Tuesday, September 20, 2011

The Gini Coefficient

     There's a great deal of discussion in the U.S. these days about "taxing the rich".  As a non-rich capitalist myself, it's an interesting debate.  It seems to me that capitalism has been successful because if you work hard you can better your circumstances - and there is no limit to how rich you can be.  The socialist argument, of course, is that everything should be shared equally in society, no matter what.  Most people I know are what I would call "capitalists with heart", ie. they embrace capitalism because of its freedom and efficiencies, but allow that society must take care of those who can't take care of themselves.  Striking the right balance is tricky.  As elucidated several days ago in this space regarding Iceland, when the masses decide the elite have gotten out of hand, watch out.  Enter the Gini Coefficient: "The Gini coefficient is a measure of statistical dispersion developed by the Italian statistician and sociologist Corrado Gini and published in his 1912 paper "Variability and Mutability" (Italian: Variabilità e mutabilità).  The Gini coefficient is a measure of the inequality of a distribution, a value of 0 expressing total equality and a value of 1 maximal inequality... It is commonly used as a measure of inequality of income or wealth. Worldwide, Gini coefficients for income range from approximately 0.23 (Sweden) to 0.70 (Namibia) although not every country has been assessed." (Wikipedia)  Gini can thus be thought of as "the gap" between rich and poor.  From the above map (based on CIA Factbook data), the question for Americans is "what company do you want to keep"?

The Good News:  Montanans are pretty good company!