Dear WS-ners,
To answer some old requests from Richard H., Mine, Gert and others, here,
a summary of method and basic theory behind past posts on Gini Index of US
1947-1998, taken from a paper in progress and mixed with a few comments:
2.0 A Summary of the General Theory and Method
Before addressing the analysis of Gini's index and its measurement it is
here a summary of the sustained global vision of the economy.
2.1 On the one hand: National Accounts Equilibrium Structure
I found2 "Macroeconomics Equilibrium Structure" from
input-output national accounts (IO-Nipas) of different years and nations
(US, Canada, Spain, Colombia, Mexico), that in spite of flaws in Nipas and
in business accounting practices, there was evidence to support the validity
of the general premise for real transactions and flows:
Q = A = D
(Q= Total costs, A=Total value added, D=Total Demand) in real currency
and market prices.
Given that A = V+S ......................(V=wages, S=Surplus) and that
......
Q = C+V .......................................(C=total intermediate cost
really paid) it follows S = C (total surplus = total capital cost)
Given that T = S+V+C................ (T= gross sales, or transaction
totals) it follows that T=V+2S, ....or...... T= V+2C, .........or
..........T=A+S
If you call a*= T/A, or a*=T/D, or a*=T/Q (average mark-up factor) you
find:
1) a* is always between one and two 1<a*<2 if there is general
surplus
2) S=(a*-1).A
3) V= (2-a*).A
4) p = S/V = (a*-1)/(2-a*) ............(p= average surplus rate) .. which
is the same as
5) a* = (2p+1)/(p+1)
2.2 On the other hand: Statistical Income Distribution
On the other hand, in a 1986 paper of mine, entitled "Pareto and
Alternative Economics"3, there is an appendix called
"Pareto and Income Distribution"2, where I conclude,
among others things:
1. Pareto's income distribution econometrics leads to a Lorenz curve,
ordered from richer to poor, of the shape:
Y=t^(2-a*) ...................where necessarily 1<= a* <=2
2. For such curve,
g = (a* - 1)/(3-a*) .......................(g=gini) which is equivalent
to saying that:
a* = (3g+1)/(1+g)
2.3 Joining the two hands: A possible systemic economics theory
Given that 1< a* <2 appears on both hands, my intuition told me
that probably they are the same parameter in both analysis: The Nipas hand,
and the Pareto's statistics hand. So,
g = (a*-1)/(3-a*) .......and .........a*= (2p+1)/(p+1) ..........leads
to:
p = 2g/(1-g) .................... (surplus rate vs. gini index) ......or
g = p/(p+2) .................... (relations gini vs surplus rate)
Now from the Lorenz initial curve Y=t^(2-a*) we may find that the
exponent 2-a* may be written in terms of g=gini, or p= surplus rate:
2-a* = 1/(p+1)
2-a* = (1-g)/(g+1)
So given that g, a* and p are inter-related in the average, the Lorenz
curve may be expressed in 3 ways:
1) Y= t ^ (2-a*)
2) Y= t ^ (1/(p+1))
3) Y= t ^ ((1-g)/(g+1))
where a*= average markup, p=average surplus rate, g=gini index
All this would mean that at the end, due to the circular nature of the
economy, society induces an internal distribution, product of human
practices, in which average (markup, surplus-rate and gini) are
statistically tied. So, if you decrease surplus-rate, markup decreases, and
gini too.
Assuming that official quintile fractions are reliable, we may infer from
them Gini's Index value with the right method, and once real average gini is
known, we get a* and p= surplus ratio.
In the example for the year 1994, from official data quintiles, I found
that: g = 0.535 (The process to be explained in an special paper)
Therefore a*= (3g+1)/(1+g)= 1.6970684= 1.70
Therefore p = S/V = (a*-1)/(2-a*) = 2.30107527=2.30
Therefore V/A = 2-a* = 0.30 and S/A = a* - 1 = 0.70
This means that you might do the inverse process: from Nipas get the
fractions of S/A and V/A, divide them to obtain the average surplus rate p
and apply Y= t ^ (1/(p+1)) to obtain an approximated Lorenz curve for your
society. Then, just compare them with official quintile data.
If you measure capitals distribution (stock shares, bank deposits, lands,
etc.) you may also find a Pareto's distribution which is quite normal,
because after all they are the accumulated or inherited results of
historical incomes distribution per period. Now, given that interests,
rents, profits to shareholders, and other forms of surplus are proportional
to them during the period, they affect the income Lorenz curve of the
period.
Some people is asking a proof that neoliberal-globalization and WB/IMF
recipes and policies have affected adversely the poorest of the world. Well,
according to this model their recipes (high interest rates+lower state
social aid+smaller real average salaries+...) are the kind of policies that
increase ginis, average surplus rates and markups, and decrease V/A
(equivalent to increase S/A, surplus/added-value). This is also related to
the recent debate about reviving keynesianism. My stand is that any policy
that makes governments to spend more in social services decreases gini,
improves a little the poverty problem, but does not create enough global
justice because it does not limit exploitation, neither imperial elites
depredation over the periphery. So if the problem is to finish neoliberal
abusement and their WB/IMF complicity, Keynes should be welcome as a first
solution, but never as a definitive one.
Well, I took some time to reply explaining this of Ginis, because I sent
some of my papers to two lists with the hope to put them in their web pages,
but had no answer so far. Those papers, plus a hard critic to Leontief and
the model with my calculations of the parametric structure of world economy
for 1997, are part of a book I am writting on alternative economics as seen
from a peripheric point of view. As you know, it is hard for people of the
thirld-world to find spaces to express ideas to europeans and
north-americans, even among those interested in the project for global
justice and world systems, so I feel glad by just explaining myself through
this letter and list, and understand our need to create a web page for
peripheric proposals under our own control.
Finally, my public thanks to all those brave persons that participated in
recent DC events, because they have done a remarkable job and deserve our
admiration and more active support.
Thanks, Emilio