Income Inequality and Social Unrest: What’s Their Function?

The current debate on Cato Unbound, particularly today’s contribution from economist Edward E. Leamer, circles around the danger that income inequality poses to political stability.

Leamer argues that computer technology amplifies innate talent differences, and hence will widen existing income disparities. This seems undeniable. He then goes on to imply that this is necessarily a threat to political stability or social harmony. But is it?

Leamer’s unstated assumption is that there is a simple monotonic relationship between income disparities and social unrest. That is certainly a reasonable hypothesis, but it is not the only such hypothesis.

Isn’t it also possible that the relationship is more complex, and multivariate? It seems at least worth investigating the possibility that the relationship between income inequality and political instability is asymptotic – that the richer and richer Bill Gates becomes, the less impact any further increase in his income will have.

More importantly, isn’t it also worth considering the possibility that there are other variables in the equation besides income inequality; for example, the sufficiency of the incomes earned by those in the lowest quartile of the earnings distribution. If the poorest quarter of citizens were destitute, that would seem more socially destabilizing than if they could comfortably feed, clothe, and house themselves and their families – regardless of the incomes of the rich. Someone able to live comfortably might not care if the richest citizens double their incomes tomorrow, whereas someone who is barely scraping by might resent even the most modest increase in the incomes of the rich.

So perhaps the seemingly inevitable increase in income inequality will not pose a threat to social stability, so long as those with the least marketable skills can still earn a comfortable living.

It would be interesting to see a natural experiment conducted to test this theory using historical data.

The American Meddling Association

The American Medical Association has long ceased to be a serious advocate for doctors. It instead has become a propaganda arm for the wackier factions of the public health movement. The Chicago Sun Times reports that at its annual meeting this week, the AMA is considering throwing its support behind a move to tax soda sales, with proceeds going to various anti-obesity measures. This, despite little evidence that soda consumption is linked to weight gain (non-diet soda consumption has remained virtually unchanged since 1988). Not to mention the fact that if we’ve learned anything about sin taxes, it’s that they’re inevitably used for projects far removed from those educational programs promised when they’re enacted.

The soda tax endorsement comes on the heels of the AMA’s embarassing attempt to pass off a web-based survey (which the organization later admitted was an “advocacy” tool) about alcohol consumption as scientific research, complete with a fake margin of error. Last year, the same organization and its president expressed shock that – gasp! – most minors get their first taste of alcohol from… their parents. Seems to me that the supervising eye of a parent would be the ideal circumstance under which a minor would get his first sip of beer or wine, wouldn’t it?

Consider these other action items from the agenda for the AMA’s annual meeting this week:

  • Support a 50 percent reduction in salt in processed foods, fast foods and restaurant meals over the next decade.
  • Oppose beer ads on college sports broadcasts.
  • Prepare a report summarizing video game research, including emotional and behavioral effects and addictive potential.
  • Push to ban smoking in all public places and workplaces.
  • Support mandatory school instruction on the dangers of Internet pornography.

Meanwhile, as it continues to tell parents how to raise their children, and push for government regulation of private behavior, the AMA has been conspicuously silent, passive, or just plain wrong on issues you’d think would be high-priority for a group that claims to represent doctors: The relentless DEA campaign against doctors who specialize in pain management, for example. Pain activists say the AMA has been AWOL. And not only didn’t the AMA oppose many of the more onerous HIPAA regulations, it lobbied for their enforcement. The organization has also taken a relatively passive stance of the federal prohibition on medical marijuana, which puts political drug eradication goals ahead of patient care.

The AMA’s percentage of revenue from membership dues has fallen over the last few years. It now counts just 26% of U.S. physicians among its dues-paying members.

Given the organization’s priorities, I can see why. Journalists should keep that figure in mind when reporting on official AMA positions. The group certainly doesn’t represent the opinion of all doctors. Of, for that matter, even a majority of them.

Why Do We Spend So Much on Defense?

Reuters alerts us to the new report from the Stockholm International Peace Research Institute, which includes a workup on global military expenditures. A few key findings:

World military expenditure in 2005 presents a real terms increase of 3.4 per cent since 2004, and of 34 per cent over the 10-year period 1996–2005. The USA, responsible for about 80 per cent of the increase in 2005, is the principal determinant of the current world trend, and its military expenditure now accounts for almost half of the world total.

[…]

The USA is responsible for 48 per cent of the world total, distantly followed by the UK, France, Japan and China with 4–5 per cent each.(emphasis mine)

The USA is today unchallenged in our hemisphere, and we enjoy friendly relations with almost all great powers in the world, depending on one’s perspective on where the US-China situation is headed. Fighting terrorism the right way–with bolstered intelligence cooperation, small-scale special forces activities and cooperation with our allies–is actually quite cheap.

But we still spend nearly as much on defense as the rest of the world combined. Why? If the threat of terrorism doesn’t justify such massive expenditures, what on Earth are we so afraid of?

There isn’t a good answer. Moreover, even this enormous level of expenditure doesn’t seem to be turning the Bush administration’s ambitious foreign policy aspirations into reality, and the unfortunate mismatch between means and ends is on display daily in Iraq. The thing to do, of course, would be to acknowledge the limits of military power, quickly pull our foreign policy goals into line with our national interests, and stop trying to reshape the culture and politics of faraway peoples that we don’t understand, and who don’t threaten us. Unfortunately, such a correction doesn’t seem to be in the offing.

For a useful and thoughtful critique of US defense spending, see this PA by my former colleague Chuck Pena.

A.I. Yai Yai!

Economist Robin Hanson suspects that the world economy may soon be doubling every week or two. He arrived at that suspicion based on historical extrapolations, but he also has a theory as to how it might happen: the development, in the near future, of intelligent machines.

According to Hanson, efforts to computationally model the human brain, neuron by neuron, could reach fruition within the next 25 to 50 years. He plays pretty fast and loose with the details, though, so let’s take a closer look at the bleeding edge of the field.

The mother of all brain simulation projects is Blue Brain, a joint project of IBM and Ecole Polytecnique Fédérale de Lausanne (a Swiss town also known for its lower tech, but tastier, fondue). Announced with much fanfare in 2005, Blue Brain has as its anything-but-modest mission to create a complete and exhaustively accurate simulation of the human brain within a decade or so. They figure they can knock out the neo-cortex in the next few years.

Somebody buy these guys a calculator.

The current Blue Brain hardware has 8,000 processors and they have apparently set it up so that one chip models one or two neurons. That has allowed them, as of this month, to model a 10,000 neuron grouping called a “column.” That’s hugely impressive. But, umm, 10,000 down, 99,999,990,000 to go.

The human brain is estimated to have about 100 billion neurons, so they’re going to need another 10 million or so Blue Brain computers to finish the job given the current specs. They’re having a tough time convincing the Swiss government to spring for another one or two of them.

Mind you, computer processing power per dollar has been increasing exponentially over time since the earliest electromechanical computers. So maybe, in a generation, we’ll be revisiting this question. But that’s an awfully big maybe.

It seems doubtful that we’ll be able to create Marvin the paranoid android any time this century. And it’ll be some time after that before the technology is commercialized and we all have “plastic pals” who are “fun to be with!”

So keep contributing to that 401K. It’s gonna be a while before it starts doubling every week or two.

Florida Lacks Hobgoblins

In his recent contribution to Cato Unbound, creativity guru Richard Florida argues that continued economic growth will depend on “regional, national, and global efforts to harness the creativity of each and every human being.” Fair enough. What, then, is his education policy prescription for attaining that goal? He doesn’t say –- at least, not in the aforementioned posting.

Looking for an answer, I turned to Florida’s other writings, browsing them for references to “education” and “schools.”

This search quickly revealed that Florida places great emphasis on improving our education system. “What we really need in order to prepare our children for the creative economy,” he exhorts, “is a comprehensive education, something that takes them from aesthetics to algebra without pretending that the two are mutually exclusive” (Flight of the Creative Class, 2005, p. 255). He adds, “As society diversifies and specializes, more and more different kinds of education and teaching styles must be made available.”

So increased educational diversity appears to be the order of the day. Or does it?

Writing in Washington Monthly in 2003, Florida conspiratorially confides that “no one wants to admit this openly, but we’re already headed toward effective federal government takeover of troubled public schools…. Only a national strategy can repair the now broken connection between good local schools and regional prosperity.”

Increased educational diversity through more pervasive central planning? Alas, the cognitive dissonance is only beginning.

Florida’s next education policy prescription is higher spending. To make his point, he trots out the embarrassing jade that “it will be a strange day when our schools get all the billions they need and the army has to hold a bake sale to fund its bombers.” To drive the point home, he characterizes current U.S. public school spending as “paltry sums of money” (Flight, p. 255).

As Florida surely must know, total U.S. public school spending now stands at roughly one half of one trillion dollars a year. Annual per-pupil spending is roughly $10,000. That is a quarter of a million dollars for every classroom of 25 students.

The only nation on Earth currently spending more per pupil at the K-12 level is Switzerland. The Netherlands, which routinely trounces the U.S. on international tests of academic achievement, spends $4,000 less per pupil annually.

Having laid waste to his credibility with the trivially falsifiable claim of underfunding, Florida immediately downplays his own argument. A mere three pages after throwing money and slogans at the problem, he explains that “throwing more money and slogans at the problem will only get us so far” (Flight, p. 258).

If consistency is the hobgoblin of little minds, the mind of Richard Florida is a vast hobgoblin-free zone.

Whatever the merits of his claim that the presence of creative bohemians causes economic growth, Florida does not seem to have a coherent education policy for promoting creativity or, for that matter, anything else.