Monday, April 2, 2012

Attitudes toward Money, Wealth Inequality, and what it means.

I've written before on the Gini Coefficient. It it is a measure of the Lorenz Curve relation of wealth distribution. It is commonly used to measure income inequality. I recently saw an economist chart called Attitudes toward being rich...

So I immediately thought, hmmmm, what's the relationship to Gini coefficient here? I assume that people  are fairly perceptive, and know their relative wealth. A poor person is by definition someone without too much money, that has a lot to worry about other than being rich and having expensive things. Yet oddly, by my perception, it's these really poor people who are often willing to work harder, and are more successful, and frugal. 
My quick check showed 42 for Russia, and 25 for Sweden. I know of the top of my head that Mexico, and Russia have a large number of Billionaires with a lot of really poor people so I'm thinking people focusing on wealth inherently results in a less equal distribution of wealth. I grabbed some numbers from Wikipedia, so it's spread across a few years, but let's assume fairly accurate: 

Slovenia appears to have something going on because it's WAY out of the way on my assumption, but in general the numbers seem to show a clear correlation. We must always be wary of assuming that correlation equals causality, for it is not always so. But I wonder. Sweden, Norway, The Netherlands, and Finland, "Nordic" countries by my reckoning seem to be more wealthy then most, and have a high GDP Per head. These four countries are all in the top 13 when it comes to nominal GDP per capita,  and the top 21 when adjusted for Purchasing Power Parity, or cost of goods.
So I augmented my chart to add in Nominal GDP per capita, and took out two huge outliers (Bulgaria and Ukraine) for the sake of the chart.
These numbers are not normalized, so it doesn't say that GDP/head is MORE correlated. To me it's just very clear that attitudes on money, wealth inequality, and wealth of a nation are all related. But what's the cause and effect? Can it be legislated away, or is it a fundamental issue of perception, and society? Or even just a function of the Bell Curve? It's clear to me the logic of a more equal and successful society being related. But what's the cause and what's the effect?
There's a lot of talk in politics in the US these days about taxing rich, and taxing poor. Will it make the rich run away, or actually help everyone? I do believe that financial chicanery has rigged the system toward big banks, and that's why a lot of people are mad. The bankers are not giving more value then they were 10, 20, 50, and a hundred years ago, and their piece of the pie (profits/valuation relative to S&P total) has grown dramatically. I can't cite this directly but I saw a fairly authoritative chart on CNBC recently.

Looking forward to comments on the Business/Finance front, as well as Socio-Political aspects...