Fun with Gini Coefficients

by Brian on October 1, 2010

Income Change under Conservatives and Labour “Matt Yglesias”:http://yglesias.thinkprogress.org/2010/09/new-labour-and-inequality/ and “Brad DeLong”:http://delong.typepad.com/sdj/2010/09/in-which-matthew-yglesias-observes-that-innumeracy-is-an-awful-thing.html have argued that this graph, from “Lane Kenworthy”:http://lanekenworthy.net/2009/06/01/did-blair-and-brown-fail-on-inequality/, shows that we shouldn’t be too critical of Labour’s performance with respect to inequality over their 12 years of government in Britain.

Both Matt and Brad are pushing back against “Chris’s post below”:https://crookedtimber.org/2010/09/30/its-about-the-distribution-stupid/, which argued that Labour had done very little about equality. (Although in his remark on my comment on his post, Brad now seems to suggest that his post was a pre-emptive strike against what Chris would go on to write in comments.) There’s a natural rejoinder on behalf of Chris, which has been well made in both Matt and Brad’s comments threads. Namely, if the graph really showed that things had gotten better, equality-wise, the Gini coefficient for the UK would have fallen. But in fact it rose, somewhat significantly, over Labour’s term. Indeed, the “IFS Report”:http://www.ifs.org.uk/publications/4524 that the graph is based on shows quite clearly that it rose markedly towards the end of Labour’s term.

So I got to thinking about how good a measure “Gini coefficients”:http://en.wikipedia.org/wiki/Gini_coefficient are of equality. I think the upshot of what I’ll say below is that Chris’s point is right – if things were really going well, you’d expect Gini coefficients to fall. But it’s messy, particularly because Gini’s are much more sensitive to changes at the top than the bottom.

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Hayek’s Zombie Idea

by John Quiggin on October 1, 2010

I’m paying close attention to Amazon rankings just now[1], and it’s striking that both the #1 and #2 spots in “Economics-Theory” are held by FA Hayek’s Road to Serfdom. Whatever your view of Hayek’s work in general, this is truly bizarre, and indicative of the kind of disconnection from reality going on on the political right. On the natural interpretation, shared by everyone in mainstream economics from Samuelson to Stigler, this book, which argued that the policies advocated by the British Labour Party in 1944 would lead to a totalitarian dictatorship, was a piece of misprediction comparable to Glassman and Hassett’s Dow 36000. So what is going on in the minds of the buyers? Are they crazy? Do they actually think that Hayek was proven right after all? Is there a defensible interpretation of Hayek that makes sense?

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