How Should Wealth Should be Distributed (Part Three}

Here's my last post on the inequality of wealth distribution (previous posts here and here).  Maybe it should have been my first post, since it provides a rationale why you should care about inequality of wealth distribution.  Some would say you should care on moral grounds.  Others argue that inequality is also detrimental on economic grounds.  In other words, no matter which side of the political divide you inhabit, this is something you should care about.

Nobel Prize winner Joseph Stiglitz's recent book The Price of Inequality examines these reasons.  He argues that the current economic malaise and poor prospects of the middle and lower classes in the US are not a result of economic forces beyond America's control, but of the exercise of political power by moneyed interests over legislative and regulatory processes**:

"While there may be underlying economic forces at play, politics have shaped the market, and shaped it in ways that advantage the top at the expense of the rest".  

In his New York Times opinion piece entitled Inequality is Holding Back the Recovery, Stiglitz argues persuasively that economic inequality is squelching recovery because it means that tax receipts are down, economic volatility is up, and the middle class is too weak to support consumer spending and cannot invest in the future (education or businesses).

Although the US sits 91st of 153 countries on its wealth distribution (as described in this post), it feels as if Stiglitz is pushing a rock uphill in raising the issue of inequality, when you look at the general political debate in the US.


Ironically, Germany which sits 13th on the list (with wealth inequality declining) has seen inequality emerge as an election issue, as described in this Economist article***.  Germany had a huge increase in inequality with the integration of East Germany, but the gap between East and West Germany is shrinking.

Often, wealth inequality in the US is justified on the basis that the people at the top earned their money through hard work in a land of equal opportunity.  Indeed, t|he US cherishes its image as a utopia of meritocracy: anybody who works hard can make it.  The facts show otherwise: not only is there greater inequality in the US than in most developed nations, but this inequality is persistent.  Children in other rich countries like Canada, Germany, France and Sweden have a better chance of doing better than their parents than American children*.  A New York Times article reported that at least five large studies showed the US to have less mobility than comparable nations: Canada, Norway, Finland and Denmark all showed greater mobility.  A Globe and Mail headline boasted "In Canada, unlike the US, the American dream lives on".




*  I've taken that fact from Stiglitz' column
** phrasing directly taken from NYT book review of this book
*** According to The Economist, Germany sits at 7th, rather than 13th position as my data claimed.  That data showed German data from 2000, so it makes considerable sense that Germany has risen since then.  I chose to characterize Germany at 13th to be consistent with previous post.

Coursera takes off

Coursera has just announced that they hit three million students during March.  One year.  Three million students.  These students took over ten million courses.  Quick - do the math.  That's over three courses per student on average.  That would make me not so unusual for registering for ten:  I've completed three, am in the midst of five (two very half-heartedly), have abandoned one, and one more has just started.

I'd be very interested to see a breakdown of the geographic distribution of the students.  Certainly, I found the distribution in World History Since 1300 to be very broad and the students very diverse.

edX, the Harvard-MIT platform has far fewer courses, and far fewer students (in the thousands, not the millions as far as I can see).  Is there a critical mass factor in course selection?  Will more people 'shop' for courses, where there are more courses?  The bigger you are, the bigger you'll get?

As a frequent-flyer member of Coursera, so to speak, I'm certainly more likely to browse the courses there.  However, I did register for an edX course recently: Michael Sandel's famous Harvard course on Justice.

How Should Wealth be Distributed (Part Two)

In my last post, I opened the subject of income inequality.  This topic of income and wealth inequality has been fascinating me lately, and I'm not alone in this fascination as growing wealth disparity is gaining more and more press attention.

The most common way to measure income inequality is using the Gini coefficient described here. There's quite a bit of math behind the calculation of the index, but, in simple terms, a country Gini index of 100 indicates perfect inequality (i.e. one person owns all the wealth) while 0 indicates perfect equality (i.e. wealth is evenly distributed among all).  Wolfram Alpha has a histogram showing the distribution of the Gini index across the world.

I was curious about the degree of wealth inequality in various nations around the world.  This reference* shows the Gini index for 153 countries around the world with, the Seychelles at the bottom of the inequality list with a coefficient of 65.77, and Denmark at the top with a coefficient of 24.70.  Not surprisingly, the ten countries showing the greatest inequality are all relatively poor - the Comoros, Namibia, South Africa, Botswana, Haiti, Angola, Honduras, Central African Republic, and Bolivia.

Three of the four countries with the lowest Gini coefficient - i.e. with the most equal distribution of wealth - are not, surprisingly, Scandinavian: Denmark (24.70), followed closely by Japan (24.85), Sweden (25) and Norway (25.9). The Czech Republic (25.82) rounds out the top 5.

I reflected on how this might play out in real life.  When visiting Kenya and Tanzania a few years ago, I observed that ordinary Tanzanians seemed to be much better off than Kenyans, despite a substantially higher per capita GDP in Kenya than in Tanzania ($808 versus $532).  Well, on the Gini list, Kenya (at 47.68) is near the bottom at 120th of 153, while Tanzania (at 37.58) is just above the middle at 67th, a full 53 positions higher than Kenya.  So, from my own small, personal, totally unscientific sample, you can actually see the difference distribution of wealth can make.

How does North America fare?  Canada (32.56) is 30th of 153.  Mexico (48.28) is almost tied with Kenya at 122nd.  So where might the US be, the richest country in the world?  The US** (40.81) is a dismal 91st : i.e. it's in the bottom half of the world when it comes to inequality and it's about half way between Kenya and Tanzania.

The next question to ask is whether this matters very much.  What's your opinion of how wealth should be distributed in your country?

* I should point out that in this chart I found, the coefficients relate to different years in different countries, so they are not directly comparable.

** This figure dates from 2000, and recent data points to a deteriorating situation re inequality since then.

How Should Wealth be Distributed? (Part One)

US Wealth Distribution 

Recent research by Harvard's Michael Norton and Duke's Dan Ariely (described here) reported on a survey of respondents' views on how wealth should ideally be distributed (column 1), their perception of how wealth is distributed (column 2), and how wealth really is distributed (column 3).

There's stunning divergence between these charts.  People feel wealth should be fairly equally distributed.  They perceive that wealth is not distributed that equally, but that it's in the ball park.  However, they miss the fact that wealth is distributed much much more unequally than they perceive.

Wealth is extremely unevenly distributed in the US.  The top 1% hold 40% of the wealth, and the top 20% hold over 80% of the wealth.  Yet a random sample of 5,000 Americans perceive that the top 20% hold just over 50% of the wealth, and they feel that, ideally, they should hold about 30% of the wealth.

The research has provoked discussion on the topic, and has also spawned a video that expresses the data more visually which will appeal to those less comfortable with simple percentages and statistics.

The reason for this misperception among Americans might be explained by some of Dan Ariely's previous work in behavioural economics.  Dan Ariely is best known for his book Predictably Irrational.  It's a great read and I highly recommend it.  (I've written about Ariely's work before in posts here, here, and here.)  Ariely's research highlights the many behaviours exhibited by humans that are simply not rational.

One of Ariely's key points is that people assess choices in comparison to easily comparable choices in their own environment.  So one could postulate that people have a distorted perception of wealth distribution because they mostly pay attention to the people around them, people likely to enjoy similar levels of wealth to their own.  Then they extrapolate from that experience and assume the whole country exhibits a similarly flat wealth distribution.  They are also misled by evaluating people's wealth based on their apparent material possessions, yet one family might own their McMansion outright while the family next door is drowning in debt.

The survey did not uncover a big difference in attitude between those who voted Republican and those who voted Democratic.  They had a remarkably similar view on how wealth should be distributed.  American politics can be very puzzling to non-Americans.  If people voted purely based on their economic self-interest, then the top 1% - or let's be generous and say the top 20% - would vote Republican and the rest would vote Democratic.  However, we don't see those voting patterns.  Puzzling.

* For those interested in this topic, there's a second post on this topic here.

San Miguel

San Miguel is one of the Channel Islands in the Santa Barbara Channel off the coast of California.  If you're picturing a warm, sunny Mediterranean climate like that of Santa Barbara, you'd be wrong. Vicious winds pound the treeless landscape, laden with sand that punishes buildings and people alike.  The prose describing these conditions is potent.  If you're at all suggestible, you'll want to be warm and cosy as you read.

Yet this desolate landscape has been home to sheep ranchers and T. C. Boyle's  San Miguel follows two such families - the Waters who arrived in the 1880s and the Lesters who arrived in the 1930s.

The story is told through the eyes of three women, Marantha Waters and her adopted daughter Edith, and Elise Lester.  Both families arrive on the island due to the fervent drive of the husbands, Will Waters and Herbie Lester.  Both men are veterans, Will of the Civil War and Lester of the First World War, both face poor prospects, and both work extremely hard to eke a penurious subsistence out of the ranch, while their wives cook endless roasts of lamb and try to make a comfortable home in the inhospitable locale.

Will Waters is a tyrannical, miserable cuss who has inveigled Marantha's money to buy into the ranch, on the false pretence that the climate will be beneficial for her TB.  Marantha strives to maintain a positive attitude in the face of the harsh elements, the damp rot and rodents that infest the tumbledown house, and isolation relieved only by the arrival of the sheep shearers and the odd fisherman.  However, it's clear she's fighting a losing battle against her conditions and worsening disease.  Marantha tries to pass on her remaining money to Edith to give her independence, but Edith ends up trapped with the abusive Will as a beleaguered servant, desperate to escape.

Matters are somewhat better for Elise Lester.  From a wealthy Eastern family, this spinster librarian thought she'd never marry, until the charming Herbert Lester appeared in her life.  She falls in love with Herbie and approaches the island as a great adventure, where she and Herbie build a strong family with their two daughters.  Although still challenging, conditions have improved on San Miguel since Marantha and Edith served out their sentences.  The house is in much better shape and, although life is still lonely enough that the arrival of the sheep shearers is a big event, life is enlivened by the frequent visits of recreational yachters from Santa Barbara, and a friend with a plane who never fails to arrive with many goodies in hand.

The tale of the Lesters was my favourite part of the book.  Elise is a sensitive foil to the obviously bipolar, lovable Herbie and the two treat their isolated existence with their daughters as a privilege, insulated from the nasty things that happen in the rest of the world.  The press idealizes their existence and for a brief period they are characterized as a Swiss Family Robinson leading an idyllic self-sufficient pioneer existence.

T. C. Boyle brings these characters to life.  For me, though, even though the stories were told through the eyes of the women, it was the men and the island who made the most powerful impression in this excellent book.

Developing Innovative Ideas for New Companies

Having enthused in a previous post about how much I enjoyed my first Coursera course, History of the World Since 1300, it's only fair to report that, like any university, there are good courses and bad courses at Coursera.  I put Developing Innovative Ideas for New Companies, given by James Green of the University of Maryland in the latter category.  [Full disclosure: I teach a course called Managing Innovation in a couple of different MBA programs, and so I have strong views about the topic.]

The title of the course suggested it would be about innovation, but it was really about entrepreneurship.  The concepts in the course would be of some value to someone starting a business, but they would not enlighten one about how to undertake innovation.

The delivery style was plodding and studded with several annoying speech habits*.  The professor mostly read off very detailed slides in a slow monotonic voice and I was ever so glad of the Coursera feature that allows you to speed up the lecture to 1.5 times normal speed.  Even the navigation and exercises of the course were not as well thought out as other Coursera courses.  All in all, I don't recommend this course.

* many non-value-adding repetitions of 'with that', 'in that way', 'what that means', 'for that', 'within that' and so on.

The Imposter Bride

Lily Azerov steps down from the train in post-war Montreal*, nervously scanning the station to find Sol, the man she has come to marry.  Sol takes one look and decides to back out of the long-distance-arranged marriage.  Lily's rejection doesn't last long, because Sol's brother Nathan soon asks her to marry him.  For Nathan, what starts as pity turns into love and soon Sol is ruing his impulsive decision.

This might sound like the set-up for a classic novel about a love triangle, but the heart of The Imposter Bride is the gradual unfolding of the back stories of the various characters in the novel.  They all have fascinating stories and the jumps back and forth in time, which can sometimes be disconcerting, were very gracefully handled.  It was a good read, and I can see why it was short-listed for the Giller Prize.

*The story had particular resonance for me, because of its setting Cote St. Luc, the neighbourhood immediately north of Montreal West.  Half the students in my high school Montreal West High were from that neighbourhood.

MOOCs - A Coming Onslaught

I've been writing about, talking about, thinking about and taking MOOCs (Massive Open Online Courses) for quite a while now.   I've just read Thomas Friedman's recent New York Times article about MOOCs.  He and I are pretty much on the same page - although a lot more people read his page than mine!  Of course, Clayton Christensen has been talking about education being ripe for disruptive innovation for years and published Disrupting Class five years ago.

Friedman points to the emergence of Professor as Rock Star.  I've long made the point that, with the globalization of education, the few will rise to the top and drive out mediocrity. Friedman describes how  Harvard Humanities professor Michael Sandel, has become a rock star in Korea and China.  I first heard Sandel speak at the TED conference in 2010 and I've just signed up for his upcoming Justice course on edX, the joint MOOC platform of Harvard and MIT.  Regular readers of this blog may soon read more about that course.

Who wants to learn high school math from a crappy, or even mediocre, high school math teacher when you can learn from the incredibly popular and engaging Salman Khan at Khan Academy?  Who wants to learn history from a schmuck at a third-tier university when you can learn at the feet of Jeremy Adelman of Princeton?  (see my rave review of his Coursera course here.)

I've mused about this rock star phenomenon with my students in the Managing Innovation course I've been teaching in two different MBA programs since retirement from full time employment.  I consider myself a 'pretty good' teacher, regularly earning Teaching Excellence awards at University of Toronto's Rotman School of Management and complimentary comments from students.   But world class?  I think not.  Clayton Christensen is not teaching online yet, but if someone were to be given the chance to learn from this rock star, the pre-eminent world expert on innovation, or from Lib Gibson, they'd be crazy to choose me.

So what are the prospects for a good-but-not-world-class professor?  As lectures become available online, institutions are experimenting with flipping the classroom model: watch the lectures online in your own time at your own pace  and do homework or discussions during class.  San Jose State is flipping that classroom with MIT's introductory Circuits and Electronics course and College Preparatory School in East Palo Alto is doing the same with Salman Khan's math videos.   Perhaps there'd be scope for people like me running those discussions.  But this prospect would be rather gloomy if teaching was my chosen career.  Such outsourcing would definitely diminish my value.

Another of Friedman's points is about the coming shift from the Time Served model of education to the Stuff Learned model.  Sitting through high school, and getting a graduation certificate (of uncertain pedigree since different high schools have such different standards), will no longer be the benchmark.  Rather, your actual competence in a subject will be measured.

A good example of this is my own abortive registration for Calculus: Single Variable by Professor Ghrist of University of Pennsylvania.  I had two motives.  One was a crazy desire to refresh my memory about calculus and one was to see Professor Ghrist's teaching methodology, which looked downright exciting.  I was advised to take a self-administered test before starting the course to ensure I had the right background: if I scored less than 80%, think twice about registering.  So, I have a Masters in Math, and I've even taught first year calculus - a mere 43 years ago - although I've never used a stitch of what I learned.  The Axiomatic Foundations of Algebraic Topology (my thesis topic) doesn't exactly come up in everyday conversations.  Well, I was even rustier than expected and I didn't come near scoring 80%.  So I self-selected out of the course.  (Maybe I'll go to Khan Academy and brush up on some of that prerequisite stuff).

So how does this differ from what happens now?  I'm sure that with a credential like a Masters in Math, I'd have been accepted into that course.  In the bricks-and-mortars world, my bum in that seat would have denied a chance for another more worthy student.  In the world of 'infinite' capacity, I can decide whether to take the course or not, without impacting access for anybody else.  And there was a great online tool to help inform my decision.

National Grammar Day

Today is National Grammar Day.  How cool is that?  Do you care a lot about grammar?  What grammatical error most infuriates you?

A Huffington Post article about this auspicious day used a graphic with a spelling mistake rather than a grammar mistake, but I thought it was funny enough to include anyway.  I hope that teacher wasn't an English teacher.  Notice I didn't use 'hopefully' to start off that sentence, a common error that used to drive my old friend Ken Iverson* mad.

 

There was a recent post in the Harvard Business Review Blog in which Kyle Wiens justified his refusal to hire anybody with poor grammar.  He has observed that the care a person takes with grammar is correlated with the care they take with other jobs.  If they don't take the care to express themselves clearly, with good grammar, their software code tends to reflect the same sloppiness.  And, as he puts it, anybody who can't learn the difference between it's and its in two decades has a learning curve he's not comfortable with!

Today's post on HBR Blog described some (relatively unscientific) research on the correlation between correct grammar on LinkedIn profiles and job levels achieved: it showed people with better grammar rose to higher career levels.

Now guess how tense I was writing this post about grammar errors.  I hope nobody finds any mistakes I missed.

*Ken Iverson was the brilliant creator of the APL programming language.

Trends in Africa

Many people are forecasting continued strong economic growth in Africa.  Some of the fastest rates of GDP growth in the world are found there.  But there is a lingering unease about political stability and governance.  Some interesting graphs from the Harvard Business Review blog here, show that is improving too.

Most of us likely think of Africa as riddled by coups and poor governance.  This chart shows coups are on the decline.  There's still a way to go, but the trend is promising.

There's also a heartening trend in the proportion of representative governments, as shown in this chart.

I remember the enthusiasm 6 years ago after the TED Global conference in Arusha, featuring  a variety of talks describing exciting progress that shattered myths about the continent. The optimism was infectious, even to those (like me) who hadn't attended.  

It takes a really long time to reposition a brand, but it would be nice to see Africa's 'brand' start to catch up with emerging realities there.  Such positive rebranding would create positive reinforcement for existing trends and engender an acceleration of opportunities on the continent.