A tale of two charts

Ritchie gives us this chart:


It shows the distribution of household incomes in the UK. According to Ritchie it shows that there is clearly and obviously a bias in favour of the rich, one which we should do away with by taxing them more and redistributing that money to the poor. Do note that this is post tax and post benefit systems (although not post government supplied services which will roughly double the incomes of those in the poorest decile).

Here\’s another chart:


This shows the absolute standard of living of the poorest 10% in various countries. Yes, this is post tax and post benefits and makes attempts to include the value of government supplied services.

(By measuring at PPP and then translating those standards of living into a percentage of US median income we are able to get something which is truly comparable. The original underlying paper does indeed discuss such things as the more market based health care in the US against the free at the point of use most other places, differences in food prices and so on and still comes to this conclusion about absolute living standards.)

Well, as you can see, the absolute living standards for the poor in the UK, US, Sweden and Finland all seem to be around and about the same: between 35% and 39% of US median household income.

But as we can also see the redistribution in such places as Sweden and Finland leads to the top 10% of households enjoying only slightly above US median lifestyles while the UK and US systems seems to allow much greater than this.

So we would seem to have two systems of getting to the same end: that end being a certain lifestyle available to the poorest in the nation. We can have a very high level of curtailment of the living standards of those at the top and this lifestyle of 35-39% of the US median income. Or we can have much less curtailment of those lifestyles at the top and still have this living standard of 35-39% of US median income for those at the bottom.

Which you prefer, well, let\’s try and think through that. Which system provides the greatest amount of human joy and utility? The one where we take care of the poor and allow others to flourish or the one where we deliberately limit the flourishing and yet provide exactly the same standard of living to the poor?

Ritchie says limit the flourishing. I say provide the poor with the lifestyle while allowing the maximal flourishing possible consistent with doing so.

As Ritchie says:

That’s the difference between left and right.

That underpins what this blog is, in its UK context, about.

Well, quite, I think that is what his blog is about, it\’s also what this one is about.

Which version of the world, which socio-economic system, you prefer is entirely up to you of course. But I\’ll argue until the day I\’m dead that my preferred system is the only one which can possibly be called \”liberal\”.

5 thoughts on “A tale of two charts”

  1. I think your argument is a non-sequitur, the US would likely have a higher income per head than the UK if it had a large welfare state (in fact I guess we’ll see in the next few years). Also given how small incomes are at the bottom the difference between the UK and Denmark is actually about 22% higher income, so such small differences matter. Finally I thought some of the countries you mention (such as Sweden) you believe to have a more pro-economic growth policies than the UK?

  2. Tim:

    In one respect, I’m in agreement. If one (or a society) were forced to choose between just those two alternatives, I’d also choose the one you recommend (but Ritchie’s entitled to choose the other–whatever the reason for his preference). The greatest recommendation for your choice would seem to be that the “hit” (for maintenance of the total dole) is more widely spread among a class less likely to move, evade, or avoid the hit itself (combined with a general appeal to charitable impulses).

    The problem with that solution (indeed, both “solutions”) is that neither is actually a solution except to the immediate problem and that both will lead, inexorably, to a worsening of the original problem: one of the effects on those of the recipient class will be, by rewarding the behavior and conditions qualifying those to receive the dole, to fertilize the growth of such behaviors and conditions (and to encourage their political activity toward such growth); at the other end, those paying the freight, whether
    middle or high, are somewhat de-incentivized toward working/earning.

    Either way, these are merely slightly different paths on the “road to serfdom” (socialization), each step of which will require (on account of its inadequate outcome–purely in the opinion of its supporters) either a retreat (toward greater freedom) and abandonment of the original intervention or additional steps (either in layers of enforcement or new interventions to “close the loopholes” or inadequacies in the original).

    A characteristic of this “road” is its effect on the pyches of those travelling it: the further from freedom appear to be their circumstances, the dimmer seem prospects of attaining freedom by the necessary series of–usually–small steps in that direction and the more futile seems resistance toward steps in the other.

    I really am not keen on rehashing this “road” allegory but it is much more than a fable or simple illustration: it accurately describes “what’s going on” and, just as accurately, foretells the general future to be expected as outcomes of alternative actions.

    If determined on steps toward totalitarianism, why make a fuss between only slightly different (yours and Ritchie’s) paths? Why not pick a step backward (toward greater freedom) to fight for–rather than argue over which step toward full “planning” will be less disruptive or more tolerable? That’s the real choice–for as long as it lasts.

  3. I’d like to see a version of that first chart for lifetime income. If you’re going to redistribute from rich to poor that’s the one you should base your decision making on. A snapshot in time like that published leads to semi-informed decision making. Consider that at different times in my life I think my income would have put me in most of those deciles at some time or other. It wasn’t a simple linear progression up and back down either.

    When I was in initially in the lower deciles I took a mortgage at the limit of affordability with reasonable confidence that later on the higher decile me could afford it. When later came along I paid off my mortgage and saved aggressively. This has been very helpful now I’m back down in the middle deciles. The 10th decile me has redistributed to the 6th decile me. No doubt any further assets accrued by the 6th decile me will be redistributed to the lower decile (retired) me in the future.

    The state doesn’t need to be involved in my time based redistribution. If it had taxed the crap out of me in the upper deciles then the lower decile me would have to be holding out for the handouts now. High tax in upper deciles would have had the opposite effect to that intended – money would have been less distributed between income deciles.

  4. I don’t quite see why Ritchie thinks the skewed-ness of the graph (in a statistical sense) implies a bias to the rich. He’s just using a word that has a technical meaning in one context in its more natural sense – but that doesn’t mean anything.

    Any more than thinking something is ‘important’ because it is statistically ‘significant’.

    There is a lower bound to this distribution, because you can’t have negative income. But there’s no upper bound. So of course it looks like that, what did he expect it to look like?

    It’s like when Lord Monckton of whatsit got all excited about climate change records labelled ‘censored data’. Sometimes you just have to look the terms up to find out what they mean…

  5. Pingback: Britblog Roundup #271 « Amused Cynicism

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