Beware the spirit level

May 21st, 2014 at 7:00 am by David Farrar

Matt Nolan at TVHE warns:

I see that authors are in town, and as a result there was a recent Herald article took aim at income inequality in New Zealand, relying strongly on the book ‘The Spirit Level’.  A conversation about the inequalities society believes are fair, or at least justifiable, is a good thing.  However, the Spirit Level’s claims that simply targeting measures like the Gini coefficient will make everyone better off is a misleading, and dangerous, place to start this conversation.

 In their initial book Wilkinson and Pikett make the claim that the relative distance between incomes (which they in turn call inequality) in a country/region causes a variety of social ills (worse health outcomes, higher crime rates, etc).  They stated that this implies everyone, even those with higher tax burdens, would be better off if we increased taxes and transfers and lowered income inequality.

When I initially reviewed the book I found that their claims were significantly oversold, the book was filled with inconsistencies, and their policy conclusions were unjustified.  This disappointed me, not because I think we should ignore inequality, but because I believe that asking why income inequality has changed and who has been hurt is an incredibly important question – one that has not been given enough attention.

It turns out that there are a number of left-leaning economists found the claims oversold.  For example, in the Oxford Economic Handbook of Economic Inequality, three authors (Leigh, Jencks, and Smeeding) point out that a relationship between health outcomes and inequality does not seem to exist.

The Spirit Level uses cherry picked data to reach the conclusions they wanted.

An example with life expectancy is in this blog post.

Peter Saunders has also debunked much of the book, which I covered here. He also shows how you can find stats that argue the opposite:

Saunders constructs a social misery index showing that social misery is higher (r^2-0.39, p<0.001) is countries with greater income equality by focusing on racist bigotry, suicide rate, divorce rate, reverse fertility rate, alcohol consumption and HIV infection rate.

The questions that media should be asking the authors is why did they leave out countries like Hong Kong, when their inclusion would have changed their conclusions.

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22 Responses to “Beware the spirit level”

  1. thePeoplesFlag (175 comments) says:

    “…The Spirit Level uses cherry picked data to reach the conclusions they wanted…”

    For the readers of this blog all I can say is – Oh the irony, how it hurts.

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  2. redqueen (456 comments) says:

    @thePeoplesFlag

    You’re up early…job interview? Wait, nevermind.

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  3. SPC (5,392 comments) says:

    The books conclusions are nothing novel, the Behavioural Science Unit of the FBI did a global study of crime back in the 1980′s, they found nations that were mono-cultural and egalitarian had lower crime rates. Higher crime rates were related to income disparity associated with (ethnic) group difference.

    That there might be a connection between lack of equal society inclusion, because of poverty (that becomes inter-generational if it impacts on access to health care and educational success), that might cause problems for that society is just common sense.

    After all, while National does not use the term closing the gaps, many of its programmes have as a goal this very ambition.

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  4. duggledog (1,356 comments) says:

    Equality – short hand for communism. The human story is one of inequality, some will succeed, some will fail, most generally muddle through these days. All one can do is create a landscape where at least there is equal opportunity

    I’d say in New Zealand there are equal opportunities for everyone, and success if you’re prepared to take those opportunities and work hard. That’s why immigrants would come here in their millions – tomorrow – if they were able to.

    Those who bang on about ‘inequality’ in this country I am immediately suspicious of. The way they want to address it is ultimately to put their thieving little hands in my pockets.

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  5. prosper (132 comments) says:

    They can do studies, they can write books, they can preach to the stupid but the fact is some people will do well and some poorly.i
    It’s human nature. There is no point in taking most of the money off the contributors give to the non contributors. Perhaps the government should be looking at work camps for the second third generation welfare recipients to see if that helps. The current efforts are not and is resulting in poorly paid academics doing stupid research to stay on the tax payers treat.

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  6. KJ (2 comments) says:

    Spirit Level authors respond to criticisms, including Peter Saunders’ analysis here

    http://www.equalitytrust.org.uk/resources/our-publications/authors-respond-questions-about-spirit-levels-analysis

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  7. RRM (9,453 comments) says:

    Inequality???

    Here’s some inequality:

    https://i0.wp.com/iconicphotos.wordpress.com/files/2009/08/kevin-carter-vulture.jpg

    ^^^ That little Sudanese girl’s parents are nowhere to be found. Probably dead.

    The vulture in the background is waiting for her to die so it can eat her.

    Kevin Carter took the photo (his “job description”) then departed the scene. He won the Pulitzer prize for that photo, and then killed himself three months later, after it dawned on him what an inhuman c**t he’d become.

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  8. hj (6,350 comments) says:

    I find Matt Nolan quite balanced.

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  9. prosper (132 comments) says:

    Is the spirit level about Sudan or is it about the inhabitants of the OECD countries. The UN could improve condition in Sudan if it chose. Ask Helen why it’s not?

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  10. hj (6,350 comments) says:

    To me inequlaity on it’s own is a blunt isntrument we need to look at trust and reciprocity and all the things that bind societies together. Tradtitionally the big earner was the hunter who came back with the game on his back, but everyone was chipping in to the best of their ability. Now we are divided and distant groups.

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  11. tom hunter (4,413 comments) says:

    Perhaps the message should also be, beware the inequality propaganda, because it’s being pushed by every left-wing group in the Western world at the moment: Australia, USA (a “series” no less), Britain, and so forth.

    One would think that if the existing, massive, social welfare systems, including superannuation and state medical care, have not prevented this, then further income redistribution schemes would also fail. However, it’s obvious that such schemes are the objective – plus electoral victories too of course.

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  12. prosper (132 comments) says:

    Traditionally the weak and the non contributors died. We have gone past that thankfully but we haven’t found a way of reducing the number of non contributors.

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  13. EAD (603 comments) says:

    I always find these “Spirit Levelers” and their call for more government to resdistibute wealth in the name of “equality” amusing as they always ignore the elephant in the room of Central Banking. Do these authors ever draw the mental link that society was at it’s most equal in 1971 which happened to be the last year of the Bretton Woods Gold Standard before the age of unrestricted fiat money creation got ushered in?

    How so few people can inflict so much damage on so many is almost unfathomable, and all because the general public chooses to remain IGNORANT of monetary policy and believe the lie that inflation of 2% (in reality it is at least 5%) is to be desired in a healthy economy. If we were to call inflation by it’s true name “currency debasement” then perhaps we might to get somewhere.

    I can only pray that the Austrian School, the good folks at Positive Money http://www.positivemoney.org.nz/ and articles like the below from Zerohedge continue to be understood by more and more people so we can stop the continued rape of the poor an middle class to fund the wealth of the 1%<.

    http://www.zerohedge.com/news/2014-05-19/smoking-gun-federal-reserves-murder-middle-class

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  14. jcuk (585 comments) says:

    It is the degree of inequality that is wrong ….Thomas Pikkety’s book “capital in the 21C” traces the history of the situation and has an answer which you can disagree with if you like …. I appreciate that for some the amasing of wealth is a game or pastime worthy of admiration but looking at the whole picture the current situation while not a bad as it was prior to WWI is unsatisfactory and most likely will get worse unless proper measures are taken with progressive taxation so that those with the most pay to support those with the least while leaving good opportunity for personal endeavour and resulting success.

    Note there is also an executive summary of the book by A. D. Thibeault for those who don’t want to pay the price of the book published by newbooksinbrief.com … or don’t want the detail of the book and prefer a summary.

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  15. jcuk (585 comments) says:

    Those that argue that it has been tried and failed are probably correct but they merely look at the end result and ignore the track which is usually too little effort which leads to failure along with misplaced emphasis … the most glaring case I am aware of is the American situation in the GFC where the banks were saved and the people let go to hell.

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  16. tom hunter (4,413 comments) says:

    unless proper measures are taken with progressive taxation so that those with the most pay to support those with the least while leaving good opportunity for personal endeavour and resulting success.

    I always think it’s a good idea to bring these general, societal debates down to the personal level, so how much extra money are you prepared to give to the government, if any?

    Are you okay with that money being distributed to people who need it via existing government schemes, or should there be some new mechanisms for spreading the wealth around?

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  17. Ryan Sproull (7,030 comments) says:

    I went to Monday’s lecture (“here are the stats”) and will probably go to this evening’s (“here’s why we reckon the correlation is causal”) and Friday’s (“possible solutions”).

    There were plenty of outliers in their data, and they didn’t have a problem with that. They were talking about trends, not absolute rules.

    At tonight’s lecture, though, if they are going to make a case for causal connections, then outliers will have to be explicable.

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  18. Kimble (4,379 comments) says:

    They were talking about trends, not absolute rules.

    Bullshit.

    They selectively included outliers which created “trends”, and excluded outliers that would have destroyed their “trend”.

    Their response to Saunders was pathetic and he simply responded back pointing out how they either didnt answer his criticism or layered on more falsehoods. At that point they screamed “HARASSMENT!” and ran away.

    And that is not even addressing how disgustingly self-serving their lies have been. They are, quite frankly, horrible people and are the exact sort that must be drummed out of the field for the sake of science.

    The only use their work can be put to is to more easily identify people whose opinion ought to be ignored. If you tout their work as proving anything, then you are showing yourself to be more than willing to embrace lies to get your way.

    The entire book is one great big Gish Gallop.

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  19. Fentex (867 comments) says:

    I bought “The Spirit Level” because I think wealth inequality is a problem and danger to civil society and was interested in reading about research regarding it.

    I didn’t get very far, throwing it across the room after only a few pages. The writing was poor, the direction obviously pre-determined and the attitude one of pre-conceived conclusions.

    It makes me very angry that interesting, possibly important topics, get such poor representation.

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  20. goldnkiwi (993 comments) says:

    Not to do with alcohol then?

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  21. jcuk (585 comments) says:

    Tom Hunter … during the period of my life when I was earning above average salary I never bemoaned or bothered at the amount of tax I paid and viewed my fellow workers who complained with disapproval…. today I would put myself at about low medium with not much to give and not expecting anything but believe it is obsene that some through inherited wealth make if even more while others struggle for existance.

    As one who has done the research and the knowledge to write about the subject I thought Thomas Picketty’s solution of 0.5% tax on incomes up to a million and perhaps 5<7% on those above a quite reasonable situation. Unfortunately he doubts if the idea would get world wide approval needed for it to work.

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  22. jcuk (585 comments) says:

    There is a problem for some with taxation as being in private enterprise and being the ‘Boss’ they see the amount of tax they are called upon to pay wwhereas those earning wage or salary do not really see the tax going with PAYE and the sensible people learn to live on what they have in the pay packet after all deductions are made …. how I contributed to my pension fund …. I never saw it so never missed it :)

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