Wealth inequality: not so simple
There’s a new edition of the Credit Suisse report on global wealth. It thinks New Zealand is the second richest nation in the world, and that the USA has 10% of the world’s poorest people.
Here’s a picture of some of those world’s poorest people.
These are graduates from the Keck School of Medicine, at the University of Southern California, who owe an average of over US$200,000 in student loans. By the Credit Suisse definition of wealth inequality they have less wealth than people living in poorly-maintained state housing in south Auckland. They have less wealth than immigrant agricultural workers in southern California. They have less wealth than subsistence farmers in Chad.
The computations are correct in a sense, but useless for two reasons. The first is that they don’t count the value of any non-salable assets (like a degree in medicine from USC, or permanent residency in the US). The second is more subtle. Wealth inequality is a concern over and above income inequality mostly because it’s bad for governance: small groups of people get too much power. Assets minus debts isn’t a good indication of this power, because the cost and effectiveness of lobbying, influence, and bribery varies so much from country to country.
Thomas Lumley (@tslumley) is Professor of Biostatistics at the University of Auckland. His research interests include semiparametric models, survey sampling, statistical computing, foundations of statistics, and whatever methodological problems his medical collaborators come up with. He also blogs at Biased and Inefficient See all posts by Thomas Lumley »
In addition to the definitional problem above – when this Credit Suisse report came out there was extensive media coverage of the claim that New Zealand was second wealthiest country in the world. Now that this has been found to be a basic arithmetic mistake – dividing instead of multiplying by the exchange rate probably http://www.inequality.org.nz/new-zealand-worlds-wealthiest-country/ but most of the media outlets haven’t picked it up and continue with uncorrected stories (eg http://www.radionz.co.nz/news/national/287940/nz-second-richest-country-global-report ). There’s something fundamentally wrong with this asymmetry.
Shouldn’t there be extensive publicity given to a) correct the impression and b) give Credit Suisse – who’s day job it is to make money out of financial services – a well deserved reputation hit for letting the blunder through, and indeed making it a focus of publicity when it should have failed obvious sniff tests?
9 years ago
Yes, I think there should be publicity both for “Surprising fact isn’t surprising” and “Surprising fact isn’t fact” in this case.
9 years ago