Sunday, 4 December 2011

Wilkinson in The Guardian

Last week, Richard Wilkinson wrote an article for The Guardian in which he claimed that a large reduction in inequality took place in the 1930s which led to a large rise in life expectancy, despite economic hardship.

Rather surprisingly, health – and probably other indicators of wellbeing – continued to improve in the great depression of the 1930s. This is likely to have been partly because that period saw the most rapid sustained increase in equality on record.

There are two problems with this assertion. The first is that the Great Depression of the 1930s did not see "the most sustained increase in equality on record." The big fall in inequality began in 1939-40 as a result of the Second World War and continued through the austerity years of the 1940s. Rationing, conscription and full employment are the most plausible explanations for this decline. 

As the graph below shows, this was an international phenomenon known as the Great Compression. A similar graph appears in the revised edition of The Spirit Level (p. 296) clearly showing little change in British inequality in the 1930s. (Both graphs show the share of income held by the top 1% of earners. Other measures tell the same story.) It is puzzling that Wilkinson, whose bachelor's degree was in economic history, can confuse the Great Depression with the Great Compression.

The second problem is that Wilkinson's only piece of empirical evidence linking reduced inequality with better health during this period comes from life expectancy data (he offers no evidence at all to support his hunch that "probably other indicators of wellbeing" also improved). Life expectancy is indeed a good proxy for health, but there was nothing remarkable about the improvements seen in the 1930s. As the graph below shows, life expectancy increased throughout the century at a steady rate. There is no historical correlation between inequality and health (nor with any of the other criteria studied in The Spirit Level)

Life expectancy neither rose more sharply when inequality was low, nor declined when inequality was high. Because of the sustained rise in life expectancy, it is possible to point to any event in the 20th century (except for the two world wars) and say that it coincided with a rise in life expectancy. It would be fatuous, but it would be factually correct. But if you were to say that x caused a rise in life expectancy—as Wilkinson is doing here—you would rightly be accused of mistaking correlation for causation and committing a basic post hoc ergo propter hoc error.

Wilkinson is so committed to the theory that inequality is the main driver of social outcomes that he is compelled to view any period of history which saw a decline in inequality as a time of national revival, regardless of what the history books say. In The Spirit Level, he and Pickett display nostalgia for wartime Britain, austerity Britain and the 1970s, despite these being notoriously miserable times to be alive. It is appropriate that the grim 1930s be added to that list.

The main aim of Wilkinson's article is to dismiss the academic field of happiness studies. More of that in January when the Institute of Economic Affairs publishes a monograph on that subject...

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