothy Noah has a story in the New Republic (http://www.tnr.com/article/politics/magazine/100516/inequality-mobility-economy-america-recession-divergence) that concentrates primarily on income heritability that's worth reading. It touches on the declining economic mobility in the United States:
"In the United States, economic mobility is lower than it was during the late nineteenth and early twentieth centuries; it is no longer accelerating, as it was during the ’50s and ’60s; and it is either about the same or a little lower than it was in 1970. “Personally,” Brookings economist Isabel Sawhill told me in an interview last year, “I believe that it has slipped.
"Most of Western Europe today is both more equal in incomes and more economically mobile than the United States. And it isn’t just Western Europe. Countries as varied as Japan, New Zealand, Singapore, and Pakistan all have higher degrees of income mobility than we do. A nation that prides itself on its lack of class rigidity has, in short, become significantly more economically rigid than many other developed countries."
So if you think having income concentrated in an increasingly smaller number of hands, that's fine. It's just an extension of an argument that has influenced U.S. economic policy for decades. But let's not pretend that the opportunities to be in that elite economic class haven't been shrinking over the years.
(Now is when you argue that it's happening because of taxes and regulations, even though the countries beating us in income mobility often have significantly higher taxes and much more regulation.)
"This has to be the goofiest Republican talking point I've ever heard. Groups"...
Well gordon young after taking a look at your blog posting of Flint or Ground Zero? I think I see what might be a possible reason for your confusion....
Interesting site BTW...
Thanks, Juandos. I love this blog, even though I often disagree with it. I chime in every once in a while, often playing devil's advocate, just to provide you guys with a new target!
Let's face it, there are two reasons the press focuses on income brackets:
1. It's easily available data and the press is composed largely of people who can't or are too lazy to think through complexity (which of course may simply reflect their audiences)
2. It fits their template that wealth is a zero sum game and a The Rich are simply stealing it from The Poor.
Besides ignoring the mobility aspect, they are also (purposely) ignoring two other pertinent facts:
1. Income BEFORE taxes and government payments is not a very good measure of well-being. The disparities are far less when you adjust for these factors.
2. Income is usually reported at the household level. Household characteristics account for a lot of the disparity. Adjust for marriage, household size and age and a lot of the differences between "income brackets" goes away.
Oh, I see. Income disparity in the U.S. is all an illusion. It doesn't really exist. It only appears to exist because of how it's measured. Are you serious?
Why not just acknowledge income disparity as a byproduct of our economic system, and counter that that system, despite some flaws, is the best system available. It's helped create one of the most powerful countries in history. I don't understand an approach that refuses to acknowledge that there may be downsides to something that, overall, is a good thing. You're losing a lot of potential converts to your ideas with this all or nothing approach.
And, as I stated earlier, the U.S. has lower income mobility than many other countries now, and mobility in those countries is measured the same way as in the U.S. And those countries often have higher taxes and more regulation than the U.S.
"Most of Western Europe today is both more equal in incomes and more economically mobile than the United States.
Yes, Europe has it all figured out. That's why the average Frenchman's income is on par with the average Louisianan's, one of the two poorest states in the United States.
I see you've fallen for the statistical illusion.
In poorer Europe, where outcomes outcomes are more leveled, the difference between income brackets is tiny and it's not hard to hike yourself over a low bar. They move up from really really poor to not as poor. YAAAAAY. Three cheers for finally being able to afford a window in the living room but still no dishwasher and living in a house less than half the size of the average American house. What an accomplishment.
By contrast, income brackets in the united states are much much larger and thus harder to cross.
What never seems to make it into those brilliant little pieces you mention is that Americans are richer and the American middle class is richer than most of the people in the top income brackets in Europe.
And by "richer" I mean are able to consume more and better stuff. More and bigger houses, more clothes, more jewelry, more restaurant food, more technology, etc. You'd still be hard pressed to find an air conditioner in Paris and dishwashers and washing machines are luxuries.
"I chime in every once in a while, often playing devil's advocate, just to provide you guys with a new target"...
Good on you gordon young...
I found a bit of nostalgia (had forgotten about the place in fact) in your Touch Boutique Remembered posting...
I think I visited that shop maybe half a dozen time or so in the early seventies...
I had a paternal uncle and aunt that had a small dairy operstion out by Owosso (maybe 40 miles away) that I would occasionally visit and help out on...
Yeah, Flint was a very different place back then...
"Yeah, Flint was a very different place back then..."
Hey, something we can all agree on!
And who knows what this comment section would be like if we all visited the Touch Boutique before writing. Ha ha.
I don't understand an approach that refuses to acknowledge that there may be downsides to something that, overall, is a good thing.
The inequality you view as a downside, I view is an upside. I view it that way as an immigrant who went from the bottom of the bottom quintile to the top of the top quintile. The ability to earn as much as I can is powerful incentive to produce.
But, I am no match for Richard Epstein in explaining the incredible benefits of income inequality.
This comment has been removed by the author.
Income inequality rises during high growth periods and diminishes during slow growth/contraction periods. If greater equality is the goal, the current administration is definitely pursuing the proper economic policies to bring it about.
Hey Gordon-
Let me apologize. I was trying to make a joke, sticking with the baseball analogy, but re-reading it I did come off as an asshole. I am sorry.
Sowell is not trying to pretend economic inequality doesn't exist. It clearly does. What he is objecting to is the phrase that the rich are getting richer and the rest of us are left in the dark. That is clearly not true. The whole mobility thing disproves that. Americans move between the classes all the time. Just as baseball players move between the different leagues all the time. I myself jumped from lower-middle class to middle-middle class over the past year and a half.
To go back to the baseball thing, what Sowell is arguing is not that it's OK that the Yankees are winning many championships because the team keeps changing. What he is saying is, because the composition of the Yankees change from year to year, one cannot say that only a handful of players are getting the benefits. Nope. not true. Some players left the Yankees after they won their ring(s). Some joined the Yankees after the 90's and have no rings. The composition of classes change all the time and to measure brackets and then claim there are problem with individuals is false.
Capitalism is not a perfect system, but it is by far the greatest known method for reducing poverty. Why, in America alone the poorest 5% of Americans live better than 80% of the world. hell, I am middle class and I live better than 99% of the world. There is no system of economic justice better than that of capitalism. I am a humanitarian. I am a conservationist. I am an environmentalist. That is why I am a capitalist.
The TL;DR version of my above post is you need to compare apples to apples if you want a valid conclusion.
Gordon:
"Jon and Buddy, you're not really doing much to counter my argument. And by the way, I'm not even contesting the premise. Just the lame attempt to justify it."
Which part of that drivel was your argument?
- "So if you're the Red Sox..."
The point is that you aren't necessarily stuck being a Red Sox. If you play well you too could become a Yankee, while poorly playing Yankees could become Red sox. A widening difference between top scoring Yankees and bottom scoring Red Sox just doesn't seem like a very important issue.
- "Or if you live in a country..."
If you work hard at it you have a chance of becoming that dictator some day. Are you complaining that most people won't become dictator, or that dictators exiat?
- "Or if you're a social conservative..."
That one just doesn't make any sense.
- "If you think it's a good idea for huge amounts of wealth to be concentrated in the hands of a tiny percentage of people, why not just say it?"
It's not clear whether you mean wealth of income, but you should read the Sowell pieces to clear up your confusion on this issue.
Gordon Young says: "So if you're the Red Sox and you continually get beat by the Yankees, who have a rotating collection of players over the years who hit in the .300s, then you shouldn't mind because it's not the same players beating you every year?"...etc..
Your comment reflects an "us" vs "them" mentality.
We're all on the same team.
If you're a poor hitter, you should be happy a great hitter is taking up the slack.
Maybe another way of looking at it is like this:
If you were to judge employment only based on the unemployment rate, one would conclude that almost no jobs have been added over the past year. However, that is not true; some 3 million+ jobs have been added.
So, it's the same thing with income. When you focus on brackets, rather than individuals, you reach the wrong conclusions.
re: "moving between brackets"
vs
how many are moving and are the brackets shifting and changing so that more folks are in the less well off brackets than before ?
Sowell attempts to purposely and wrongly depict the real downward shifting of economic fortunes to be instead a "shifting between" with a sports flavor.
and he talks about abstractions as if virtually everything that relates to the economy, the deficit,the debt, etc is not an abstraction?
in other words the man is blathering to feel his gums flap - red meat gum flapping for some - for sure - but most assuredly gum flapping with about as much import as a long-haired fool standing on a box in a park proclaiming "the world will end"!
Gordon Young says: "the U.S. has lower income mobility than many other countries..."
You're assuming income is measured the same way between countries.
In the E.U.-27, for example, a larger proportion of income reflects government compared to the U.S..
Also, in the E.U.-27, which has a GDP equal to the U.S., but has 200 million more people (or per capita income is much lower), people live in much smaller houses, drive small cars or ride bicycles, and consume much fewer private goods.
In the U.S., an unskilled immigrant, who couldn't find a $2 an hour job in his home country, can make over $50,000 a year with overtime moving to the U.S. and working, e.g. in energy, construction, or transportation.
In 2007, 20% of U.S. households earned at least $100,000 a year. Many of those workers are in industries that didn't exist 30 years ago.
It would be nice if Thomas Sowell was making a factual argument verses an intellectual argument. This class warfare issue is nothing but fodder for the politically inclined and one's "informed opinion" is more ideological than logical or fact based. It only takes a google click away to "Income inequality in the United States" to begin to understand the issue. Seems to me many people have been rotating down from the third quintile to the second quintile. Like being demoted to the minor league
Yet Sowell doesn't know enough on statistics except to find some tidbit that lets him say "move along, there's no problem here" while misinterpreting it completely.
Perhaps he should just let those number-crunchers do their work. They're more correct about those "abstractions" than Sowell's ever going to give credit to being correct.
Really, all this discussion around income is a red herring. One's income does not accurately measure standard of living nor economic equality.
For example, let's assume (for the sake of simplicity) that we live in a world where everything was free. Then one person could control all the income in the world, but there would be no economic inequality.
But we don't live in such a wondrous world. We live in a world where things cost money.
Really, the best way to determine economic inequality is not income but rather consumption. How does the lifestyles of the rich and famous differ from the lifestyles of the common man? Well, in that respect, the US is very equal. The Consumption Gini Coefficient for the US is about .33 (technical note: the Gini Coefficient is a measurement of how equal a distribution is. The closer to 1, the less equal).
Really, when you think of it, what do the super rich have that the common man doesn't in the United States? His toys may be bigger, but not really different. We all have cars. We all have homes. We all have DVD players (which just 10 years ago were a toy only for the rich!).
Regardless, all of this misses the key point here. You cannot draw the conclusion that "the Middle Class is stagnant" from this data. That is an illogical conclusion.
Brackets are fluid. To make static judgements based on them is a Stats 101 mistake.
Here is a chart that groups income by age. The data is as expected, the older you get, the more value you have to offer and the more income you earn.
http://tinyurl.com/8fh946u
The somewhat unexpected group that had income growth was 65 and over. Every other age group was in decline, equally.
http://tinyurl.com/9bczxlz
"Really, all this discussion around income is a red herring. One's income does not accurately measure standard of living nor economic equality."
*like*
What's with all this "equality" malarkey? Everyone is supposed to make the same income regardless of their economic contribution? The godless Commies couldn't even set that up.
Well, the problem is income is often used as a proxy for standard of living. However, it's not a fantastic proxy. As goods become cheaper (which is the natural direction in a market-based economy), they require less income to purchase. Therefore, the standards of living can raise without increases in income.
Income is used as a proxy but it is a bad choice.
Match the above income distribution by age chart with the Census age demographics and it is a clear indicator of any income inequality. Our older age group is increasing in size and of course the older age group earns more. Birth rates are flat so don't expect an improvement anytime soon.
Well, Jon, people in the middle class in the United States don't have private jets. Who can live without that?
Why is income inequality important at all? There are all sorts of inequality at least as important as income inequality, so why focus on this particular inequality, but accept the others?
The focusing on income inequality is just the cynical politics of jealousy and greed, the greed for other people's stuff and life. I was taught to work for the things I want and to mind my own business.
On the irrelevance Of income inequality at all.
"Why are "progressives" madly obsessed with inequality of incomes but not with inequality of work effort, risk taking, prudence, courage, honesty, integrity, ambition and dedication? Monetary incomes, after all, are largely a result of the application of these qualities: Those who apply more of these qualities to their lives and careers generally earn higher incomes than are earned by those who apply fewer of these qualities to their lives and careers."
Additionally, for those who continue to think income inequality is some sort of injustice remember the following. Those in the top 20% of income earners work 700% more, i.e., 7 times, hours than those in the bottom 20% of income earners. Those in the top 20% earn 15 times more than those in the bottom 20%. Meaning that once the number of hours worked are accounted for, those in the top 20% make only twice as much as those in the bottom 20% (by comparing earnings per hour worked, rather than earnings per year). Earning money is really just as simple as showing up for work day in and day out.
In an ideal world, 100% of the population would belong to the middle bracket, that way everyone would be pretty much equal. :-)
John said:
"We all have cars. We all have homes. We all have DVD players (which just 10 years ago were a toy only for the rich!)."If this was true there would be very little need for voter ID cards. You destroy any semblance of making a point of continued discussion regarding some little know factor as "Consumption Gini Coefficient" This sounds like something that needs to be tested. My first impression CGI does not pass the sniff test.
John Murphy:
Not a mistake at all to consider the stagnation as something that is happening. The mistake is to use the static/dynamic handwaving to say that the problem "doesn't exist".
While people may move from bracket to bracket, the behavior of the members of each bracket and the treatment of members of each bracket do not change and thus allows measurement.
What's really at stake is the influence that each proverbial bracket has on the population and the ability for each bracket to affect other brackets. The amount of money is not the problem - the influence behind it is the problem.
Strip the influence from the money and the problem disappears. However, it must apply to the private sector as much as some would want to disarm the public sector (and leave the United States powerless).
Ken:
While it is one thing to think that such qualities would be more likely to result in reward, the last decade has proven otherwise(courtesy of the final tiers of work falling to offshoring). If anything, the world has been used largely against the US citizen to subjugate them and strip them of the security commensurate with US citizenship.
In addition, such qualities are not to be found solely by forming a business. Trying to make everyone some sort of entrepreneur isn't helping - as people do quite well when they don't have multiple levels of middlemen between them and an employer.
The private sector needs to stop trying to make people suffer (or passing it on to non-business entities) and start making a long-term effort to re-integrate the unemployed in ways favorable to the unemployed(as opposed to tapping into their desperation).
re: " static/dynamic handwaving to say that the problem "doesn't exist".
there is no question that dramatic and troublesome changes are taking place for many folks who are not poor and not rich.
Their 401(k)s have take huge hits then many had their homes drop in value to a point lower than what they owed. This also killed their option some expected to use in sending their kids to college.
Finally, they lose their jobs along with their health care....and cannot find new work... chronically unemployed or finding work at 1/4 their previous salary.
these are not "abstractions".
the "opportunity" economy is not fun place and is way the hell more uncomfortable than the previous situation where many folks had a job, health care, a home, and enough money to live well, get some extras and send their kids off the college.
that "abstraction" has taken a hit.
OMG Several sane comments in a row. This is driving the CGI towards zero where CGI = Crap Gross Indicator
My first impression CGI does not pass the sniff test.
Of course it doesn't. Anything that flies in the face of your thesis that a measurably poorer and more bankrupt, but seemingly more equal Europe has it all figured out wouldn't pass the smell test, would it?
Aaaah, how much better it is to have a never changing hereditary elite who are literally the same people generation after generation while les Miserable are kept in their hovels where they belong. The class differences in most of Europe are astonishing. It's too bad we don't have that here, eh? But, alas, the mizzies here have washing machines, dishwashers, flatscreens, boats, pools, multiple cars, and vacation homes. They're able to afford more than the average Count and often even a Marquis in Europe. Quelle dommage!
Salaries haven't changed much for the middle, but more compensation takes the form of perks and commissions, which is not counted in the statistic. Statistics are a great way to lie - even unintentionally.
But, let's ignore this fact for a moment. Suppose you have no expectation of your money income rising in the future. If five years from now you will, with the same income, be able to allow yourself to take a private jet to your destinations instead of battling the TSA to take pack yourself in like a sardine with the rest of the public a rigidly scheduled flight on Chien Gris airline, would you consider yourself wealthier? That's essentially JM's point. We measure welfare by the amount we can consume, not the amount of filthy, smelly bills we have stashed away or receive from someone else.
Don Boudreaux explains:
http://www.youtube.com/watch?v=s6FmhXQ32Wo
If poverty is defined as the lowest quintile of family incomes, then there will ALWAYS be 20% of all families in poverty.
Work on the Consumption Gini Coefficient
More academic work on the difference between income inequality and consumption inequality.
seth,
it is one thing to think that such qualities would be more likely to result in reward
You missed the point entirely. From this statement it seems the only reason you think anything should be done is for monetary reward. You should only be a loving father and husband to get money or you think that you should get money for those things. That wasn't the point at all.
The point was that there are many things much more important than money, particularly in a country where real poverty doesn't exist, only relative poverty. The point is that focusing on income inequality instead of asking about inequality in many other much more meaningful areas, you reveal yourself to be shallow, envious, and materialistic.
You missed the point entirely. From this statement it seems the only reason you think anything should be done is for monetary reward. You should only be a loving father and husband to get money or you think that you should get money for those things. That wasn't the point at all.
I was strictly speaking within the context of a career. In addition, it does not help that work is being valued as "something one does every so often" versus "something one does over the course of decades" via things such as temporary labor, consultancy work, offshoring, and PPACA. In the former, looking at the long term is discouraged; in the latter, it is a necessity that builds character.
Either one can perpetually live in the moment or be able to provide for a lifetime. Unlike many in my generation, I would rather choose the latter.
Finally, I'm quite aware of the whole "relative poverty" issue. I just dont use it as a reason to subjugate US citizens(or to justify taking actions detrimental to them) whether by opportunity or by money.
You missed the point entirely. From this statement it seems the only reason you think anything should be done is for monetary reward. You should only be a loving father and husband to get money or you think that you should get money for those things. That wasn't the point at all.
My point was made strictly in the context of a career. Things like PPACA, offshoring, temporary work, and various forms of work abstraction(consultancy, staffing agency, etc.) have devalued work. These things have taken work from the value-building "something you do over a course of decades" to a value destroying "something you do only every so often". The former is my preference, which suggests that work is done for not-so-shallow purposes while the latter suggests a shallow series of one-night stands.
Where that idea intersects with the topic is that monetary inequality is pointless as a direct indicator, it will indicate the quality of opportunity.
In addition, I am aware of the idea of relative vs absolute poverty. However, it is used by many to justify the subjgation of or the retaliation against US citizens.
"The former is my preference, which suggests that work is done for not-so-shallow purposes while the latter suggests a shallow series of one-night stands."
"My Preference" is exactly right. Not everyone - in fact very few people it seems - share your preference.
As incomprehensible as it is to you, apparently many people prefer a series of one night stands to a long term commitment.
Why do you believe your preference should be imposed on them?
"Although strikeouts are associated with dominance on the part of the pitcher, it is recognized that the style of swing that generates a home run also leaves batters somewhat susceptible to striking out. Some of the greatest home run hitters of all time – such as Reggie Jackson and Sammy Sosa – were notorious for striking out."
Wikipedia
It turns out that making such comparisons often makes a lot of sense.
What happens to an individual isn't the issue when you are studying trends. Some people may move in and out of the highest and lowest brackets, true enough, but if the brackets are getting farther apart you have identified a trend.
We monitor and predict when airplane and truck engines will fail by analyzing the amount of metal particles in the oil. Some individual engines may fail prematurely, and some may be in good shape when they are overhauled prematurely based on the trending, but overall the trend analysis is still valid.
"We monitor and predict when airplane and truck engines will fail by analyzing the amount of metal particles in the oil. Some individual engines may fail prematurely, and some may be in good shape when they are overhauled prematurely based on the trending, but overall the trend analysis is still valid."
So you would be alarmed if the spread of engine failures between shortest life and longest life increased?
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