Tag Archives: Wealth

The Poor Are Not Fat

In both the popular press and academic research, there is the argument that the growth of fast food and energy-dense food has been an important cause of the overweight epidemic in the U.S. and that this has disproportionately affected poor people. [Some] argue that limited economic resources may shift dietary choices toward a diet that provides maximum calories at the least cost. An implication of this line of research is that the poor cannot afford healthy diets. (more; ungated)

In fact, however, the poor are on average not fatter than the rich:

Contrary to conventional wisdom, … the poor have never had a statistically significant higher prevalence of overweight status at any time in the last 35 years. Despite this empirical evidence, the view that the poor are less healthy in terms of excess accumulation of fat persists.

A new paper manages to find a relation between poverty and fat – both the very fattest and the very thinnest people tend to be poor:

Distribution-sensitive measures of overweight … [show] that the severity of overweight has been higher for the poor than the nonpoor throughout the last 35 years. … The strongest relationship between income and BMI is observed at the tails of the distribution. … For those at the tails of the BMI distribution, increases in income are correlated with healthier BMI values.

OK, but this hardly supports a general story that the poor can’t afford healthy diets. It fits much better with there being a small fraction of “broken” folks who tend both to have low abilities to earn money, and to have an unhealthy weight, both too high and too low.

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Who Is Consistent?

Young rich well-educated men make more consistent choices. Family structure, risk tolerance and personality type don’t matter:

We conduct a large-scale field experiment … to test subjects choices for consistency with utility maximization. … High-income and high-education subjects display greater levels of consistency …, men are more consistent than women, and young subjects are more consistent than older subjects. We also find that consistency with utility maximization is strongly related to wealth: a standard deviation increase in the consistency score is associated with 15-19 percent more wealth. This result conditions on socioeconomic variables including current income, education, and family structure, and is little changed when we add controls for past income, risk tolerance and the results of a standard personality test used by psychologists. (more)

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Raid The Rich

Me in March on Why Track Trends?:

Tyler’s thesis is that the US has slower growth than decades ago because we’ve used up the low hanging fruits. … My grad school (Caltech) didn’t teach macro … so I’ll stay agnostic for now. But what I can speak to is how little such trend analysis or projection matters, at least for most economic policy.  … The question of which institutions will most increase economic welfare rarely depends much on the exact values of the sorts of parameters social scientists and the media track with such enthusiasm and concern.

Me 1.4 years ago on Enable Raiders!:

A robust, properly functioning market for corporate control is vital to the performance of a free-enterprise economy. …

It is hard to exaggerate how very important this is – we’d be so much richer now if it it had long been easier for raiders to take over public firms. We now put many inexcusable obstacles (listed below) before such raiders, including disclosure, super-majority, poison pill, and merging delay rules.

Today’s Post:

Growing income disparity in the United States … has reached levels not seen since the Great Depression. In 2008, … the [140,000 member] top 0.1 percent of earners make about $1.7 million or more, including capital gains. Of those, 41 percent were executives, managers and supervisors at non-financial companies, … with nearly half of them deriving most of their income from their ownership in privately-held firms. An additional 18 percent were managers at financial firms or financial professionals at any sort of firm. …

In 1975 … the top 0.1 percent of earners garnered about 2.5 percent of the nation’s income, including capital gains. …. By 2008, that share had quadrupled and stood at 10.4 percent. … The share of the income commanded by the top 0.01 percent rose from 0.85 percent to 5.03 percent over that period. For the 15,000 families in that group, average income now stands at $27 million.

The inquiring mind is surely curious to know who exactly are today’s super-rich, and how much richer they are now than before. But good policy is mostly about good institutions, which just shouldn’t depend much on such parameters. If you worry that managers get paid more than they contribute to firm value, a robust solution is to strengthen competition for corporate control, so raiders can takeover and then fire overpaid managers. Trying to independently determine manager contribution is far far harder.

If you worry instead about how much managers respond to taxes by reducing their efforts or moving to other jurisdictions, that also probably doesn’t depend much on just how rich they are or how much that has changed in recent decades. Wanting to tax managers more because you learned that they made more money than you thought seems much more like envy than neutral efficiency analysis.

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The Rich Have More Kids

Bryan Caplan finds that while more education (and being born later) predicts fewer kids, controlling for those factors (and age), more income predicts more kids. I don’t recall doing so, but Bryan says I predicted this result with some confidence years ago, but that he was skeptical at the time. Here are Bryan’s results predicting number of kids for men:


and for women:

Note the year effect is about the same for men and women, but the education effect is twice as big for women, while the income effect is twice as big for men. (All effects are highly significant.) Bryan concludes:

If you’re prone to futurist speculation, trying re-imagining Idiocracy.  The twist: in the real world, the most fertile people aren’t those with low IQ; they’re people who counter-stereotypically combine low education with high income.  Plumbers shall inherit the earth!

Bryan would be right if humans continued to dominate the Earth via ordinary reproduction. However, if (robot) emulations instead dominate, the question is whether the sorts of attitudes that tend to make people want to make more kids also tend to make them want to make more emulation copies. I predict surveys would find a positive correlation in these attitudes. At least I predict this conditional on respondents being induced to accept the emulation scenario as real, which is the frame of mind people would be in if emulations became feasible. Hence I predict while emulations would select heavily from our most productive folks, who tend to be well educated, emulations will tend to select from the richer but less educated part of this population. Really good plumber emulations shall inherit the Earth.

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Farmers Commit

Our worthy overlords speak:

A survey … invited the very rich to write freely about how prosperity has shaped their lives and those of their children. … Roughly 165 households responded, 120 of which have at least $25 million in assets. The respondents’ average net worth is $78 million, and two report being billionaires. … Respondents report feeling that they have lost the right to complain about anything, for fear of sounding—or being—ungrateful. Those with children worry that their children will become trust-fund brats if their inheritances are too large—or will be forever resentful if those inheritances (or parts of them) are instead bequeathed to charity. ….

If the rich do take jobs, they sometimes find that co-workers resent them on the grounds that they’re “taking away the jobs of people who need them.” The rich also leave jobs more quickly than others, for the simple reason that they can afford to do so. … An heir … earned an M.B.A. from a top-tier school and was an obviously intelligent man. He nonetheless moved from one high-tech job to another. “At some point, something would happen at each job that those who have to work for an income would learn to tolerate. … And he’d just say, ‘I don’t want to deal with this.’ Eventually he had to say, ‘I don’t have a career.’” …

One issue that … comes up frequently is the question of at what point in a relationship to reveal one’s wealth—a disclosure he makes sound as fraught as telling your date you have herpes. “When do you tell someone that you have got a huge amount of money?” he asks rhetorically. “If you tell them too soon, you are going to worry that they want you for your money. If you wait too long, can the person really trust you? (more)

The right to complain, and when to disclose to mates, are issues mainly because the very rich are a minority. But committing less to careers because they don’t have to put up with stuff, that issue applies to all of us to a lesser extent, in this our rich world. Our farmer ancestors were way into commitment, to marriage, to land, to family, to religion, etc. But with increasing wealth, we feel less of the fear that inclined farmers to follow strong norms. Overall this self-indulgence is probably good, but let’s not pretend that something valuable is not being lost in the trade.

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