21 September 2010

Where do you fit in the income distribution

An interesting post by Paul Krugman discussing your subjective sense of where you are located in the income distribution. For example, rising inequality at the top (top 1%) in the past two decades has meant that people in the top 10% underestimate their true position in the income distribution.

18 September 2010

Old age in ancient Greece: the case of philosophers

I thought it would be interesting to provide some contextual information to the current debate on the so-called 'ageing problem'. Though this data should be taken with a certain degree of scepticism, the following graphs present the relation between the year of birth and the age of death of various greek philosophers across time...

It is striking to see how some two and half millenia ago, the privileged segments of the Greek civilisation enjoyed life expectancies that are extremely high even for today's standards, indeed higher than most laborious population in our societies currently enjoy.

16 September 2010

Equal opportunity: where do we stand and does it make sense?

The issue of whether to promote equality of outcomes or of opportunity is not a new and has been raging between proponents of the left and of the right. Even where there is agreement that equality of opportunity is what should constitute the locus of our attention, it is not obvious how this imperative is best achieved or indeed against which benchmark we should assess whether we succeed.

As always a look at simple empirical data provides a set of tentative - and quite surprising - answers to these questions. One way to consider this question is to analyse the strength of the link betwen individual and parental earnings. Given radom distribution of abilities across the population, one can reasonably assume that this link should be small where equality of opportunity is ensured.

15 September 2010

Failure of economics or of economists?

Dani Rodrik's recent post provides a helpful clarification between the profession's flaws and economics as  a discipline:
"The fault lies not with economics, but with economists. The problem is that economists (and those who listen to them) became over-confident in their preferred models of the moment: markets are efficient, financial innovation transfers risk to those best able to bear it, self-regulation works best, and government intervention is ineffective and harmful.
They forgot that there were many other models that led in radically different directions. ... If anything needs fixing, it is the sociology of the profession. The textbooks - at least those used in advanced courses – are fine.
Non-economists tend to think of economics as a discipline that idolizes markets and a narrow concept of (allocative) efficiency.
If the only economics course you take is the typical introductory survey, or if you are a journalist asking an economist for a quick opinion on a policy issue, that is indeed what you will encounter. But take a few more economics courses, or spend some time in advanced seminar rooms, and you will get a different picture."

The real question is then why those simplistic models prevailed and not alternative theories that captures the complexity of the economic system?

13 September 2010

Working time before the welfare state and employment regulations

In the dictionary of the workers' movement one learns that the average working day for men, women and children in the early 19th century in France was a striking 15 hours. Bear in mind this is an average, some could reach 20 hours a day. This extreme working time did not suffice to ensure even subsistence nutrition, leading some comentators at the time to declare: "Vivre pour l'ouvrier c'est ne pas mourrir" (page 15).

This rythm was not without consequences, looking at the evolution of life expectancy in some places in France is instructive. In Mulhouse, the average life spans for workers was above 25 years old in 1812, by 1827 it had fallen to 21 years old (page 16).

Downsizing in Cuba: Is public sector employment that detrimental to national income?

In a recent article in Le Monde one learns that Cuba is about to eliminate 500,000 posts in the public sector which currently employs 85% of active labour force. In a rhetoric that has now become mainstream, the move was justified by stressing the sub-optimal support given by the state to unproductive activities, allocation problems in the labour force, and so on. Fidel's brother went as far as saying: "we must eradicate for ever the idea that Cuba is the only country in the world where one can live without working".

As it is always good to go back to the basics, I wondered what was the empirical link between the number of public sector workers and a nation's income per head. Let's consider public sector employment as a share of total empoloyment relying on ILO data (the data is a bit old - mid to end 1990s - but the main point remains. A casual look at a selection of 15 OECD countries reveal some striking things.

The first four contenders are, not surprisingly, located in Scandinavia (Sweden, Norway, Finland, Denmark), they are also located in the first fifteen richest nations as measured by GDP per capita at nominal exchange rates. The 'liberal' anglo saxons nations, save for the US are around 20%; Australia and Canada have more public sector employees (relative to total employment) than Germany while Japan has less than 10% public sector employees.

But one may be forgiven for raising the following point: sure, some rich developed countries can afford big public sectors, but surely to get to that point one ought to minimise the inefficient public sector, right?

To answer that question, let's focus, for the sake of parsimony, at emerging BRICs (Brasil, Russia, India and China). For starters, China had in 1996 about 36% of its employment in the public sector and the figure for India (formal employment; only public sector and private enterprises with more than 10 employees, excluding agriculture) was so large that my first reaction was to think that I was misreading the table: 70%! Brasil did have a fairly low share of employment in the public sector of about 10% while Russia was close to 37% (including public employment in government and the enterprises and organisations owned by the state).

Clearly, this a very crude analysis: it is neither exhaustive in its selection of countries and ignores the time dynamics, nor does it control for other relevant factors; but even at such a simplistic level one seriously questiosn the validity of an assertion regarding the size of the public sector that is often taken as an established fact.

02 September 2010

Unemployment, atypical work and employment policies in France before the crisis

In the fifteen years preceding the crisis, unemployment had been falling to reach about 8% in 2007. This reduction was done against the backdrop of a rise in the share of employees on temporary contracts and a persistently high share of employees on part time contracts. It is interesting to note in this respect that unemployment was reduced without shifting unemployed workers into part time contracts.

Churchill sums up the problem of assessing politicians' performance

With the publication of Tony Blair's autobiography it may be worthwhile remembering a famous quote by Churchill: “History will be kind to me for I intend to write it”. But then you would be missing crusty revelations if you were not to read it; for instance: "The truth is, MPs were underpaid and expenses were used to top up income: but you can't say it". Well, with the success of this book there won't be a need to top up his income...

01 September 2010

The myth that free market's evils are offset by wealth that it generates

An excellent article by Ha-Joon Chang in the Guardian, let me quote his main point:
"We have to question an assumption that has dominated economic thinking over the last three decades – namely, the belief that maximising market freedom is the best way to generate wealth."
"Sadly that assumption has been proved wrong. After three decades of deregulation and tax cuts for the rich, growth has slowed down, rather than accelerated, in almost all countries. The world economy, which was growing at about 3% in per capita terms in the "bad old days" of widespread regulation and punitive taxation for the rich in the 1960s and 70s, has grown at about half that rate in the last three decades. In Britain, average annual per capita income growth rate was 2.4% in the 60s and the 70s, when the country was allegedly suffering from the "British disease"; but it fell to 1.7% during 1990 to 2009, after it is supposed to have been cured of the disease thanks to Margaret Thatcher's heroic struggle in the 1980s."