Income Inequality (22): Social Mobility in Anglo-Saxon Economies, Ctd.

After completing my older post on the subject – in which I argued that Anglo-Saxon economies don’t do a very good job promoting social mobility despite the focus on individual responsibility and policies that (should) reward merit (e.g. relatively low tax rates) – I found this graph which I thought would illustrate my point.

Although the US and other Anglo-Saxon countries aren’t in the graph, the UK is. And the effect of parental education on child earnings in the UK is particularly large. The children of the well-off and well-educated earn more and learn more than their less fortunate peers in all countries in the world, and that’s hardly surprising given the importance of a head start, both financially and intellectually. What is surprising is that this is less the case in countries which pride themselves on their systems that offer people incentives to do well (low taxes, minimal safety nets etc.).

So one wonders which fact-free parallel universe David Cameron, the new UK Prime Minister, inhabits:

The differences in child outcomes between a child born in poverty and a child born in wealth are no longer statistically significant when both have been raised by “confident and able” parents… What matters most to a child’s life chances is not the wealth of their upbringing but the warmth of their parenting. (source, my emphasis)

Extolling the virtues of good parenting can never hurt, except if you have a low boredom threshold because it’s so goddamn obvious. But making it sound like parents’ wealth or education are “insignificant” is truly grotesque and an insult to those poor parents who have children that aren’t doing very well. And even for those living in the alternative reality where only bad parents keep children back, the Conservative leader’s position in fact, and unwittingly, should lead to left-wing policies, as Chris Dillow points out:

Because of bad parenting – which begins in the womb – some people do badly in school and therefore in later life; they are less likely to be in work, and earn less even if they are. However, we can’t choose our parents; they are a matter of luck. It’s quite reasonable to compensate people for bad luck, so there’s a case for redistributing income to the relatively poor, as this is a roundabout way of compensating them for the bad luck of having a bad upbringing.

High levels of social mobility can compensate for high levels of income inequality: if people can be socially mobile, and if their earnings and education levels don’t depend on who their parents are but on their own efforts and talents, one can plausibly claim that the existing inequalities are caused by some people’s lack of effort and merit. However, the UK and the US combine two evils: low mobility and high inequality, making it seem that whatever effort you invest in your life, you’ll never get ahead of those rich lazy dumb asses. So why would you even try? Low mobility solidifies high inequality.

Just to show that the U.S. isn’t better than the U.K.:

Parental income is a better predictor of a child’s future in America than in much of Europe, implying that social mobility is less powerful. Different groups of Americans have different levels of opportunity. Those born to the middle class have about an equal chance of moving up or down the income ladder, according to the Economic Mobility Project. But those born to black middle-class families are much more likely than their white counterparts to fall in rank. The children of the rich and poor, meanwhile, are less mobile than the middle class’s. More than 40% of those Americans born in the bottom quintile remain stuck there as adults. (source)

Income Inequality (20): Social Mobility in Anglo-Saxon Economies

I know that talking about national or international economic models should be avoided because it’s highly simplistic, but I’ll do it anyway because I want to show that people who do sincerely talk about such models make some assumptions about them that are, in my view, incorrect. The Anglo-Saxon economic model, when compared to the mainland European model, is believed to focus more on individual responsibility than on social support. It imposes lower taxes and delivers a less developed social safety net. It’s more “liberal” (in the European sense of the word, meaning less social) and free market oriented. (Anglo-Saxon means English-speaking countries such as the United Kingdom, the United States etc. but there are large differences between the UK and the US, the UK being less “Anglo-Saxon” than the US; and some mainland countries – like some Eastern European countries – are more “Anglo-Saxon” than they are “mainland”. This goes to show that we’re being simplistic; see also here).

The mainland model is often believed to be better at poverty reduction, job security, social services, and income equality. The Anglo-Saxon model on the other hand is said to be more flexible, less state dependent and more competitive (because of lower taxes and less labor regulation) and suffers less unemployment (because of the less generous social safety net; see also here).

For the same reasons, the Anglo-Saxon model is also believed to be less equal and more open to social mobility – social mobility being defined as the difference between the socioeconomic status of parents and the status their children will attain as adults. When the focus is on individual responsibility and when people can keep a larger share of their income after taxes, they are incited to do well, to work hard, to develop their talents, and to innovate. This not only creates a more competitive economy, but also one in which people can be socially mobile and rise in status and wealth. Countries that impose high taxes and offer generous safety nets don’t give the same incentives.

However, we see that the UK and the US aren’t characterized by relatively high levels of social mobility:

A father’s income determines his son’s to a greater extent in Britain than in any other wealthy nation, with half of a high earner’s “economic advantage” being transmitted to their children, a study by the Organisation for Economic Co-operation and Development has found. … In Britain … background determines a person’s success to a far higher degree than in almost any other rich country. “Education is not as important for social mobility in Britain as for other countries. Class, to be honest, is the most likely explanation,” said Romain Duval, head of division in the Paris-based OECD’s economics department. (source)

Something similar is the case for the US.

It appears that the United States has less intergenerational social mobility than many other industrialized countries. (source)

It’s true that the UK and the US (especially the US) are highly inegalitarian, and increasingly so, but high levels of income inequality do not necessarily go hand in hand with high levels of social mobility. In fact,

social mobility between generations tends to be lower in more unequal societies. (source)

So if you care about social mobility – and I think you should because high levels of social mobility indicate equality of opportunity, something no one objects to – then you should care about reducing inequality rather than promoting it through “Anglo-Saxon” tax and welfare systems (to the extent that there is something like it in the real world).

Measuring Human Rights (6): Don’t Make Governments Do It

In the case of dictatorial governments or other governments that are widely implicated in the violation of the rights of their citizens, it’s obvious that the task of measuring respect for human rights should be – where possible – carried out by independent non-governmental organizations, possibly even international or foreign ones (if local ones are not allowed to operate). Counting on the criminal to report on his crimes isn’t a good idea. Of course, sometimes there’s no other way. It’s often impossible to estimate census data, for example, or data on mortality, healthcare providers etc. without using official government information.

All this is rather trivial. The more interesting point, I hope, is that the same is true, to some extent, of governments that generally have a positive attitude towards human rights. Obviously, the human rights performance of these governments also has to be measured, because there are rights violations everywhere, and a positive attitude doesn’t guarantee positive results. However, even in such cases, it’s not always wise to trust governments with the task of measuring their own performance in the field of human rights. An example from a paper by Marilyn Strathern (source, gated):

In 1993, new regulations [required] local authorities in the UK … to publish indicators of output, no fewer than 152 of them, covering a variety of issues of local concern. The idea was … to make councils’ performance transparent and thus give them an incentive to improve their services. As a result, however,… even though elderly people might want a deep freeze and microwave rather than food delivered by home helps, the number of home helps [was] the indicator for helping the elderly with their meals and an authority could only improve its recognised performance of help by providing the elderly with the very service they wanted less of, namely, more home helps.

Even benevolent governments can make crucial mistakes like these. This example isn’t even a measurement error; it’s measuring the wrong thing. And the mistake wasn’t caused by the government’s will to manipulate, but by a genuine misunderstanding of what the measurement should be all about.

I think the general point I’m trying to make is that human rights measurement should take place in a free market of competing measurements – and shouldn’t be a (government) monopoly. Measurement errors are more likely to be identified if there is a possibility to compare competing measurements of the same thing.

The Causes of Poverty (24): Population Growth and Income Growth: Incompatible?

Some blame overpopulation for many of the world’s problems such as poverty, famine and war (which are obviously rights violations). There are supposed to be too many people for peaceful coexistence and sustainable food production. Those who worry about overpopulation are often called (neo-)Malthusians, and either predict a sharp fall in population levels because of the problems caused by overpopulation (a “Malthusian catastrophe”), or/and propose population control as a measure to solve these problems.

For pretty much all of human history, population growth constrained growth in real standards of living. That’s the “Malthusian Trap”: as standards of living improved, population increased, which put a strain on resources and drove down standards of living, which in turn drove down population growth, rinse & repeat. The industrial revolution broke this trap, although it’s worth pointing out the fairly obvious fact that this is not true for the entire world. Conor Clarke (source)

… over a roughly 3000 year period, during which there was obviously quite a lot of technological progress — iron plows, horse collars, mastering the cultivation of rice, the importation of potatoes into Europe, etc. — living standards basically went nowhere. Why? Because population growth always ate up the gains, pushing living standards back to roughly subsistence.

… technological change was slow — so slow that by 1600 or so, when England had finally reclaimed its population losses from the Black Death, it found real wages back to more or less 1300 levels again.

And here’s the sense in which Malthus was right: he had a fundamentally valid model of the pre-Industrial Revolution economy, which was one in which technological progress translated into more people, not higher living standards. This homeostasis only broke down when very rapid technological change finally outstripped population pressure for an extended period. Paul Krugman (source)

It’s clear that population growth can go hand in hand with income growth, and that it’s not correct to state that population growth necessarily leads to more poverty, which in turn leads to a reversal of population growth. But these compatible evolutions of population and income seem to require technological advances.

Note: my criticism of Malthusianism and other types of overpopulation hysteria (see here for some examples) is targeted only at deterministic theories which believe in overpopulation as the main if not only cause for the world’s problems, and which see overpopulation as a global problem. I accept that in certain specific areas of the world, population pressures can make things worse. But I don’t agree that these pressures are the sole or even the main cause of problems such as poverty, famine, war etc. And neither do I agree that population control is the main remedy for these problems. For example, we all know that water shortages – even very local ones – aren’t caused by overpopulation and won’t be solved by population control. More intelligent irrigation methods are the answer. And when we leave the local level and take the global point of view, the population problem is even less salient. On a world scale, income has grown systematically faster than the world’s population during the last centuries. Population pressures do not lead us to an inevitable “trap” as Malthus and his followers claim.

Measuring Democracy (2): Polity IV, and Some of Its Problems

Polity IV is, like Freedom House and others, a project ranking countries according to their political regime type. It’s extensively used in comparative and causal analysis that require a distinction between democracies and non-democracies, partly because its time series start from the year 1800.

Its

perspective envisions a spectrum of governing authority that spans from fully institutionalized autocracies through mixed, or incoherent, authority regimes (termed “anocracies”) to fully institutionalized democracies. The “Polity Score” captures this regime authority spectrum on a 21-point scale ranging from -10 (hereditary monarchy) to +10 (consolidated democracy). (source)

The Polity Score is the aggregate of 6 component measures that aim to record what are called key qualities of democracies: executive recruitment, constraints on executive authority, and political competition.

However, it seems that Polity IV doesn’t adequately measure what it claims to measure. Its concept of democracy is quite thin, resulting in a fair number of “perfect democracies”, whereas we all know that there is no such thing in the world we live in. And other countries, which are obviously dictatorial, are classified as fairly democratic. A quote from this paper (which is an attempt to improve Polity IV):

Polity’s 21-point democracy/autocracy scale, illustrated by the dashed line [in the figure below], tracks the major changes in British political history, but only roughly. The Reform Bill of 1832 revised a complicated system of determining the franchise by increasing the number of voters from 500,000 to 813,000. Despite the modesty of this expansion, changes in the Polity Score for Britain give a sense of greatly expanded democracy, moving from a -2 (democracy=4, autocracy=6) to a +3 (democracy=6, autocracy=3).

However, … only six percent of the adult population voted even after the reform.

While the male franchise had broadened considerably by 1884, suffrage still excluded agricultural workers and servants. Actual voter turnout reached 12% of the population only in the election of 1885 before falling, and didn’t return to that level again until 1918. All the while, Polity scores for executive recruitment and competition increased while institutionalized autocracy decreased. In 1880 the Polity democracy score stood at 7 (autocracy=0). By 1901 the democracy score rose to 8 and by 1922 Polity suggests that Britain was a “perfect 10” democracy, even though full male suffrage was not achieved until 1918 and full female suffrage until 1928.

Britain has received the highest democracy rating ever since, even though the voting rate has never exceeded 60% of the adult population.

The high scores that Britain receives from 1880 on are misleading and, with respect to changes in participation, mistimed. As Figure 1 illustrates, participation doubled during a period Polity records as unchanged and doubled again during a modest 2 point move in Polity.

The racial exclusion in South Africa also demonstrates the danger of conceiving democracy without taking account of the breadth of citizen participation. According to Polity, South Africa was a relatively stable democracy from 1910 until 1989. It was coded a 7 out of 10 on democracy and a 3 of 10 on autocracy, bringing its score to +4. A positive score is surprising because it ignores the exclusion of the 90 percent of the population that did not – most could not – vote.

Switzerland, our final example, has scored a perfect 10 out of 10 on democracy in the Polity dataset since 1848, even though women – roughly half the population – were not granted the right to vote until 1971, 123 years later. Furthermore, electoral turnout has hovered around 30% recently, despite virtually universal suffrage. One reason is that Switzerland’s collective executive is an organizational form that diminishes voter motivation by minimizing the significance of election outcomes. Surely such a system should be regarded as less democratic than one in which most citizens participate in elections that actually make a difference in the leadership and policies of the nation.

What is Democracy? (37): One Man, One Vote

Or better, one person, one vote. It’s not until relatively recently that women and minorities have been given the vote, even in the most advanced democracies in the world.

In most modern democracies, most adults have a vote. Few large groups (felons, children and immigrants excepted) are excluded from voting, and no one has more votes than anyone else. (In the early days of many democracies, some people had a larger number of votes; this was called plural voting).

However, it’s not because all people have one vote, that all votes have the same weight and that all people have an equal weight in the aggregate outcome of the vote. They only have in democracies that use proportional representation. PR results in a political spectrum in parliament that roughly coincides with the spectrum of the voters. No part of the electorate is over- or under-represented.

Democracies which do not use PR often use district systems (e.g. the U.S. and the U.K.). This is also called the “first-past-the-post” system – whoever has most votes in a district (not necessarily the majority of votes) gets the seat in parliament reserved for this district and becomes the only representative for the district (“winner takes all”). In some cases, this electoral system gives power to a relative majority and therefore, not necessarily an absolute majority. A party that has a few more votes than all other parties in a majority of districts, will have a majority of seats in parliament, but perhaps a minority of the votes. As this example indicates, a district system can result in the rule of a minority. An important minority or maybe, even a majority may not be represented at all. Political equality and majority rule, the basic values of a democracy, are affected. There is no longer a perfect match between the views of the people and the views present in parliament.

In such a system, the one-man-one-vote principle can be further harmed If the districts are not equal in proportion in terms of population. If both a small group of people and a large group of people have one representative, then we can hardly claim to have political equality, regardless of the possible problems created by the winner-takes-all rule. In some countries, rich minorities have often been given small districts, which favored them politically and offered them a very large and disproportional share of the seats in parliament. This is called gerrymandering.

For these and other reasons, the type of democracy instituted in the U.S. deviates, in part, from the principle of one-man-one-vote (a reason for some to call it a republic rather than a democracy, although the difference between these two concepts is spurious, see here). Whereas each member of the House of Representatives represents more or less the same number of voters (even though the system is based on voting districts), the Senate seats are not allocated according to population. Each state, large and small, gets two seats. Wyoming, with barely half a million citizens, has exactly the same political influence in the Senate as California (37m citizens). If you view U.S. states as large districts, you could say that the U.S. Senate has institutionalized the bias that gerrymandering can create in district systems.

This wouldn’t be so bad if the U.S. Senate, the Second Chamber in the U.S. parliament, didn’t have so much political power. Its powers, defined in the Constitution, include

  • consenting to treaties as a precondition to their ratification
  • approval of both chambers is necessary for the passage of legislation.

Even a minority of Senators can block legislation. The filibuster is a tactic used to defeat bills and motions by prolonging debate indefinitely. As it takes 60 votes out of a total of 100 Senators to stop a filibuster, a minority can block everything if it wants. So again, a further restriction of the democratic principle of one-man-one-vote. The Economist has calculated that if the least populous states ganged together, senators representing 11% of the population could thwart the will of the remaining 89%. Speaking of tyranny of the majority … The filibuster has often been used for very conservative and ill-intended purposes such as the preservation of Jim Crow laws and wasteful farm subsidies.

It can of course be used for more positive purposes as well. It can slow down over-anxious House representatives and hence improve the quality of legislation. The division of the legislative power into two parts, an Upper House and a Lower House or a House of Representatives and a Senate, is typical of a democracy and makes it possible to correct mistakes made in one House. One House can slow down or stop another House when some decisions are too risky or are taken without the necessary reflection or discussions. This system

doubles the security to the people by requiring the concurrence of two distinct bodies in schemes of usurpation or perfidy, where the ambition or corruption of one would otherwise be sufficient. James Madison in the Federalist Papers.

If we expect two houses or chambers to control and correct each other, then the participants of both must be selected in different ways. But it seems that this can still be done with a higher degree of respect for the principle of one-man-one-vote.

The reasoning behind this deviation from the one-man-one-vote system in the U.S. was to ensure equal representation of each state in the Senate, so that populous states can’t take measures that harm the fundamental interests of small states and therefore can’t violate the federalist philosophy of the U.S. It was supposed to be a counterweight against the “people’s house” (the House of Representatives) that would be sensitive to public opinion. Trust in public opinion has never been very high (which I argue is a self-fulfilling prophecy). But rather than protect the U.S. from the tyranny of public opinion, one has delivered it to the tyranny of the minority. Hardly democratic at all.