Comments on: Swedish inequality datapoint of the day http://blogs.reuters.com/felix-salmon/2011/03/25/swedish-inequality-datapoint-of-the-day/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: LennartRegebro http://blogs.reuters.com/felix-salmon/2011/03/25/swedish-inequality-datapoint-of-the-day/comment-page-1/#comment-25822 Fri, 15 Apr 2011 13:58:05 +0000 http://blogs.reuters.com/felix-salmon/?p=7728#comment-25822 This is only the start of the problems with this survey. O blogged about it. http://lennartregebro.wordpress.com/2011  /04/15/does-americans-really-want-swede ns-wealth-distribution/

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By: MyLord http://blogs.reuters.com/felix-salmon/2011/03/25/swedish-inequality-datapoint-of-the-day/comment-page-1/#comment-25414 Mon, 28 Mar 2011 20:18:44 +0000 http://blogs.reuters.com/felix-salmon/?p=7728#comment-25414 Any word what Swedes would prefer?

The way to compare income and wealth is to measure what wealth is capable of safely generating, 4 or 5%.

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By: y2kurtus http://blogs.reuters.com/felix-salmon/2011/03/25/swedish-inequality-datapoint-of-the-day/comment-page-1/#comment-25413 Mon, 28 Mar 2011 19:49:53 +0000 http://blogs.reuters.com/felix-salmon/?p=7728#comment-25413 @TFF,

I admit that any forced savings program would be a hindrence to any responsible individual who would prefer to wisely manage their own money. My experience as a financial advisor is that perhaps 20% of Americans have saved prudently enough to achive the retirement they envision.

The other 80% would have been better off had the goverment deprived them of a starbux/day for their 40 working years and allowed them a roast beef sandwich/day for their 22 year retirement.

While I’m pesimistic enought to think that any sensable solution is unlikely I don’t see why a national 401k style system could not mandate the savings as a % of earned income and deny all access to the money except for the most extreem circumstances and leave the money management up to the individual.

At scottrade there are restrictions to what I can invest my ROTH IRA in. I can’t use margin (probably a good thing.) I can’t buy options (probably a good thing.)

Most people would probably keep their money parked in whatever the default option was. Yet if you use a balanced fund as a default then the manager can swing at least some of your money between stocks and bonds if they feel a bubble brewing.

A well run national savings plan is probably wishful thinking but like getting HIV through unprotected sex, having a heart attack from being 100 pounds overweight, or getting lung cancer from smoking, the solution to the problem exists… just a matter of early education and willpower.

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By: TFF http://blogs.reuters.com/felix-salmon/2011/03/25/swedish-inequality-datapoint-of-the-day/comment-page-1/#comment-25389 Sun, 27 Mar 2011 11:23:23 +0000 http://blogs.reuters.com/felix-salmon/?p=7728#comment-25389 y2kurtus, one of the dangers of that approach is you make it increasingly difficult for RESPONSIBLE individuals to manage their earnings.

For starters, the Republican proposal (and any that is likely to pass) would restrict the investment options to mutual funds — likely low-cost index funds. While this is superior to high-cost index funds (which is essentially how most actively managed funds behave), index funds are a highly risky way to invest. They enforce whole-hearted participation in every bubble, while making it impossible to time holdings to match assets to obligations. If hedge funds were restricted to trading indexes and index futures, they would not make any money.

Second, there are three basic financial truths — college, your house, and retirement. (Because of the time frame involved, their PV isn’t as different as you might think.) There are times when it makes sense to be saving heavily for retirement, but other times when it makes sense to be aggressively saving enough for a 20% downpayment and another 10% as reserves. (Could easily be a full year’s earnings.) The more restrictions you place on the accounts, the harder it becomes to plan for the future.

Roth IRAs are the most flexible account structure I know. I would be interested in seeing statistics — are people as successful in accumulating money in Roth accounts as they are with other structures? (Obviously a strong demographic dependence that would need to be factored out.) If not, then perhaps your proposal is necessary.

Still, it would make yet ANOTHER bite out of the take-home pay. Even if it is money I would save anyways.

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By: DanHess http://blogs.reuters.com/felix-salmon/2011/03/25/swedish-inequality-datapoint-of-the-day/comment-page-1/#comment-25388 Sun, 27 Mar 2011 06:37:54 +0000 http://blogs.reuters.com/felix-salmon/?p=7728#comment-25388 Large swathes of people do not, and will not, build wealth, period.

A lot people will locate whatever there is available to consume in the present, they will consume all of it. These people, and there are a lot of them, will never have any meaningful wealth.

Sadly that is the present attitude of the leaders of our State.

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By: ginsbu http://blogs.reuters.com/felix-salmon/2011/03/25/swedish-inequality-datapoint-of-the-day/comment-page-1/#comment-25386 Sun, 27 Mar 2011 03:02:30 +0000 http://blogs.reuters.com/felix-salmon/?p=7728#comment-25386 Felix, you’re doing Norton and Ariely a disservice by misrepresenting how they disclose their use Sweden’s income rather than wealth distribution. It is clearly disclosed in the BODY of their article; only the explanation as to why is relegated to the footnote. Here’s the text:

“Americans Prefer Sweden
For the first task, we created three unlabeled pie charts of wealth distributions, one of which depicted a perfectly equal distribution of wealth. Unbeknownst to respondents, a second distribution reflected the wealth distribution in the United States; in order to create a distribution with a level of inequality that clearly fell in between these two charts, we constructed a third pie chart from the income distribution of Sweden (Fig. 1).2″ [The “2” at the end is the reference to the footnote you quote.]

While I think that they should have used scare quotes around ‘Sweden’ to more clearly indicate what they had done, their reasons are well justified as a matter of research methodology (though there is a problem with the methodology of this task that Noah catches).

Gimein says: “The effect of this and other economic research isn’t to prompt debate. It’s to shock people with numbers, even if they’re made up.” But here he betrays his own failure to carefully read their paper. The results of the second task, shown in figures 2 and 3, are based on subjects responses as to ideal distribution, not on Sweden’s income distribution. There subjects preferred an even more equal distribution than the “Sweden” distribution from the first task. Those numbers are “made up” in the slightest, nor do they involve “mislead[ing] people about what’s possible”. What those results show is that the public is already deeply confused as to the realistic range of wealth distribution.

You’re also wrong in your characterization of Freeland’s reporting. When she says “Americans actually live in Russia, although they think they live in Sweden”, she’s clearly referring, not to the preferred distribution results from task 1, but to the actual vs estimated vs ideal results from task 2. As she, correctly, goes on to say, “they would like to live on a kibbutz”, i.e. their ideal is essentially utopian. When she says “they think they live in Sweden” she’s understating their estimation of US wealth inequality, as the estimation is actually more equal than the real Swedish distribution.

Noah does get it wrong, though he has a good criticism of Norton and Ariely’s task 1 methodology. But he misses entirely their ideal distribution results from task 2 that are even more equal than the “Sweden” preference from task 1.

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By: y2kurtus http://blogs.reuters.com/felix-salmon/2011/03/25/swedish-inequality-datapoint-of-the-day/comment-page-1/#comment-25385 Sun, 27 Mar 2011 02:43:13 +0000 http://blogs.reuters.com/felix-salmon/?p=7728#comment-25385 I was logging in to write almost exactly the first comment TFF did.

If I’m 62 and I get 1500/month from SS and 1500/month from my union pension than I make $36000 a year with zero assets. That’s more income than a million dollars generates in the current rate enviroment.

We need a national savings program. Keep social security payouts just as they are… bust the earnings to pay the benefits. Next step increase payroll taxation to 12% and throw the new 5% into an UNTOUCHABLE retirement account in the name of every worker. Any approved financial company can manage the accounts. Some low cost provider with a strong reuptation like Vanguard can be the default option using active management for 50 basis points.

This way the next time we publish a study about income inequality not just the hard working responsible people will have all the money.

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By: TFF http://blogs.reuters.com/felix-salmon/2011/03/25/swedish-inequality-datapoint-of-the-day/comment-page-1/#comment-25379 Sat, 26 Mar 2011 20:57:09 +0000 http://blogs.reuters.com/felix-salmon/?p=7728#comment-25379 Has there EVER been a society with that kind of wealth equality? I suspect that we’ve seen a general growth in equality over many centuries, at least since the invention of the “trades and merchants” class. Possibly reversing a bit over the past twenty years, but not nearly to the extent of the feudal days.

People believe they live in a society of broad equality because they look around themselves and realize that the majority of people are pretty well off. The difference between my own condition and that of Bill Gates is less material than the difference between a lord who had enough to eat all winter and the peasant who starved for 3-4 months of the year.

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By: Auros http://blogs.reuters.com/felix-salmon/2011/03/25/swedish-inequality-datapoint-of-the-day/comment-page-1/#comment-25378 Sat, 26 Mar 2011 19:44:06 +0000 http://blogs.reuters.com/felix-salmon/?p=7728#comment-25378 I don’t see what’s dishonest about the paper. They fully disclosed what they were doing. It’s not their fault that most journalists are economic ignorami.

In any case, the take-away from the study is that:

(a) Americans think they already live in a society that is AMAZINGLY equal; more equal than the most equal modern societies on Earth;

and (b) they believe that this kind of equality would actually be desirable.

So the overall thrust of the journalistic commentaries — that the only reason Americans fail to support more progressive taxation and efforts to reverse the concentration of wealth, is that they don’t understand what kind of society they live in — is entirely accurate, even if the journalists are getting a key detail wrong.

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By: Curmudgeon http://blogs.reuters.com/felix-salmon/2011/03/25/swedish-inequality-datapoint-of-the-day/comment-page-1/#comment-25376 Sat, 26 Mar 2011 17:30:03 +0000 http://blogs.reuters.com/felix-salmon/?p=7728#comment-25376 If I understand what you are saying, the research is intellectually dishonest, and the reporting on it journalistically dishonest. It’s one thing to show people graphics of either income or wealth distribution, and ask which society they want to live in (that’s probably reasonable research), and another entirely to ascribe them to countries, then use different measures for those countries designed to maximize the difference (highly dishonest).

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