Sunday, June 15, 2014

Long guns homicide trends in the United States

Using FBI and US Census data I found the following: 

-The number of rifle homicides declined 41% between 1998 and 2012. Rifle homicides per 100,000 people in the Unites States declined 48.5% in the same period of time. 

-The number of shotgun homicides declined 52% between 1998 and 2012. Shotgun homicides per 100,000 people in the Unites States declined 58% in the same period of time. 

Most firearm homicides are committed using handguns, not rifles or shotguns. The number of homicides committed with long guns is small, according to FBI data, the number of people killed by rifles and shotguns in 2012 was 625, compare this to:

-518 people murdered with blunt objects
-678 people murdered with hands/feet
-1,589 people murdered with knives

In my opinion, the evidence suggests that long guns, which includes "assault weapons", are not a serious threat to public safety. Also, their use in murder has been declining dramatically in recent years. Thus, the case for banning long guns is as strong and as weak as the case for banning knives, blunt objects, and hands/feet.

FBI Data:

US Census data:

Friday, June 13, 2014

Wages vs. Productivity

Wages and Productivity: 

Often times it has been claimed that wages have not increased with economic growth. Think tanks like the Economic Policy Institute have made this claim by comparing the increase in GDP per hour (economic growth) over time to the increase in median wages adjusted to the Consumer Price Index (CPI). This is wrong for the following reasons:

-Economic theory predicts that workers are paid according to the revenue they bring to their employers. Thus, worker compensation is tied to the price changes in ALL goods and services, not just consumer goods.

-Comparing average productivity to median wages is an apples to oranges comparison. 

-Wages are not the only way workers are compensated for their labor, they are also paid in health care benefits, pensions, etc. Thus, we need to look at worker compensation over time, not just wages. 

- Even if one wanted to see how median compensation changed over time, the correct price index is the Personal Consumption Expenditure (PCE), since the CPI is widely believed to overstate inflation. According to the Federal Reserve, "[We] carefully considered both indexes [CPI and PCE] when evaluating which metric to target and concluded that PCE inflation is the better measure. [1]"

Luckily a 2013 study has examined all these things [2]. Their results can be seen in the graph below. Here is a summary of their findings:

-The Blue and Purple lines show the relationship between average productivity and average worker compensation (respectively) in the United States over time. As you can see, up until 2001, there is a perfect correlation. After 2001, worker compensation has lagged a little but not by much. 

-The bottom orange line shows how median worker compensation adjusted for the PCE has changed over time. As you can see, since between 1980-2010, it has increased approximately 30%, indicating a 1% increase per year.




Wednesday, June 11, 2014

Wealth redistribution and poverty

Thoughts on taxing the rich: 

The typical left wing solution to any problem is higher income taxes on the rich. In fact, I remain unconvinced that modern liberalism is nothing more than envy wrapped in political rhetoric. For example, here are two issues which leftists think can be fixed by even more taxation of the wealthy:

1. Wealth inequality
>Modern liberal solution: Tax the rich even more
>Classical liberal solution: Privatize social security (thus making everyone an owner of capital)

2. Poverty
>Modern liberal solution: Tax the rich even more (wealth redistribution)
>Classical liberal solution: Grow the economy, 75% of the income gains that accrued to the bottom 40% of income earners worldwide are a result of economic growth according to the World Bank. [1]

Indeed, economic growth is the main driver in poverty reduction and the means through which the standard of living of country's citizens increases. Thus, anything that hinders economic growth is very much against the interests of the poor, as well as everyone else. And of course, a recent survey of the economic literature on government spending and taxation has found that in OECD (developed) countries, taxes are significantly negatively correlated with growth even after controlling for numerous of relevant factors that could affect growth. According to the authors:

"Most studies find increase in government size [taxation or spending as a % of GDP] by 10 percentage points is associated with a 0.5 to 1 percent lower annual growth rate." [2]

For the United States specifically, research conducted by Keynesian economists David and Christina Romer states:

"[W]e find that a tax increase of one percent of GDP lowers GDP by about 3 percent." [3]

It's also worth noting that according to the Fraser Institute, the poor in the most economically free (the most capitalist) countries are better off than the average person in the least economically free countries:

"In the top quartile [of economic freedom], the average income of the poorest 10% was $10,556, compared to $932 in the bottom quartile in 2011US(PPP) dollars (Exhibit 1.9). Interestingly, the average income of the poorest 10% in the most economically free nations is more than twice the overall average income in the least free nations." [4]

Thus, there is good reason to expect that higher taxes on the wealthy could hurt economic growth and thus the poor. There is also good reason to expect economic freedom to be good for the poor. However, I'm not convinced that modern liberals actually want to help the poor. If they did, they would be actively doing something to help them, not trying to reach into other people's pockets to do what they think is right. I think their obsession with taxing the rich is more driven by envy than anything else, that or they wrongly believe in the zero sum game view of the world, in which one man can only gain at the expense of others. Regardless, I seriously doubt much good could come from further taxation of the wealthy (or anyone else) or further degradation of economic freedom (which the US has been experiencing for a decade).