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Thread: Bad science and the 'disappearing' middle class

  1. #1
    Cyburbian Luca's avatar
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    Bad science and the 'disappearing' middle class

    IThis NY Times article is one of several, recently evident in weblogs, etc., that decries the ‘polarization’ of urban areas between very wealthy and very poor, with the subsequent disappearance of marginalization of the middle class.

    http://www.nytimes.com/2006/07/23/we...erland&emc=rss

    The ‘money shot’ is, the disproportionate (relative to the US as a whole) size of the tail distributions of income (i.e. there are more high-relative-income and low-elative-income residents and consequently a lot fewer about-middle-income ones; when compared to the country as whole.

    Hand-wringing is apparently a specialty of the mainstream press but I think that at least among professional planners and other interested parties, it needs to be pointed pout that the content of these articles presents some serious logical flaws.

    1. USING THE WRONG BENCHMARK
    Median income in major cities is generally higher than the national average. Thus, if you define rich, middle-class, and poor by national standards, you’d expect the distribution to be skewed toward the ‘rich’.

    2. USING THE WRONG MEASURE
    Cities where the poor are found in substantial numbers, generally benefit from various benefits, often in the form of below-market-cost housing. No sensible ‘social scientist’ measures income just in terms of monetary receipts but also in terms of direct transfers and benefits-in-kind. In a population where these housing benefits may represent a substantial percentage of income, ignoring them means that a disproportionate number are shoved into the ‘national-standard poor’ category.

    So, beyond the somewhat over-the-top headlines, what we can really say is that cities are more expensive than small towns and suburbs (duh) and increasingly only people with a substantial income (which would only qualify them as rich if they lived in Peoria) or those whose residence is subsidized can afford to reside there (duh).

    IF (a big if) we are angling toward some sort of policy aim of keeping the middle class in NYC and Frisco, then the most obvious solution is to stop paying poor people to live in Manhattan.

    Never mind statements like: “In the San Francisco Bay Area, the percentage of households earning more than $100,000 a year rose to over 30 percent in 2000 from approximately 7 percent in 1970”.

    How asinine is that? Ever heard of inflation? Ever heard of income growth ex-inflation? In 1970 few people made 100K, Nowadays that’s a much more accessible amount for a city dweller.
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    Cyburbian jordanb's avatar
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    Luca: Gini coeffients of the USA from the bureau of census

    # 1970: 0.394
    # 1980: 0.403
    # 1990: 0.428
    # 2000: 0.462

    How does your ideologically-driven wing of the field explain that away?

    To expound:

    You're taking numbers out of news reports from the popular press that aren't real scientific measures (in fact they actually mean nothing) and drawing from that that claims that the middle class is shrinking to the benefit of the rich are based on junk science. You ignore the fact that these things are going through the journalistic filter though. If you say "twenty gallons" to a reporter, he will write "about the volume of a bath tub." Reporters have a knack for turning real numbers into bogus measures for the purpose of giving the reader the "gist" of what the conclusion is. Thus distances are measured in football fields, computer speeds are measured in "millions of calculations per second" etc. If the reporter was to say that "the gini coefficient rose another 0.003 this year" that would mean nothing because most people don't know what that is and can't think in fractions anyhow, so they try to come up with some approximation that puts it in terms of dollars that people can understand.

    You commit a fallacy when you try to claim that, because the numbers that the popular press uses to report on a real phenomenon are bogus said phenomenon doesn't exist. If you choose to look at the real measures you will see that they support the idea that the news article was trying---how ever clumsily---to get across.
    Last edited by jordanb; 25 Jul 2006 at 11:38 AM.
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  3. #3
    Cyburbian Luca's avatar
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    Quote Originally posted by jordanb
    Luca: Gini coeffients of the USA from the bureau of census

    # 1970: 0.394
    # 1980: 0.403
    # 1990: 0.428
    # 2000: 0.462

    How does your ideologically-driven wing of the field explain that away?

    To expound:

    You're taking numbers out of news reports from the popular press that aren't real scientific measures (in fact they actually mean nothing) and drawing from that that claims that the middle class is shrinking to the benefit of the rich are based on junk science. You ignore the fact that these things are going through the journalistic filter though. If you say "twenty gallons" to a reporter, he will write "about the volume of a bath tub." Reporters have a knack for turning real numbers into bogus measures for the purpose of giving the reader the "gist" of what the conclusion is. Thus distances are measured in football fields, computer speeds are measured in "millions of calculations per second" etc. If the reporter was to say that "the gini coefficient rose another 0.003 this year" that would mean nothing because most people don't know what that is and can't think in fractions anyhow, so they try to come up with some approximation that puts it in terms of dollars that people can understand.

    You commit a fallacy when you try to claim that, because the numbers that the popular press uses to report on a real phenomenon are bogus said phenomenon doesn't exist. If you choose to look at the real measures you will see that they support the idea that the news article was trying---how ever clumsily---to get across.
    My criticism was aimed specifically at the journalistic treatment of demographics of large (successful) cities in virtual isolation and with confusing/muddled measures. You appear to agree with my criticism.

    I did not address the issue of changes in actual income distribution on a national scale.

    FYI, I would point out that the Gini Coefficient is a measure of inequality in toto, not of distribution, so it cannot/does not measure the incidence of 'middle-earners' but rather the (non)linearity of income distribution. Subject to some major practical problems such as measuring actual income (as opposed to monetary pay) and adjustment for significant cost differences, it is a useful measure if properly used.

    And yes, to varying dregrees, most economists would agree that overall income distribution has become less equal in the US since the 1970s. This is (only partly) linked to the ability of corporations (capital, as Marx would have it) to extract a growing percentage of value added (surplus value, per Marx) vis-a-vis the employees.

    Lastly, as disappointing as this may be to you, I don't belong to an "ideologically-driven wing" of any field. Unless you count reason as an ideology.
    Life and death of great pattern languages

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    Quote Originally posted by Luca

    And yes, to varying dregrees, most economists would agree that overall income distribution has become less equal in the US since the 1970s. This is (only partly) linked to the ability of corporations (capital, as Marx would have it) to extract a growing percentage of value added (surplus value, per Marx) vis-a-vis the employees.
    Lastly, as disappointing as this may be to you, I don't belong to an "ideologically-driven wing" of any field. Unless you count reason as an ideology.
    Luca: Semi-Off Topic, but what do you think about the "Mutualist" movement. (Kevin Carson et al) which attempts (not entirely successfully, in my non-economist opinion) to posit alternative structures for society which evade the problems of statism AND concentrated capital (the latter is the big problem I have with traditional libertarians, like jaws). http://mutualist.blogspot.com/

  5. #5
    Quote Originally posted by BKM
    Luca: Semi-Off Topic, but what do you think about the "Mutualist" movement. (Kevin Carson et al) which attempts (not entirely successfully, in my non-economist opinion) to posit alternative structures for society which evade the problems of statism AND concentrated capital (the latter is the big problem I have with traditional libertarians, like jaws). http://mutualist.blogspot.com/
    The problem with mutualists and Carson is that they consider theft perfectly legitimate. This means that their position would destroy a large chunk of the market economy were it to be applied.

    See also.

    As for reason why the rich are getting richer and the poor poorer, there are many. The great scam of central banking is an important part of it. Corporate takeover laws protecting incompetent/corrupt management teams are another. Out of the shelves and shelves of regulation made by governments every year, it's not hard to find more.

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    Cyburbian wahday's avatar
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    I feel there is some merit to this criticism, but its hard to know how the jounralists went about doing their work (or from whom they received the data and how they did their work).

    It seems to me, in my limited economics abilities, that one should be looking at the relationship between, say, household income and some sort of regional cost-of-living index to determine what "class" people may fall into.

    Although Santa Fe is not considered a major city because it is so small, the median house value has exceeded $470k. This is up from $176,000 in 2000. A great deal of this is driven by wealthy people buying second (or third, or...) homes and changing the nature of the market. These people are not residents and therefore do not show up in the census in terms of household incomes. Housing has become a crisis in Santa fe where the median household income is about $50,000.

    Similarly, a household earning $75,000 in San Francisco (where median house value is about $644,000) is not going to be considered in the same class as someone in Albuquerque earning the same amount (where the median house value is about $175,000).

    Do we know if the authors of the article attempted to make these kinds of regional adjustments?
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    Quote Originally posted by jaws
    The problem with mutualists and Carson is that they consider theft perfectly legitimate. This means that their position would destroy a large chunk of the market economy were it to be applied.

    See also.

    As for reason why the rich are getting richer and the poor poorer, there are many. The great scam of central banking is an important part of it. Corporate takeover laws protecting incompetent/corrupt management teams are another. Out of the shelves and shelves of regulation made by governments every year, it's not hard to find more.
    Interesting debate, but I'm not sure your conclusion about "justifying theft" is really what they are saying.

  8. #8
    Cyburbian Luca's avatar
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    Quote Originally posted by BKM
    Luca: Semi-Off Topic, but what do you think about the "Mutualist" movement. (Kevin Carson et al) which attempts (not entirely successfully, in my non-economist opinion) to posit alternative structures for society which evade the problems of statism AND concentrated capital (the latter is the big problem I have with traditional libertarians, like jaws). http://mutualist.blogspot.com/
    I've not read up on it sufficiently to express an educated opinion; largely because they remain, at this point, a fairly fringe group.

    My perception is that they are a dead end, trying to reconcile very limited (private) property rights with a non-coercive government. The may be useful, however, in providing a non-statist ctitique to some of the ideological and empirical weaknesses in liberterianism?
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    Quote Originally posted by Luca
    I've not read up on it sufficiently to express an educated opinion; largely because they remain, at this point, a fairly fringe group.

    My perception is that they are a dead end, trying to reconcile very limited (private) property rights with a non-coercive government. The may be useful, however, in providing a non-statist ctitique to some of the ideological and empirical weaknesses in liberterianism?

    Well...I'm not sure they really provide a prescription for the ills of the world, and I am not willing to admit that there is no role for the State, but I do find some of their arguments...interesting. I have to admit some of their themes appeal to some of my prejudices, as well. The strong localist, anti-corporate, anti-big business, anti-hierarchical institution in general themes are quite appealing. As I noted when arguing with jaws, though, mutualist societies (such as they are, there has never been a pure example in any way) have often been plagued with internecine violence and factional warfare that we would find only in gang infested neighborhoods in the modern United States. Not to deny that State capitalism engages in even worse violence, but in the case of a superpower like the United States, said State violence is comfortably removed from the world of the typical GOP voter, so they don't care.

  10. #10
    Cyburbian Luca's avatar
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    Quote Originally posted by BKM
    ...The strong localist, anti-corporate, anti-big business, anti-hierarchical institution in general themes are quite appealing....
    "Small is beautiful" and all that. One of the appeals of libertarian/market-led solutions is that it is very difficult to determine ex-ante (or even permanently ex-post) what the ideal degree of hierarchy, localism, size actually is.

    I don't share the prejudice against 'big', though obviously 'big' is more dangerous when it's bad. Jsut as i don't assume that 'public' is always worse than 'private' simply 'cause I've seen cases on both sides.

    I'll give you a (fairly silly) example. I lived in the US before Starbucks went 'national'. US-style 'beverage' coffee is what it is, but all other attempts were lamentable in the extreme. Now, between SB and the competitors / wannabes / etc. there are tens of thosuands of places, throughout the coutnry where I can get 9with soem isntruction to the staff) a more than decent espresso or cappuccino. Before SB and its clones came to London: same situation. Also, msot high streets did not ahve a single place to sit down and have a light snack or drink, other than smelly, smoky often filthy pubs.That has changed. And SB certainyl treats its suppleirs and employees better than the average small, family run Italian cafe, that I can assure you of. So, in this case, big is beautiful, or at least not ugly. Is SB like the little bars available every 50 yds in Italy. No. Funnily enough, therere aren't many (any?) SBs in Italy.
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    Quote Originally posted by Luca
    "Small is beautiful" and all that. One of the appeals of libertarian/market-led solutions is that it is very difficult to determine ex-ante (or even permanently ex-post) what the ideal degree of hierarchy, localism, size actually is.

    I don't share the prejudice against 'big', though obviously 'big' is more dangerous when it's bad. Jsut as i don't assume that 'public' is always worse than 'private' simply 'cause I've seen cases on both sides.

    I'll give you a (fairly silly) example. I lived in the US before Starbucks went 'national'. US-style 'beverage' coffee is what it is, but all other attempts were lamentable in the extreme. Now, between SB and the competitors / wannabes / etc. there are tens of thosuands of places, throughout the coutnry where I can get 9with soem isntruction to the staff) a more than decent espresso or cappuccino. Before SB and its clones came to London: same situation. Also, msot high streets did not ahve a single place to sit down and have a light snack or drink, other than smelly, smoky often filthy pubs.That has changed. And SB certainyl treats its suppleirs and employees better than the average small, family run Italian cafe, that I can assure you of. So, in this case, big is beautiful, or at least not ugly. Is SB like the little bars available every 50 yds in Italy. No. Funnily enough, therere aren't many (any?) SBs in Italy.

    A good example, Luca, and perhaps not silly at all. I would argue that in this case, Starbucks is not a pernicious influenc on the economy becase a. it's not that important a part of the economy and does not lead to the serious macroeconomic distortions and problems that, say, WalMart or Target, do; b. there remains competition, in many cases even inspired by Starbucks' example. Big is not always bad, but I would admit my prejudices. Their restrooms are certainly cleaner than the typical grungy independent cafe

    I also agree with the Mutualists' argument that removing state subsidies for environmentally destucive activities might do more to reduce environmental destruction than regulations per se. I don't find their faith in property rights as the primary mechanism to replace State regulation very convincing, though.

  12. #12
    Quote Originally posted by BKM
    Well...I'm not sure they really provide a prescription for the ills of the world, and I am not willing to admit that there is no role for the State, but I do find some of their arguments...interesting. I have to admit some of their themes appeal to some of my prejudices, as well. The strong localist, anti-corporate, anti-big business, anti-hierarchical institution in general themes are quite appealing. As I noted when arguing with jaws, though, mutualist societies (such as they are, there has never been a pure example in any way) have often been plagued with internecine violence and factional warfare that we would find only in gang infested neighborhoods in the modern United States. Not to deny that State capitalism engages in even worse violence, but in the case of a superpower like the United States, said State violence is comfortably removed from the world of the typical GOP voter, so they don't care.
    What is your take on James Buchanan's constitutionalist position that the only way for a democracy to achieve the same level of justice and satisfaction as the market is with unanimous voting? The idea is that if a state is really necessary, then there has to be unanimous agreement as to how necessary it is (i.e. everyone understands that they couldn't get the same benefits in any other way) for the state not to be exploitative. A system of majority rule just breeds exploitation.

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    Quote Originally posted by jaws
    What is your take on James Buchanan's constitutionalist position that the only way for a democracy to achieve the same level of justice and satisfaction as the market is with unanimous voting? The idea is that if a state is really necessary, then there has to be unanimous agreement as to how necessary it is (i.e. everyone understands that they couldn't get the same benefits in any other way) for the state not to be exploitative. A system of majority rule just breeds exploitation.
    Not familiar with this work. Not sure how pracitcal it would be, of course. At least for states larger than a classical polis.

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    Cyburbian Luca's avatar
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    A half-way compromise between perfect unanimity and majority rule could be to require much higher poroportions. i.e. 75% to 90%, though ultiamtely coercion is still coercion even if it's 99 against one.

    Getting back to the issue of income inequality I think it is a very corrosive problem, rooted essentially in envy and covetousness. Income insufficiency, OTOH, is a genuine concern, even in rich countries.
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    Can there be such a thing (outside a Neal Stephenson novel) as a society perfectly without coersion? Even jaws heroic writer supporting monarchy envisioned a very, very patriarchical, coercive family structure-and plenty of ethnic group solidarity. The State is not the only source of coersion.

  16. #16
    Don't confuse coercion with aggression.

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    Quote Originally posted by jaws
    Don't confuse coercion with aggression.
    I'm not.

    You are denying that coercion exists in the social settings I disucss above? Especially given your past support for "communities" and that rather frightening monarchist you referrrenced-a man who has some frightening views about cultural group purity and authoritarian paternalistic family structures.

  18. #18
    I'm denying aggression exists in these settings.

    Hoppe is not a monarchist. He simply demonstrated that democracy was worse than monarchy. All that was accomplished by democracy was the substitution of a greedy, short time preference, political aristocracy for the previous financially stable, long time preference, hereditary aristocracy.

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