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Critique of the “Mindblowing Fact” video on income inequality

The video in question  is quite “mind-blowing” as promised, indeed, at over 13 million hits, it can even be called “viral”, but there are problems in how it presents and handles facts and references. While I don’t have a problem with the facts, and I am quite certain they are based on serious numbers, the presentation was too slick, with style clearly triumphing over detail.

The speaker begins by saying he was disturbed by a Harvard study that said that the actual distribution of wealth, what Americans think that distribution is, and the distribution of wealth idealized by Americans is totally out of whack. Americans are aware of existing inequalities, but have not the slightest idea of the extent of those inequalities. While he cites the Harvard study in his presentation, his only printed citation in his list of references at the end was the Mother Jones website, which, if you scroll down, you will find the “source”. In effect, the speaker, whom I didn’t catch the name of, is in effect citing Mother Jones citing the study by Professor Norton of Harvard Business School. I am aware of “Worstall’s Fallacy”, touted most of all by Forbes commentator Tim Worstall himself (Fellow of the Adam Smith Institute, and self-described as a “world expert on Scandium”, a transition metal), that “income” and “wealth” are different ideas that seem similar, and that the speaker in this video was committing “Worstall’s Fallacy” by confusing the two. I am never told quite where the speaker in the video does this. But then I thought that even if you corrected for that in the video, it would not change the overall message, just dull it a little bit.

But an even more worrisome statement in the video was at around 2:24 or so, where he derides socialism. Why does he feel he has to separate himself from socialists? Socialism should not be considered a dirty word. The distribution he labels “socialism” is actually Communism. You can only have absolutely equal wealth distributions (as in Communism) in a command economy where you have “no freedom to choose your major”, as Abbie Hoffman once said about Maoist China in the late ’60s (why else other than in an unfree society would you study medicine if you were only going to make as much as a janitor?). And the “ideal” American distribution cited as supportable by 9/10 Americans (where rich and poor coexist) would only be possible through wealth redistribution. I think the word for that second option begins with “S” and ends with “m” and rhymes with “populism”, and exists to some extent in most advanced capitalist democracies around the world. In fact, capitalist democracies are the only places I think that socialism is possible.

A choice joke I heard making the rounds is the one about a Union worker, a Tea Party supporter, and a millionaire Industrialist in the same room where there is a plate with a dozen cookies. The Industrialist takes 11 of them, and whispers to the Tea Party supporter: “That Union guy is trying to steal your cookie!”

2 comments to Critique of the “Mindblowing Fact” video on income inequality

  • “Worstall’s Fallacy”

    No, it’s not the confusing of income and wealth that is the fallacy. Rather, it is measuring the distribution without acknowledging the things that are already done to change that distribution.

    To give a simple example. The market income gini for country A is around 0.48. The market income gini for country B is a little higher, at 0.50. So, we could, if we wanted, say that B is more unequal than A.

    However, we do tax people and we also provide benefits to people. In country B this lowers the gini by 20 points, to 0.3. In country A they do less tax and redistribution and so the gini is only reduced by 10 points, to 0.38.

    So, we would now say that after tax and benefits A is more unequal than B.

    Worstall’s Fallacy is to fail to note those things that are done. For example, people often compare the US income gini of 0.47 with that of Sweden at 0.23 or so. But the first is the market income gini, the second is the after tax and benefits gini.

    In the video the wealth distribution is measured before all of the things that we do to reduce the wealth gini. It’s thus terribly misleading as to what the real, as it is experienced, inequality is.

    • Thanks for your detailed and informative reply, Tim.

      I actually didn’t know that the gini could affect a country that much. But for the uppermost 1% that the video focused on, even if taxes took away half of that guy’s income, his income is still in the stratosphere compared with his cohorts in the “lower 80%”. Also, it’s not as if the distribution of after-tax income would send the income distribution back to 1980s levels for everyone. I think a more meaningful comparison would be to compare the gini levels over time, since the ’80s, rather than take one measurement, frozen in time, of after-tax income, then compare the disparities.

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