“[L]ive up to the conventional standard” vs. “outdo those with whom we are in the habit of classing ourselves.”

Chapter Five of Thorstein Veblen’s The Theory of the Leisure Class (1899), The Pecuniary Standard of Living, begins as follows:

For the great body of the people in any modern community, the proximate ground of expenditure in excess of what is required for physical comfort is not a conscious effort to excel in the expensiveness of their visible consumption, so much as it is a desire to live up to the conventional standard of decency in the amount and grade of goods consumed. This desire is not guided by a rigidly invariable standard, which must be lived up to, and beyond which there is no incentive to go. The standard is flexible; and especially it is indefinitely extensible, if only time is allowed for habituation to any increase in pecuniary ability and for acquiring facility in the new and larger scale of expenditure that follows such an increase. It is much more difficult to recede from a scale of expenditure once adopted than it is to extend the accustomed scale in response to an accession of wealth.

Political equality in a large group

This post is aimed at being the first part in a long-delayed “attempt to embark on” “a methodical analysis of the set of possibilities for achieving political equality”.

Part 1: Optimal decision-making, group rationality

… in which it is argued that groups, in an ideal setting, can achieve rational decisions. Group decision making constrained by practical circumstances should therefore be designed so as to produce decisions that approximate the decisions that would have been made under ideal conditions.

It is sometimes asserted that groups cannot form good policy. When such notions are expressed by the less educated, they are are attributed to the authoritarian sentiments of the unsophisticated. When such ideas are proposed by the educated, they are considered evidence of hard-headed realism. Elite speakers often mention Arrow’s “impossibility theorem” (what Arrow called the ‘General Possibility Theorem’) and claim that it “shows” that group rationality is impossible.

Effective U.S. federal tax rate vs. income

The congressional budget office provides data about the distribution of the federal tax burden (including income tax, social security tax and excise tax) among the different income groups. The chart below shows the 2005 distribution. The area of the entire chart represents the total household income in 2005 ($9.7 trillion).

The chart is divided by solid lines into 5 vertical bars, corresponding to the five household income quintiles, sorted in order of increasing household income from left to right. The bars’ widths correspond to the total income of the quintile (i.e., income per household in the group times the number of households in the group). The top income quintile is split with a dotted vertical line into the two groups – the top 1% on the right and the rest of the top quintile (percentiles 80 to 99) on the left. Those subgroups within the top quintile are broken down further into the following percentile brackets (not marked with vertical lines): [80-90], [90-95], [95-99], [99-99.5], [99.5-99.9], [99.9-99.99], and [99.99-100].

Each bar has a shaded portion corresponding to the share of the income group’s income which is collected as federal taxes. Thus the total shaded area corresponds to the federal tax total ($2 trillion = 20.5% of $9.7 trillion).

The tax rates increase from 4.3% for the bottom quintile to 32.1% for the [99.9-99.9] percentile bracket, before dipping slightly to 31.5% for the top hundredth of percentile.

Breakdown of U.S. household expenses

The chart below shows the breakdown of the average U.S. household yearly expenditure in 2007. I removed the “pensions and social security” category from the total, since this category should be seen as a tax, a benefit or savings rather than as an expense. I also carried out some grouping of expenditure categories for visual clarity. Some of the low expense categories, for example, were grouped under the heading “other” together with the category “miscellaneous”.

When comparing expenditure patterns for higher and lower income households (under $70,000 vs. over $70,000), it turned out that the proportions allocated to each of the categories are quite stable – with differences of no more than 2% in each category, and no obvious trends.

Data source: Bureau of Labor Statistics, Consumer Expenditure Survey.

History of work hours per person vs. median income

The following chart shows the trend of average weekly work hours per person in the U.S. and the trend of CPI-adjusted median U.S. household income. Both quantities rose by about 25% over the last 45 years.

Average weekly work hours per person are calculated as weekly work hours aggregates (total workers times average hours per worker) divided by the total size of the population (including non-workers of all ages). CPI-adjusted household income is shown in 2008 dollars.

Rockets fired at Israel from Gaza 2002-09

The chart and table below show the number of rockets fired at Israel from Gaza each month in the period 2002 to July 2009.

The data source is the Intelligence and Terrorism Information Center at the Israel Intelligence Heritage & Commemoration Center (IICC).  The IICC data is apparently the official Israeli count as it is referred to by the Israeli Ministry of Foreign Affairs on its website.

Links to specific documents from which the data was collected: Rocket threat from the Gaza Strip, 2000-2007, Anti-Israeli Terrrorism in 2007 and its Trends in 2008, Summary of rocket fire and mortar shelling in 2008, Operation Cast Lead – Update No. 15, Operation Cast Lead – Update No. 18, News of Terrorism and the Israeli-Palestinian Conflict July 14-21, 2009. All documents were retrieved 24-July-2009. Data for most of 2009 is available by week and was assigned to months based on greatest week/month overlap.

Unfortunately, no statistics of Israeli artillery fired at Gaza seem to be available.

Year	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
‘02	3	9	6	0	0	0	9	0	3	2	1	2
‘03	21	12	16	4	19	30	0	14	0	31	2	6
‘04	7	12	7	16	13	16	53	19	46	34	8	50
‘05	41	0	0	8	11	17	28	6	29	8	15	16
‘06	1	47	69	58	45	134	197	41	46	68	182	58
‘07	28	43	31	25	257	63	61	81	70	59	65	113
‘08	136	228	103	373	206	158	4	8	1	1	125	361
‘09	363	55	32	4	5	1	1	1	11	5

Update (3-Sep-09): August ‘09 data added to table. Source: News of Terrorism and the Israeli-Palestinian Conflict, August 25 – September 1, 2009.

Update (2-Nov-09): September and October (up to 27th) ‘09 data added to table; August ‘09 entry amended to show apparently revised number. Source: News of Terrorism and the Israeli-Palestinian Conflict, October 20-27, 2009.

Car and air transportation by income

The Consumer Expenditure Survey (2007 data) shows (1, 2) that the higher a household’s income is, the more its members travel. Households whose income is above $150,000 a year spend on average about $4,000 a year on gasoline and motor oil, while household whose income is under $15,000 a year spend about $1,000.

The BLS groups air travel together with cruiseboat travel and mass transit under the heading “public transportation”. Most of the amount under this heading is spent on air travel, with the proportion increasing with income. The amount spent on “public transportation” is therefore a good indicator of the distance covered in travel by air, and inequalities in the expenditure in this category can serve as lower bounds for the inequalities in air travel. The expenditure within this category is overwhelmingly by the rich. The top 10% of households account for about half of the total expenditure on “public transportation” – a proportion similar to their share in the total income.

Expected age at death at various ages

The chart below shows the progression over time (1900-2005) of the expected age at death for Americans at various ages. Each line shows the expected age at death for a person at a specific age (10 year intervals, except for the dashed line, corresponding to age 1 year).

Data: National Vital Statistics Reports, Vol. 51, No. 3, The 2009 Statistical Abstract, Table 103.

Obama’s name recognition history

The case of Rudolph Guiliani suggests that mass media cannot dictate to the public who to vote for. However, since it is impossible to vote for a candidate one has never heard of, mass media cannot help but determine who the public will not vote for.

Senator Barack Obama announced his candidacy for president in January 2007, yet even by by February 2006 over 40% of the people heard enough about Obama to have an opinion about him.

For comparison, a different Democratic congressmember running for the nomination, Dennis Kucinich, never managed to have more than 35% name recognition, even during the height of the primary season.

(The points marked with ‘k’ show the proportion of people recognizing Kucinich.)

Data: pollingreport.com: Newsweek, NBC and Gallup series.

Income of richest households vs. tax on high incomes

During the last 90 years the U.S. has experienced large changes in the share of the total national income controlled by the richest households. The (pre-tax) share of the richest 0.01% of households, for example, was under 1% in the late 1970’s, but over 5% in the late 1920’s and in the years 2005 and 2006.

Over the same period, income tax rates on high incomes varied greatly. The top income rate fluctuated between over 90% (1950’s and early 1960’s) and under 40% (1920’s and 1987 to the present day).

As is evident in the chart below, those two phenomena are strongly negatively correlated over time. The correlation factor is about -74%. Of course, correlation does not imply causation, but even if high tax rates on high incomes do not directly translate to smaller (pre-tax) income for the rich, the correlation supports the notion that inequality in income is determined to a large extent by public policy rather than by an “impersonal phenomenon, the market price”.

Data: Income data are from Thomas Piketty and Emanuel Saez, “Income Inequality in the United States, 1913-1998″; updated version and updated data files available at Saez’s website. Tax rate data are from “Personal Exemptions and Individual Income Tax Rates, 1913-2002″, an IRS publication.