Archive for the ‘Inequality’ Category

Milton Friedman on the single most important side effect of social policies:

One of the things I hold against the welfare system most seriously is that it has destroyed private charitable arrangements which are far more effective, far more compassionate, far more person-to-person in helping people.


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In a recent comment by Mark J. Perry, professor of economics at Michigan, the argument has been made that the decline in the middle class is the result of a positive trend: many middle-class families of the 1960s have risen into the upper class.

Over the same time period, however, the share of families with $25’000 and less has decreased only from 22 to about 18 percent.

Yes, the middle class has been disappearing

America’s “middle class” did start largely disappearing in the 1970s, but it was because they were moving up to a higher-income category, not down into a lower-income category.

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Recently, three researchers from Canada published a new study showing that girls have overtaken boys in American high schools. Among other things, their study also shows the importance of ambition. This is in sharp contrast to many political commentators who use every statistical disparity as proof that some people simply cannot make it. Also, the results suggest that good behavior still seems to pay off.

Leaving Boys Behind: Gender Disparities in High Academic Achievement

Our findings show that the predominance of girls at the top of the GPA distribution is rooted in their higher educational expectations, themselves linked to career plans that include a graduate degree.

The second dominant factor accounting for the lower grades of boys is a measure of the frequency of having been set to the office or to detention over the previous year.

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Words are probably the most important tools that politicians can use. Indeed, rhetoric is far more important in becoming a ‘successful’ politician than actual knowledge. More than a year ago, I found this wonderful sentence that ‘style often outweighs substance’ in political debates. It is basically a summary of decades of failed political crusades.

Thomas Sowell has followed and commentated on these crusades. He describes the sharp difference between words and realities in one of his articles on blacks and the housing market:

Misleading Words

It was one of the most valuable lessons, that words do not necessarily reflect reality.

Now the statistics tell us, belatedly, that blacks lost out, big time, from this “favor” done for them by politicians.

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As unpopular as it may seem, professor of economics Greg Mankiw published an article that is now forthcoming in the Journal of Economic Perspectives:

Defending the One Percent

If you take from a theory only the conclusions you like and discard the rest, you are using the theory as a drunkard uses a lamp post – for support rather than illumination.

The key issue is the extent to which the high incomes of the top 1 percent reflect high productivity rather than some market imperfection.

The most natural explanation of high CEO pay is that the value of a good CEO is extraordinarily high.

In the end, the left’s arguments for increased redistribution are valid in principle but dubious in practice.

The same logic of social insurance that justifies income redistribution similarly justifies government-mandated kidney donation. No doubt, if such a policy were ever seriously considered, most people would oppose it.

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For Uncommon Knowledge, Peter Robinson and economist Thomas Sowell discuss the nexus between culture and economic outcomes. The discussion is based on Sowell’s latest book “Intellectuals and Race”.

Multiculturalism is an insistence that the particular cultures found among less fortunate groups are not to be blamed for disparities in income, education, or crime rates but are on net positive.

This quotation reminds me of another sentence by Thomas Sowell that I posted about a year ago (link):

Although intellectuals pay a lot of attention to inequality among different groups, seldom has this attention been directed toward how the less economically successful might improve themselves by availing themselves of the culture of others around them.

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Some great quotations by Friedrich Hayek about freedom:

Freedom granted only when it is known beforehand that its effects will be beneficial is not freedom.

If we wish to preserve a free society, it is essential that we recognize that the desirability of a particular object is not sufficient justification for the use of coercion.

From the fact that people are very different it follows that, if we treat them equally, the result must be inequality in their actual position, and that the only way to place them in an equal position would be to treat them differently. Equality before the law and material equality are therefore not only different but are in conflict with each other; and we can achieve either one or the other, but not both at the same time.

We shall never get the benefits of freedom, never obtain those unforeseeable new developments for which it provides the opportunity, if it is not also granted where the uses made of it by some do not seem desirable.

Liberty not only means that the individual has both the opportunity and the burden of choice;
it also means that he must bear the consequences of his actions. Liberty and responsibility are inseparable.

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The other I came across this article by Gneezy, Niederle and Rustichini, published in The Quarterly Journal of Economics in 2003. The authors use experimental data to explore male-female performance differences in competitive environments.

Performance in Competitive Environments: Gender Differences

Large gender differences prevail in competitive high-ranking positions. Suggested explanations include discrimination and differences in preferences and human capital. In this paper we present experimental evidence in support of an additional factor: women may be less effective than men in competitive environments, even if they are able to perform similarly in noncompetitive environments. In a laboratory experiment we observe, as we increase the competitiveness of the environment, a significant increase in performance for men, but not for women.

One may wonder if this kind of research has been taken into account in the German parliament during recent talks about a gender quota

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Earlier this month I wrote about the minimum wage law (here). Adding to this, Bryan Caplan, Professor of Economics at George Mason University, argues that there is yet another logical fallacy with the minimum wage:

The Myopic Empiricism of the Minimum Wage

Explain why market-driven downward nominal wage rigidity leads to unemployment without implying that a government-imposed minimum wage leads to unemployment.  The challenge is tough because the whole point of the minimum wage is to intensify what Keynesians correctly see as the fundamental cause of unemployment: The failure of nominal wages to fall until the market clears.

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Often statistics is used in the media with the intention to emphasize some disparity. And whenever the topic is wages, the distinction between disparity and inequality becomes blurred. Economist Thomas Sowell describes the absurdity of this perspective:

Nowhere in the world do you find this evenness that people use as a norm. And I find it fascinating that they will hold up as a norm something that has never been seen on this planet and regard as an anomaly something that is seen in country after country.

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