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A recommendation for Will Hutton in his new job

Summary:
Quite why Will Hutton does keep falling, Widmerpool-like, upwards is beyond our ken. His latest new job is as the incoming President of the Academy of Social Sciences. We have a recommendation for him in this new post:Social science studies society in all its manifestations – where and how we live, economic activity, the dynamics of health, education, management, law, the wellsprings of wellbeing and humanity’s interactions with nature – backed by the careful marshalling of data and rigorous attempts to establish causation rather than correlation. Quantitative analysis is supported by case studies and oral witness, adding to the depth of research.That’s what we all desire should happen, certainly. So, let us set out to do this properly. For example, in our considerations of inequality.

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Quite why Will Hutton does keep falling, Widmerpool-like, upwards is beyond our ken. His latest new job is as the incoming President of the Academy of Social Sciences. We have a recommendation for him in this new post:

Social science studies society in all its manifestations – where and how we live, economic activity, the dynamics of health, education, management, law, the wellsprings of wellbeing and humanity’s interactions with nature – backed by the careful marshalling of data and rigorous attempts to establish causation rather than correlation. Quantitative analysis is supported by case studies and oral witness, adding to the depth of research.

That’s what we all desire should happen, certainly. So, let us set out to do this properly. For example, in our considerations of inequality.

Currently, with income inequality, we measure it as, obviously, income. This after the influence of the tax and benefit systems. This is not enough to understand actual inequality. We need further to adjust for the variance of the price level over geography. Earning the average national income of some £25,000 a year is a very different experience in London from in Leicester. The only form of inequality that could, potentially, actually matter is inequality of consumption possibilities. Which means we should be adjusting for those local price levels.

We should also be adjusting for the value of state provided goods and services as well. This alone would make a considerable difference to our measures. One TUC report had the 90/10 ratio as 12:1 for market incomes for households and 4:1 for consumption after those government provisions - and before adjusting for geography.

With our measurements of wealth inequality matters are even worse:

Our definition of wealth includes all pension wealth—whether held in individual retirement accounts, or through pension funds and life insurance companies—with the exception of Social Security and unfunded defined benefit pensions. Although Social Security matters for saving decisions, the same is true for all promises of future government transfers. Including Social Security in wealth would thus call for including the present value of future Medicare benefits, future government education spending for one’s children, etc., net of future taxes.

Clearly that’s American but the British estimates use the same method. We do not include even taxes and benefits, let alone all the other myriad things done to alter the wealth distribution. A below market rent for life is wealth, the existence of free at the point of use medical treatment for life is wealth, free education for all children is wealth.

So, in our considerations of inequality let us start measuring it properly. Of course, we know why this will be resisted, for accounting for what we already do to reduce it will weaken the force of any insistence that it must be reduced further. But the President of an Academy has the right sort of soapbox to override such political considerations.

There will be one further benefit of properly understanding the world around us. Which is that by measuring the effects of what is done we shall be able to test the effects of what is proposed. Currently the system of not including the state pension in our wealth calculations means that there is, by our measures, no effect of a change upon the wealth distribution of a change in the state pension. Counting properly would mean that we would be capturing the effects of any such change.

At which point of course this proposal will gain the support of all involved in working against inequality. For they do all want to actually reduce it, do want to measure the success of the varied suggestions.

Don’t they?

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Tim Worstall
Tim Worstall is a British-born writer and Senior Fellow of the Adam Smith Institute. Worstall is a regular contributor to Forbes and the Register. He has also written for the Guardian, the New York Times, PandoDaily, the Daily Telegraph blogs, the Times, and The Wall Street Journal. In 2010 his blog was listed as one of the top 100 UK political blogs by Total Politics.

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