Tag Archives: Standard of Living

The Economics of Salvation

A hat tip to colleague David Parr for this piece on the Economics of Salvation. David was awarded the Margaret Myers Teaching Fellowship in 2011 and has just returned from studying the history of Renaissance art in the very city in which it had been created – Florence. On his blog entry for Thursday 5th May he discusses the Economics of Salvation. Here is a piece from it.

Then today I came across a wonderful term, the Economics of Salvation. It was used in connection with a discussion by Dale Kent regarding the obligation of charity observed by wealthy citizens in Renaissance Florence in an essay, The Brancacci Chapel Viewed in the Context of Florence’s Culture of Artistic Patronage. Professor Kent identifies the unusual prevalence throughout the fresco cycle of widows, orphans, cripples and the poor amongst those wealthier citizens of the San Frediano district painted by Masaccio and Masolino in the Brancacci Chapel. As the chapel is in the church of Santa Maria del Carmine pictured above, here was an unexpected fusion of art and real life.

In this detail of the Healing of the Cripple by Masolino, the extended gestures of St Peter’s and the cripple’s empty palms are dramatic focal points of the narrative. Two well-dressed young men stroll through the piazza chatting, as in the distance, a wealthy man enters his palazzo having passed an orphaned child and a widow on the street, pointing up the social differences…

WECG – World’s Economic Centre of Gravity

Danny Quah of the London School of Economics (LSE) recently wrote a paper describing the dynamics of the global economy’s centre of gravity. By economic centre of gravity he refers to the average location of the planet’s economic activity measured by GDP generated across nearly 700 identifiable locations on the Earth’s surface.

In 1980 the WECG was located at a point in the middle of the Atlantic Ocean but by 2008 it had drifted to a location at about the same longitude as Izmir and Minsk, and thus east of Helsinki and Bucharest. Extrapolating growth in the 700 locations is projected by 2050 to locate between India and China. The graphic below shows, in 3 year intervals, the WECG 1980-2007 in black and projections for 2010 – 2049 in red. It is interesting to note how the WECG seems to move horizontally so does this suggest that the north-south divide will remain invariant? In looking at the actual data in Quah’s research, it shows that latitude declines from 66 degrees North to 44 degrees North by 2049. This might seem to imply that the south, like the east, is actually gaining considerable relative economic strength. If you are interested in Quah’s paper you can download it by clicking here.

The Inequality Weather Forecast

Thanks to Geoff Riley of the Tutor2u blog for this amusing clip of the inequality weather forecast. In earlier posts I mentioned the book that the clip is advertising – “The Spirit Level”. The book shows that there are a significant negative effects of the increase in inequality in an economy. Many graphs are presented which show how certain variables are influenced by the level of inequality. Here are some of their conclusions . Inequality:
*causes shorter, unhealthier and unhappier lives;
*increases the rate of teenage pregnancy, violence, obesity, imprisonment and addiction

On almost every index of quality of life, or wellness, or deprivation, there is a gradient showing a strong correlation between a country’s level of economic inequality and its social outcomes. Almost always, Japan and the Scandinavian countries are at the favourable “low” end, and almost always, the UK, the US and Portugal are at the unfavourable “high” end, with Canada, Australasia and continental European countries in between.

If Britain were instead to concentrate on making its citizens’ incomes as equal as those of people in Japan and Scandinavia, we could each have seven extra weeks’ holiday a year, we would be thinner, we would each live a year or so longer, and we’d trust each other more. Guardian Newspaper

England’s North South ‘Health’ Divide

There are some interesting statistics from a recent study out of the UK regarding the health of those in the North and South of England.
* 37,000 people in the north die earlier than their counterparts in the south
* deaths in the north before the age of 75 are 20% higher than the south
* gross value added per head (a measure of the state of the local economy) was 40% higher in the south

It seems that social and economic factors are extremely reliable predictors of health.
* Disposable income in the south is 26% higher.
* £19,038 in London and £16,792 in south-east. By contrast disposable income in the north east is £12,543
* Parts of the north have unemployment of 14.1% and on average is much higher than that of their southern counterparts.
* House prices on average increased by 6.3% in the south but experienced 3.3% fall in the north.
The ultimate reason for the gap is disposable income.

World Income Inequality chart

Still on the inequality theme – here is a very worthwhile chart that looks at World Income Inequality. It is from the publication entitled “The Haves and the Have-Nots,” a new book by the World Bank economist Branko Milanovic about inequality around the world which was recently reviewed by New York Times columnist Catherine Rampbell. The graph below shows how inequality in Brazil, USA, China, and India ranks on a global scale. On the x axis the population of each country is divided into 20 equally-sized income groups, which is ranked by each country’s household income per person. These are referred to as ventiles and 1 ventile = 5% of the population. So that we are looking at purchasing power parity (PPP) the data is adjusted for the variance in the cost of living in different countries.

Now on the vertical axis, you can see where any given ventile from any country falls when compared to the entire population of the world.

Brazil
– poorest 5% are amongst the poorest in the world
– richest 5% are amongst the richest in the world

USA
– the bottom 5% are richer than 68% of the world’s population

India
– the bottom 5% = 4th poorest percentile worlwide.
– the richest 5% = 68th percentile worldwide which means that USA’s poorest = India’s richest.

Now you might be wondering: How can there be so many people in the world who make less than America’s poorest, many of whom make nothing each year? Remember that were looking at the entire bottom chunk of Americans, some of whom make as much as $6,700; that may be extremely poor by American standards, but that amounts to a relatively good standard of living in India, where about a quarter of the population lives on $1 a day.

Growth – a means or an end?

The United Nations measure the development of countries using the Human Development Index. As you maybe aware this consists of three variables:
1. per-capita income,
2. life expectancy and
3. literacy rates.

This index is then used to rank countries by how “developed” they are – 169 countries were ranked in 2010. Below is the top and bottom country.
1. Norway
169. Zimbabwe

The latest Human Development Report identified that in particularly less developed countries there is a poor correlation between economic growth and improvements in health and education The graph below shows that where income has increased the impact on non-income variables (literacy and life expectancy) has been minimal. Source: New York Times – Relationship between economic growth and the non-income components of the Human Development Index, 1970–2010.

Here’s one example (from the New York Times) of economic growth not translating to development as expected.

Take a revealing comparison between China — the world’s fastest growing economy in the past 30 years — and Tunisia. In 1970 a baby girl born in Tunisia could expect to live 55 years; one born in China, 63 years. Since then, China’s per capita GDP has grown at a breakneck pace of 8 percent annually, while Tunisia’s has grown at 3 percent. But a girl born today in Tunisia can expect to live 76 years, a year longer than a girl born in China. And while only 52 percent of Tunisian children were enrolled in school in 1970, today’s gross enrollment ratio is 78 percent, considerably higher than China’s 68 percent.

It seems that there is little correlation between improvements in national income and improvements in education and health.

Economic Freedom – New Zealand 3rd

A report from the Economic Freedom of the World (EFW) measured the degree to which the policies and institutions of countries are supportive of economic freedom. Forty-two data points are used to construct a summary index and to measure the degree of economic freedom in five broad areas:

1 Size of Government: Expenditures, Taxes, and Enterprises;
2 Legal Structure and Security of Property Rights;
3 Access to Sound Money;
4 Freedom to Trade Internationally;
5 Regulation of Credit, Labour, and Business.

The research shows that individuals living in countries with high levels of economic freedom enjoy higher levels of satisfaction, greater individual freedoms, higher GDP per capita and a greater life expectancy. Below are the top and bottom 10 countries in the research (10 = perfect freedom)

Hans Rosling – TED Talks

From the TED site – Hans Rosling gives his usual passionate presentation using some great statistics on the progress of the MDG’s. Watch out for him ripping out a page from the UN Report on “Levels and Trends in Child Mortality”. For some reason it stated that Singapore, South Korea, Qatar as developing countries. However, there has been great progress in child mortality rates – see his last graphic.