Letting the Gini Out

 

                                             Letting the Gini Out

Conventional income inequality numbers report the distribution of income before taxes and transfers but that is hardly reflective of things. After taxes and transfers, income inequality is flat or decreasing, depending on your starting point. And inequality in the modern world is different than the distinction among income when Henry the Eighth was riding through the countryside. Now Henry would envy the poor. 

The modern world has leveled up. The Progressive wants to level down--except for those leaders and administrators who would gleefully do the leveling.

Income equality can be achieved. It happens in the world and has been observed and studied. It has four main causes: Plagues, revolutions, massive wars, and collapsed states. And after such calamities, income inequality returns. 

Perhaps inequality of income attends development. Perhaps it is an accident of expansion. Maybe greed when greed has a reward. But it sounds as if it cannot be attained without considerable pain. That's an experiment that one would think should inspire caution.

 

Now, this is a graph of the "Gini Coefficient," The Gini coefficient was developed by the Italian statistician and sociologist Corrado Gini. It is sometimes called the Gini index or Gini ratio. It measures the statistical dispersion intended to represent the income inequality or wealth inequality within a nation or any other group of people. So, for any point in time, the incomes of any group can be collected and compared. A coefficient of "one" represents a perfect inequality when one person in a population receives all the income, while other people earn nothing. This graph plots the inequity of income over the last decades.

The graph is remarkable in several respects, first that this kind of evaluation can be made at all. Secondly, the incredible impact of governmental income-shifting. The third is a bit different. All economists know this graph. Yet both politicians and their economic advisors act as if it does not exist. Regardless of whether income inequality is important to a society or not, there has been a remarkable flattening of the income distribution curve over the last decades. The direction over the last few decades is actually down. Yet, if the politicians and the press are to be believed, income inequality is a growing crisis.

Why is that?