The Ambrosini Critique

(h/t the Internets)

Politicians screaming about inequality often provoke analysis like this. The point being the rich have gotten much richer in the last couple of decades but the poor have had to scrape by with on a few points of real income growth. I have a couple complaints about this sort of analysis.

First, which theory of justice requires there to be equal sharing of economic growth. I get strict egalitarians want to equalize incomes, but this doesn’t require them to go as far as lamenting about variances in growth rates. All they should have to do to get their point across is to take a look at the non-zero gini coefficient and be done with it. Why bother looking at differences in growth rates?

Second, once you accept some level of income inequality is inevitable, tracking income changes by income percentiles makes no sense. People aren’t stuck in income ranks. Lots of people start their careers in a lower income percentile and then move their way up through their careers. So really what one is doing when they track changes in percentiles is tracking a particular demographic. If that’s what you’re really doing, then why not do it explicitly?

This first diagram shows median income by age group since 1967¹. Clearly, income growth has been much less dramatic in the youngest and oldest age groups. It seems easy to come up with perfectly legitimate reasons why this would be so. To me, this diagram doesn’t scream for the need for redistribution, but maybe you see differently.

BTW, you can track my dad in this diagram. He starts out in 1967 on the 15-24 line, then he jumps up to the 25-35 line in 1978, etc. Following my dad’s trajectory might be easier with this second diagram.

Its easy to see from this diagram that most of the income growth has happened in the middle ages. The inverted U-shaped pattern of lifetime income has become more dramatic in recent decades. Again, I don’t see a problem here.

UPDATED: fixed some typos.

1. Source. [↩]

I would sacrifice 5 people (myself, my sister, and my cousins) today to save/ensure my grandfather was able to conceive our parents.

— Mason on a post on discount rates at Overcoming Bias.

This argument is just about as convincing as the one gun control opponents use when they say “guns do not kill people, people kill people.” What we are supposed to conclude from this is that the appropriate way to deal with guns is to regulate the behavior of people who own them–and not to control the circulation of guns directly.

— Dani Rodrik

Regulation, of any kind, is NOT the gun-totters point.

Inspired by my earlier post and this guy, I’ve become more systematic in my rankings of the presidential candidates. I’ve weighted the importance to me of 14 topics and then scored each of the candidates in each topic. Doing the sums I should have a more or less objective (aka issues driven) ranking. The results:

1. Mitt Romney
2. John McCain
3. Barack Obama
4. Rudy Giuliani
5. Mike Huckabee
6. John Edwards
7. Hillary Clinton

Funny story. I’m still going to vote for Obama in the primary.

Alex is the quiet half of the MR blog, but he usually makes up for his low quantity with high quality. His most recent post, The Law of Unintended Consequences, is in response to this post at the Freakonomics. Alex comes up with this definition for the Law:

The law of unintended consequences is what happens when a simple system tries to regulate a complex system. The political system is simple, it operates with limited information (rational ignorance), short time horizons, low feedback, and poor and misaligned incentives. Society in contrast is a complex, evolving, high-feedback, incentive-driven system. When a simple system tries to regulate a complex system you often get unintended consequences.

The Law should make us hesitate to invoke the so-called Precautionary Principle that I wrote about a couple years ago. The Principle would have us do “something” about climate change because even though there’s great uncertainty about the science of climate change, there’s a substantial chance of great harm if we do nothing. The Law, though, pushes back on the idea of doing “something” by suggesting that “something” will have unintended side effects.

The NYT piece also got this reaction from Andrew Gelman and someone over at his place has this great take on the Law:

I usually think of the law as a normative one: if you propose a policy to do X and use only the direct consequences of X to motivate your decision, you will have overestimated the effect of X by ignoring indirect effects. The reason the expected effect is always counter to the direct effect is that the economic incentives must work in the other direction — otherwise you wouldn’t have needed to impose X in the first place. Thus, the ingenuity of people attempting to follow the economic incentives underlying the problem will always frustrate, to some extent, the direct effect of what you’re trying to do.

The Law suggests anything we do can have significant negative side effects. For whatever reason, incentives are aligned in the economy towards emitting lots of green house gases. Unless we address all of those incentives directly, Andrew’s commenter suggests we expose ourselves to the potential for negative unintended side effects.

How to address incentives directly? Balance policy towards pricing green house gas emissions (e.g. CO2 tax) and away from regulations (e.g. CAFE standards).

Ok, two. Where the hell do social democrats get their marching orders? ¹ And what the hell does a shorter work week have to do with the environment?

1. A hint, I think, is provided by this take-down of Paul Krugman [pdf] [↩]

I saw Atonement this afternoon. It was way too long, but I liked it. A romance got in the way of an author’s coming of age story in which she discovers the power, both good and evil, of story telling. Its set during World War II and the small clips of BBC propaganda were a nice touch.

If you see it, count how many times you find yourself wishing the girl would just break down and tell a damn story already.

…

Lately I’ve been working on a little cognitive dissonance. On the one hand, science is a form of story telling. This is how I teach my classes. I figure if I can get a really good story in about “how things work” I can *really* teach my students economics. Otherwise, they memorize theorems, stylized facts and definitions in order to pass exams. By telling stories, I can fool myself in to thinking I’m doing something more than just pushing them further down the conveyor belt.

On the other hand, science is anti-story telling. Its about the truth, not about drama and gathering a bunch of facts together to move the plot along is antithetical to data-driven science. Story telling is just data mining.

…

I saw Once last week. If I wanted to see two hours of music videos for crappy love songs, I’d Tivo three days of MTV and skip through the commercials. On Friday, I saw Cloverfield. I can’t add much more to the discussion over at MR; I just wish they would have been able to make this movie under the Godzilla franchise. Also, my brother’s reaction, paraphrasing, “Except for the monster, the movie pretty realistically portrayed my life in New York City when I lived there.”

Woot!

Too bad it was in the context of bitching about Schools of Education where most of our k-12 teachers are trained:

Instead of competition and diversity in the education schools, we confront what Hirsch calls the “thoughtworld” of teacher training, which operates like a Soviet-style regime suppressing alternative perspectives. Professors who dare to break with the ideological monopoly—who look to reading science or, say, embrace a core knowledge approach—won’t get tenure, or get hired in the first place. The teachers they train thus wind up indoctrinated with the same pedagogical dogma whether they attend New York University’s school of education or Humboldt State’s. Those who put their faith in the power of markets to improve schools must at least show how their theory can account for the stubborn persistence of the thoughtworld.

(h/t Kling)

PS – I grew up in Humboldt County hating the hippies up in Humboldt State who, as it turns out, were mostly there training to be teachers. Also, later in life I went to Humboldt to add a Math degree to my growing list of certifications. Oh, I don’t hate the hippies anymore.

Yes, President Clinton is in town. I can hardly contain myself… rather, tear myself from my desk.

This only makes me want to list all the people I’d rather see President than Hillary (subject to change as the facts change):

1. Obama
2. Romney
3. McCain
4. Huckabee
5. Clinton
6. Edwards (I’m really not a fan)