Tag Archives: Inequality

Both Plague & War Cut Capital Share?

I just finished reading Walter Scheidel’s The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century, and found myself agreeing with Scheidel against his critics. Scheidel is a historian who says that inequality has mainly risen in history when income increased, making more inequality physically possible, and when scale and complexity increased, creating more and bigger chokepoints (e.g., CEO, king) whose controllers can demand more rents.

Big falls in inequality have mainly come from big collapses, such as big wars, revolutions, plagues, and state collapses, which are usually associated with violence. This suggests that a big inequality fall is unlikely anytime soon, and we shouldn’t wish for it, as it would likely come from vast destruction and violence. All of which I find very plausible.

While usually big wars via mass mobilization didn’t change inequality much, in the mid 1900s such wars seemed to have gone along with a big taste for redistribution and revolution. This happened to a lesser extent in Ancient Greece and Rome, and fits a story wherein more forager-like cultures care more about redistribution, especially when primed by visible mass sacrifice.

I noticed one puzzling pattern, however. Income in the world goes to owners of capital, to owners of labor, and to those who can take without contributing to production. As the rich usually get more of their income from capital, compared to labor, one thing that can cause less inequality is a change that makes capital earn a smaller share of total income. The puzzling pattern I noticed is that even though big plagues and big wars should have opposite affects on the capital share, both of them seem to have cut inequality, and both apparently in part via cutting the capital share of income! Let me explain.

Big plagues cut the number of workers without doing much to capital, while big wars like WWI & WWII destroy a much larger fraction of capital than they do of labor. Which event, big plague or big war, reduces the share that capital earns? The answer depends on whether capital and labor are complements or substitutes. If they are substitutes, then destroying capital should cut the capital share of income. But when they are complements, it is destroying labor that should cut the capital share.

The simple middle position between complements and substitutes is the power law (a.k.a. “Cobb-Douglas”) production function, where output Y = La*K1-a, for Labor L, capital K, and constant a in (0,1). (Partial derivatives set wages w = dY/dL and capital rent r = dY/dK.) In this situation, the capital share of income r*K/(r*K+w*L) = 1-a, and so never changes.

If, for example, labor L falls by a factor of 2, while capital K stays the same, then wages rise by the factor 21-a while rents fall by the factor 2a, with the product of these factors being 2. Compared to this simple middle position, if labor and capital are instead complements, then in this example wages would rise and rents would fall by larger factors. If labor and capital are instead substitutes, the factors would be smaller.

Economic papers based on data over the last century usually find labor and capital to be complements, though there are notable exceptions such as Thomas Pietty’s blockbuster book. That fits with data on the Black Death. In the century from 1330 to 1430, Europe’s population fell roughly in half, wages doubled, and rents fell a lot. In England, wages tripled. Similar behavior is seen in other large ancient plagues – wages rose by a factor of four in Mexico! This looks more like what you’d see with complementarity than with a simple power law.

World War I (WWI) killed about 1% of the world population, while the concurrent 1918 flu killed about 4%. World War II (WWII) killed about 3%. But capital was cut much more. The ratio of private wealth to national income fell by a factor of two world wide, and by even larger factors in the main warring nations (source):
WealthToIncomeNow for the puzzle. If capital and labor were still complements during WWI & WWII, then destroying a lot more capital than labor should have resulted in rents on capital rising by a factor so big that product of the two factors increases the capital share of income. Is that what happened? Consider Japan, where 5% of the population died:

Real [Japanese] farm rents fell by four-fifths between 1941 and 1945, and from 4.4% of national income in the mid 1930s to 0.3% in 1946. .. By September 1945, a quarter of the country’s physical capital stock had been wiped out. Japan lost 80% of its merchant ships, 25% of all buildings, 21% of household furnishings and personal effects, 34% of factory equipment, and 24% of finished products. The number of factories in operations and the size of the workforce they employed nearly halved during the final year of the war. p.121

Gains from capital almost disappeared during the war years: the share of rent and interest income in total national income fell from a sixth in the mid-1930s to only 3% in 1946. In 1938, dividends, interest, and rental income together had accounted for about a third of the income of the top 1%, with the remainder divided between business and employment income. By 1945, the share of capital income had dropped to less than an eighth and that of wages to a tenth; business income was the only significant revenue source left to the (formerly) wealthy. p.122

In 1946, real GNP was 45% lower than it had been in 1937. p.124

The sharp drop in top income shares .. were caused above all by a decline in the return on capital. .. Most of these changes occurred during the war itself. p.128

Consider also France and Germany (which lost 2% & 11% of people in WWII, respectively):

During WWI, .. a third of the French capital stock was destroyed, the share of capital income in national household income fell by a third, and GDP contracted by the same proportion. ..In WWII, .. two-thirds of the capital stock was wiped out. .. real rents fell by 90% between 1913 and 1950. p.147

[German] rentiers lost the most: their share of national income plummeted from 15% to 3% even as entrepreneurs were able to maintain their share .. real national income was a quarter to a third lower in 1923 than it had been in 1913. p.152

Maybe I’m missing something, but I don’t see how this is remotely consistent with labor and capital being complements. Yet complementarity seems a good fit to big ancient plagues and more recent empirical studies. What gives?

GD Star Rating
Tagged as: ,

Alas, Unequal Love

We each feel a deep strong need to love others, and to be loved by others. (Self-love doesn’t satisfy these needs.) You might think we could pair up and all be very satisfied. But this doesn’t happen for two main reasons:

  1. We each prefer to love the popular, whom more others also love. So a few get lots of love, while the rest get less.
  2. We can more easily love imaginary fictional people than real people. Especially ones that more others love.

So even if you are my best source for getting love, the love I get from you may be far less than the love you are giving out, or than I’m giving out. And a few exceptional people (many of them imaginary) get far more love than most people need or can enjoy.

This seems an essential tragedy of the human condition. You might claim that love isn’t a limited resource, that the more people each of us love, the more love we each have to give out. So there is no conflict between loving popular and imaginary people and loving the rest of us. But while this might be true at some low scales of how many people we love, at the actual scales of love this just doesn’t seem right to me. Love instead seems scarce at the margin.

Can we do anything about this problem? Well one obvious fact is that we don’t love people we’ve never heard of. And we can control many things about who we hear of. So we could in principle arrange who we hear about, in order to get love spread out more evenly. But we don’t do this, nor do we seem much inclined to do anything like this. We instead all devote a great deal of time and effort to hearing about as many popular and fictional people as possible. And to trying to be as popular as we can.

I don’t have great ideas for how to solve this. But I am convinced it is one of our essential problems, and it is far from obvious that we’ve given it all the careful thought we might. Please, someone thoughtful and clever, figure out how we might all be much loved.

GD Star Rating
Tagged as: , ,

Cities As Harems

Many animal species are organized into harems, wherein a single male dominates a group of females and their children. When males become adult, they must leave home and wander singly or in small male groups hoping to tempt harem females into liaisons or to start new harems.

I’ve heard that polygamous sects are often run this way today, with older men kicking out young men when they come of age. But re-reading Montaillou on rural 1300 France makes me realize that humanity has long has related harem-like gender patterns.

Back in 1300 France, centrality gave status. The biggest cities were at the top, above towns and then villages. At the bottom were woodcutters and shepards, all male, who spent most of their time wandering far from villages or towns. Along with soldiers and sailors, these men lived dangerous low-status high-mobility lives in sparse areas. They sometimes tempted women into liaisons, or made it rich enough to start a family in a village. Such mating strategies may explain why such men moved so often even they were poor and moving is expensive.

Back in the high status centers, there remained a few high status men and women, many low status women, but fewer low status men. The lower status women were often servants to high status males, and often had affairs with them.

In the US today, the states with the most men relative to women are Alaska, Wyoming, North Dakota, Nevada, Utah, and Montana — mostly harsher low density areas. In contrast, the states with the most women relative to men are District of Columbia, Rhode Island, Maryland, Massachusetts, New York, near some of our biggest high status cities. Most big US cities have more women than men. The exceptions are San Jose, San Francisco, Las Vegas, Honolulu, Austin, Seattle, San Diego, places with new booming, mostly tech, industries. Men are more willing to move to try new often-harsher industries and places.

We hear college-educated women complain today that there aren’t enough college-educated men to go around, either during college itself or afterward. Of course there are plenty of other men around, but these women mostly consider such men beneath them. Seems to me this isn’t that different from 1300 France; women are more eager to locate near high status people. They focus on high status men, and lament there aren’t enough to go around.

Sometimes people fear today that low status men unhappy from being unable to find women will cause havoc. But in the past men avoided such feelings successfully by just avoiding women. By rarely seeing women they less often felt the envy that might cause havoc. If there’s a bigger problem today it might be because low status men more often come into contact with attractive but unavailable women. From this perspective, maybe low status men avoiding women via male-oriented video games isn’t such a bad thing?

Added 5July: Birds are like this too.

GD Star Rating
Tagged as: , ,

Hive Mind

Some people like murder mystery novels. I much prefer intellectual mysteries like that in Garett Jones’ new book Hive Mind: How Your Nation’s IQ Matters So Much More Than Your Own:

Over a decade ago I began my research into how IQ matters for nations. I soon found that the strong link between average IQ and national productivity couldn’t be explained with just the conventional finding that IQ predicts higher wages. IQ apparently mattered far more for nations than for individuals. In my early work, I estimated that IQ mattered about six times more for nations than for individuals: your nation’s IQ mattered so much more than your own. That puzzle, that paradox of IQ, is what set me on my intellectual journey. …

I’ll lay out five major channels for how IQ can pay off more for nations than for you as an individual: Continue reading "Hive Mind" »

GD Star Rating
Tagged as: , ,

Does Decadence Cause Decay?

Noble gentlemen and ladies in [Japan’s] Heian period (794-1185) were often remarkably promiscuous. … “Heian society was on the whole governed by style rather than by any moral principles, and good looks tended to take the place of virtue.” … It was, as all this suggests, a rather effete culture. The aristocratic ideal of male beauty—highly perfumed, moon-faced, smooth-skinned, extravagantly dressed—was close to the feminine ideal. A distinct air of decadence during the peak of the Heian period also suggests the approaching end of a regime, a world, in Genji’s words, “where everything seems to be in a state of decline.”

Less than two hundred years later, the self-obsessed nobility of the Heian court, distracted by the rituals and refinements of palace politics, oblivious of the world outside the capital, and mostly bored out of their minds, were overwhelmed by more vigorous provincial clans, notably the samurai, with their warrior codes and martial ideals. But in Genji’s time, the early eleventh century, the imperial capital (today’s Kyoto) still held sway; anyone unlucky enough to live in the provinces was considered too uncouth to be taken seriously. (more)

This seems a familiar history story, that elite self-indulgence and moral decadence causes social decay and displacement. It contributes to the Hunger Games stories, for example. It also seems a common foundation of conservative thought. But, is it true? I ask because I actually do not know. Has anyone done statistical tests on systematic historical datasets to see if decadence actually causes decay and displacement? I could imagine counter arguments, such as that decadence promotes peace instead of destructive war-mongering. So I’d prefer not to have to rely only on a few anecdotes and plausible intuitions.

GD Star Rating
Tagged as: , ,

Em Redistribution

I’m in the last few weeks of finishing my book The Age of Em: Work, Love, and Life When Robots Rule The Earth, about social outcomes in a world dominated by brain emulations. As a teaser, let me share some hopefully non-obvious results about redistribution in the em world.

There are many kinds of inequality. Inequality exists between different species, between generations born at different times, and between nations of the world at a time. Within a nation at a time, there is inequality both between families and within families. There is also inequality across the moments of the life of each person. In all of these cases, there is not only financial inequality, but also inequality in status, prestige, pleasure, lifespan, happiness, and more. There is also inequality between the size of families, firms, cities, or nations, even when individuals within those groupings are equal.

Today, we have relatively little intentional redistribution between generations or between nations. Redistribution within the moments of a person’s life happens, but that is mostly left to that person to choose and to fund. Similarly, redistribution between siblings is mostly achieved via differential treatment by parents. Instead, most concern today about inequality, and most debate about redistribution to address inequality, focuses on one very particular “standard” kind of inequality.

This standard inequality looks at differences in average individual financial incomes between the families of a nation, all at a given time. This type of inequality is actually one of the smallest. For example, in the U.S. today financial inequality between families is only one third the size of that inequality between siblings within families, and even that is much less than the inequality between individuals from different nations. We may focus our redistribution feelings on this standard inequality because it seems to us the most analogous to the inequality that forager sharing norms addressed. Alternatively, perhaps it is the most profitable type of redistribution for opportunistic rent-seekers.

This history suggests that the em world will have little redistribution between em generations or city states, and also that each clan is mostly in charge of deciding how to address inequality within that clan. After all, em clan members are more similar and closer to each other than are human siblings, even if they may sometimes be more distant from each other than are typical human life moments. Also, clan members have rather complex relations with each other, making it hard pick a natural sub-clan unit to be the standard basis for counting inequality. So that leaves ems with comparing inequality between clans.

A set of em clans can be unequal in two different ways. One way focuses on individual incomes, or perhaps individual happiness or respect, and says that a clan is better off if its individuals are on average better off. The other way focuses on the overall size and success of a clan. Here a clan is better off if it has more members, resources, or respect. Historically, most redistribution efforts have focused on average individual outcomes. For example, we have seen very little efforts to redistribute between human family clans based on family size. That is, we almost never take from families with many descendants in order to give to families that have few descendants. Nor do we take much from big nations, cities, or firms to give to smaller ones.

Because most em wages are near subsistence levels, unregulated wages have less inequality than do wages today. So em clans naturally have less inequality of the standard sort that is the focus of today’s redistribution. In contrast, em clans have enormous inequality in clan size, resources, and respect. However, history gives little reason to expect much redistribution to address this inequality. It is not very analogous to forager sharing, nor does it lend itself to profitable rent-seeking.

Thus the main kind of redistribution that we have reason to expect in the em era is between the clans of a city, based on differences of average within-clan individual income. But we expect less inequality of this sort in the em world, and so expect less redistribution on this basis.

Income taxes are today one of our main mechanisms for reducing the standard inequality that compares individual incomes between families within a nation. Over the last two centuries, big increases in the top marginal tax rates have mostly followed wars where over two percent of the population served in the military. For example, in the U.S. the top marginal tax rate jumped from 15% to 67% in 1917, during World War I. Controlling for this effect, top tax increases have not been correlated with wealth, democracy, or the political ideology of the party running the government. This weakly suggests that the local degree of individual income redistribution between the clans of an em city may depend on the local frequency of large expensive em wars.

If ordinary humans are included straightforwardly in the redistribution systems of the em world, then the simple result to expect is transfers, not only away from richer humans, but also from humans to ems overall. After all, in purely financial terms typical ems are poorer than the poorest humans. Redistribution systems may perhaps correct for the fact that em subsistence levels are much lower than are human subsistence levels. But if so such systems may also encourage or even require recipients of aid to switch from being a human to being an em, in order to lower costs.

During the em era, humans typically have industrial era incomes, which are much higher than subsistence level incomes. While many and perhaps most humans may pay to create a few ems, they tend to endow them with much higher than subsistence incomes. In contrast, a small number of successful humans manage to give rise to large em clans, and within these clans most members have near subsistence incomes. Thus transfers based on individual income inequality take from the descendants of less successful humans and give to descendants of more successful humans.

GD Star Rating
Tagged as: , ,

Advice Shows Status

When we give and seek advice, we think and talk as if we mainly just want to exchange useful information on the topic at hand. But seeking someone’s advice shows them respect, especially if that advice is followed. And in fact, a lot of our advice giving and taking behavior can be better understand in such status terms:

When making decisions together, we tend to give everyone an equal chance to voice their opinion. To make the best decisions, however, each opinion must be scaled according to its reliability. Using behavioral experiments and computational modelling, we tested (in Denmark, Iran, and China) the extent to which people follow this latter, normative strategy. We found that people show a strong equality bias: they weight each other’s opinion equally regardless of differences in their reliability, even when this strategy was at odds with explicit feedback or monetary incentives. (more)

Individuals in powerful positions are the worst offenders. According to one experimental study, they feel competitive when they receive advice from experts, which inflates their confidence and leads them to dismiss what the experts are telling them. High-power participants in the study ignored almost two-thirds of the advice they received. Other participants (the control and low-power groups) ignored advice about half as often. … Research shows that they value advice more if it comes from a confident source, even though confidence doesn’t signal validity. Conversely, seekers tend to assume that advice is off-base when it veers from the norm or comes from people with whom they’ve had frequent discord. (Experimental studies show that neither indicates poor quality.) Seekers also don’t embrace advice when advisers disagree among themselves. And they fail to compensate sufficiently for distorted advice that stems from conflicts of interest, even when their advisers have acknowledged the conflicts and the potential for self-serving motives. … Though many people give unsolicited advice, it’s usually considered intrusive and seldom followed. Another way advisers overstep is to chime in when they’re not qualified to do so. … many advisers take offense when their guidance isn’t accepted wholesale, curtailing further discussion. (more)

GD Star Rating
Tagged as: , , ,

Relishing Inequality

As we’ve become richer, we have moved from farmer toward forager values. This has made us more egalitarian – we are more averse to inequality and domination, and more uncomfortable when people brag, give orders, or act overtly as if some people are much better than others.

On the surface, our stories tend to affirm our social norms. Villains are often greedy disagreeable unstable illicit dominators, while the heroes who oppose them are often modest, agreeable, and capable, but not assertive or aggressive.

However, not all is as it seems on the surface. For example, we are far more interested in seeing drama or action shows centering on theses kinds of jobs: police, soldiers, doctors, lawyers, scientists, chefs, actors, athletes, and musicians. These are jobs where extreme outcomes are more possible, either because big harms can be avoided, or because great status or honor might be gained.

In jobs with more extreme possible outcomes, we are more comfortable with overt inequality and domination. We are more ok with the capable doc getting explicit deference, and berating the incompetent doc. Or with junior chefs saluting “yes chef” like soldiers. Or with the super musicians not giving much consideration to the grips and groupies who serve them.

We are not only more ok with such overt inequality and domination for these jobs in real life, we are also more ok with it in fiction. In fact, you might well say we relish it. Just as little girls fantasize about being a princess, or little boys fantasize about being action heroes, we all like to imagine we are the more able workers shown in these stories. We like to imagine getting the status and deference that these fictional characters are shown to be justified in getting.

Of course we prefer to paper this over with a villain who is far worse, making our heroes look great by contrast. So we can pretend that what we really want is to bring down the arrogant. This is somewhat like how we like stories that titillate with sexual or other indulgence, but then pretend to endorse a morality tale where such behavior is punished in the end. In both cases we can enjoy a fantasy of vicariously experiencing pleasures, while officially pretending to disapprove of them.

GD Star Rating
Tagged as: , ,

The Rosy View Bias

How much does merit contribute to success? A rosy view is that success is mostly due to merit, while a dark view is that success is mostly not due to merit, but instead due to what we see as illicit factors, such as luck, looks, wit, wealth, race, gender, politics, etc.

Over a lifetime people gain data on the relation between success and merit. And one data point stands out most in their minds: the relation between their own success and merit. Since most people see themselves as being pretty meritorious, the sign of this data point depends mostly on their personal success. Successful people see a rosy view, that success and merit are strongly related. Unsuccessful people see a dark view, that success and merit are only weakly related.

In addition, successful people tend to know other successful people, and people tend to think their associates are also meritorious. So the other data points around people tend to confirm their own data point. The net result is that older people tend to have more data on the relation between merit and success, with successful people seeing a rosy view, and unsuccessful people seeing a darker view.

Since the distribution of success is quite skewed, most older people see a darker view. However, that dark majority doesn’t get heard much. Most of the people who are heard, such as reporters, authors, artists, professors, managers, etc., see rosy views, as they tend to be both older and successful.

Also, most people prefer to look successful, and so they prefer to look like they’ve seen a rosy view. Even if they haven’t, at least not yet. And a good way to look like you believe something is to actually believe it, even if your evidence doesn’t support it so much.

In sum, we expect the people we hear to be biased toward saying and believing a rosy view of the relation between success and merit. Of course that might be good for the world, if a realistic view would lead to too much envy and conflict. But it would still be a biased view.

Added 11p: Of course if they can find a way to rationalize it, we expect everyone to be inclined to favor a view where merit is a big cause of people reaching up to the success level where they are, but non-merit is a relatively bigger cause of people reaching the higher levels above them. When there are many success ladders we expect people to see merit as a big cause of success on their ladder (up to their point), but as less a cause of success on other ladders.

GD Star Rating
Tagged as: ,

Pretty Smart Healthy Privilege

In our social world, people who are prettier (or hotter) can wear a wider range of clothing and still be seen as socially acceptable. For example, when less pretty people wear especially form-fitting or revealing clothes, they are likely to face social disapproval. They can’t “pull it off.”

Similarly, people who are smarter (or wittier) can talk in conversation about a wider range of topics. If you are not clever or witty, and you bring up a sensitive topic, you are likely to seem awkward and inappropriate, and induce social disapproval. But if you are clever or witty, you can often bring up such subjects in a way that makes people around you laugh and approve.

People who are healthier also have a wider range of socially acceptable activities. People who try to join a group hike or club dance, but who don’t have the energy or coordination to keep up with others, are often frowned upon.

These are three examples of privilege based on familiar kinds of inequality. Not only are these sorts of privilege quite widely accepted, rarely causing much embarrassment or guilt, but we often go out of our way to celebrate and revel in them. In fashion runways, lecture halls, and sporting events we select the most pretty smart healthy people we have, and give them extra attention and approval, thereby increasing social inequality resulting from differences in these features.

An even more dramatic example is inequality based on species. Humans today are gaining huge advantages relative to other species. And most people seem quite okay with celebrating and encouraging these advantages.

When you hear concerns expressed about privilege or inequality, you don’t usually hear these features mentioned. Instead the focus is more often on inequalities tied to income, parental wealth, dominant vs. marginal cultures and ethnicities, rich vs. poor nations, or dominant vs. marginal gender or sexual preferences and styles. Many people seem to find it quite easy to get worked up over privilege and inequality tied to those features.

Now while I can sorta empathize with such resentment and indignation, they don’t feel much more compelling to me that related feelings about the privileges of pretty, smart, or healthy people. Or even humans relative to other species. So while I could sort get behind efforts to mildly reduce the worst extremes caused by all forms of privilege and inequality (or by total inequality, weighing all things), I can’t get behind efforts to focus much more on some forms relative to others.

I have tried to make sense of why people treat these things differently. For example, people seem more concerned about the kinds of inequality that concerned their distant forager ancestors. People seem more eager to express indignation about kinds if inequality would more support more easy grabbing. And people seem more suspicious of inequality resulting from more opaque larger-scale social processes (like labor markets), rather than from more transparent biological and smaller-scale social processes.

But none of these explanations seem to me good reasons to actually worry much more about these kinds of privilege and inequality. Yes disapproved processes like wars, slavery, and theft have contributed substantially to some cultures or sexual styles becoming dominant in our world. But disapproved processes also contribute substantially to some people becoming prettier, smarter, or healthier in our world. And in neither case am I willing to conclude that disapproved processes are the overwhelming cause of such inequality.

As things are counted in today’s political calculus, this apparently makes me a “conservative,” in that I’m less concerned about the sorts of inequalities that greatly concern “liberals.” But I see this less as taking a political position than as remaining uncertain – until I see a good reason to care differently about different kinds of inequality, I’m going to consider them as similar. I see this as like being agnostic about religion. Some people consider a religious agonistic as taking a strong position against religion, and as being almost the same as an atheist. But I think it is worth distinguishing people who take a position against a common view, from people who are uncertain about that view.

GD Star Rating
Tagged as: , ,