Tag Archives: income distribution

The Case for Activism

So I watched the video Innocence of Muslims that supposedly caused the outrage ultimately leading to novel US protests throughout the Middle East.

First of all, it was clearly a satire.  The issue is that of blasphemy, which is illegal in many of the countries with these protests.  Blasphemy is often recognized as unacceptable within the religion itself, versus being illegal in a country that predominantly constitutes of those in said religion.  The latter likely implies the former (i.e. being illegal likely means it is unacceptable in the dominant religion).  Although perhaps ironically, the Quran and hadith do not mention blasphemy, whereas Christianity condemns it.[1,2]  In the case in question, the issue was about the legitimacy of Muhammad’s teachings. Given the laws within the countries and the video, it’s no surprise that the protests have erupted.  What I personally find puzzling however, is why in the 21st century blasphemy is still taken seriously.

Blasphemy essentially involves questioning that which is assumed to be true.  There is an inherent anxiety in this, for if the assumptions are without merit, the whole religion falls apart.  Now of course, if the assumptions are with merit, then questioning them is meaningless, so why punish individuals in this case?  Won’t their absence of finding anything troubling with the religious assumptions and corresponding time wasted in the process be punishment enough?

Now take two other institutions that have assumptions that are questioned: law and mathematics.  In law, the assumptions are the laws themselves.  Yet for ubiquitously accepted reasons, we permit our legislative representatives to amend and refine laws so that they are compatible with the time period.  Similarly in mathematics, one may start with some axioms and prove something from them (or analogously, start with some laws and note an acceptable behavior), then later the mathematician may change the axioms to prove something more general or more specific.

Thus for the same reasons, I’d argue that the questioning of the assumptions within a religion could only be beneficial to it–except perhaps to those who benefit from the doctrine at a given time.  Religion, like law, may particularly benefit some members at a given time, and such members may be reluctant to welcome change.  This is something of which I claim all members of the institution need to be aware.  For if you fail to question the authority and dogma, you simultaneously give permission to sustain what may amount to a select few disproportionately benefiting.

[1] Saeed, Abdullah; Hassan Saeed (2004). Freedom of Religion, Apostasy and Islam. Burlington VT: Ashgate Publishing Company. pp. 38–39. ISBN 978-0-7546-3083-8. (via Wikipedia: “Blasphemy”)

[2] Mark 3:29

Where’s the Money?

The actual paper can be found here.

The Lorenz Curve

Suppose we want to measure the wealth gap of a nation.  The Gini coefficient does this by measuring how far away we are from perfect equality.  Consider the following graph.

The x-axis represents shares of income.  So .5 on the x-axis represents half of those who have an income (50\% of income earners are on either side), and everyone is included since unemployed are considered to have 0 income.  The y-axis represents the sum of all incomes up to income x.  Hence on this particular depiction of the Lorenz curve, which represents this for a made-up nation, it appears the bottom 50\% of income adds up to about .2 (or 20\%) of the total income.  The perfect equality line has a slope of 1 since if everyone has the same income, then each step forward on the x-axis (where steps are evenly distributed because of equal income) adds the same amount to the cumulative income.  Measuring the deviation (Gini coefficient) from perfect equality thus amounts to computing the pink area as a ratio to perfect equality.  That is, if G represents the Gini coefficient, A is the pink area, and B is the grey area, then

\displaystyle G=\frac{A}{A+B}=\frac{A}{1/2}=2A=2\left(\frac{1}{2}-B\right)=1-2\int_0^1 L(x)\,dx

where L(x) is the Lorenz curve.  It thus takes a value between 0 and 1 where 0 is perfect equality (everyone has same income), and 1 is perfect inequality (one person has all of the income).  We can see a variation of Gini coefficients by nation:

There is also the trend since WWII:

Image by Wikipedia User Cflm001

The US Gini coefficient has moved up from .408 in 1997 to .45 in 2007 and ranks 39 out of 136 nations for highest Gini coefficient [1][2].

[1]  https://www.cia.gov/library/publications/the-world-factbook/fields/2172.html

[2]  https://www.cia.gov/library/publications/the-world-factbook/rankorder/2172rank.html

Political Policy and the Wealth Gap

Consider the US income distribution in 2005.

Image by Catherine Mullbrandon (1)

It demonstrates that a clear majority of the population earns an income at the relatively low end of possible incomes in our economy.  This sort of curve isn’t too surprising since those who acquire relatively more resources initially can in turn acquire additional resources easily since they can afford costly investments with large payoff.

This presents a problem of endgame capitalism.  The idea is that if a system has a finite amount of resources and a finite number of people attempting to acquire as many resources as they can such that none have 0 resources, then the instability of socialism (where everyone has the same amount of resources) will force some to have more, and in turn make it easier for them to get more by contracting others (i.e. forming a corporation).  Slowly those with less lose more and more over time until several “corporations” remain.  Then the process repeats, and eventually we are left with a single owner, or at least one person getting arbitrarily close to possessing all of the resources.  To combat this endgame, we are left with political policy.

The highest tax bracket in the US is 35% and applies to households making over $373,000 [2].  That is less than 2% of the population.  There will come a point in our future where we will have to decide between “fairness” and efficiency.  It would be far more efficient for very low incomes to have 0% (or at least very low) tax rates and for the upper echelons pay bigger percentages.  They could still rank far above the rest after taxes.  During previous time periods taxes were raised to combat the costs of the federal government (in particular WWII in 1945).

Image by Greg Hollingsworth (3)

Also of interest (as Greg points out) is the correlation between the decrease in the top tax rate and increase in the national debt.

[1]  http://visualizingeconomics.com/2006/11/05/2005-us-income-distribution/

[2]  http://www.irs.gov/pub/irs-drop/rp-09-50.pdf

[3]  http://greghollingsworth.org/blog/2009/8/10/the-high-cost-of-low-taxes.html