Which country is better?

[phk]

I found this on the internet somewhere.

Country A
Income growth rate for the bottom 25% is 1.5%.
Income growth rate for the top 25% is 1%.

Country B
Income growth rate for the bottom 25% is 3%.
Income growth for the top 25% is 3.5%.

An exercise in normative economics.

Go ahead and assume that each class starts out with the same income in both countries.

Poor regardless of country have a $100 per year in income.
Rich regardless of country have a $1000 per year in income.

To find the income over time through the fixed growth rate use this formula.

Y(T) = Y(0)e^r*t

Y(0) would either be $100 or $1,000, which is the value you start with.
e is  ~2.71.
r is the % growth rate.
t is time (in years).

From first inferences.

Country A will experience an overall growing income (slow however) but declining income inequality over time.

Country B will experience rapid growth for both ends of the distribution however income inequality will increase over time.

What ought to be the case? Poverty reduction or Inequality reduction?

[Obnoxiously Slutty Girly Girl]

B, clearly.

[Beet]

B can always redistribute the wealth.

[Marokai Backbeat]

It depends on a great deal of things. Are the situations economically in both countries relatively stable? Do both countries do well with their healthcare system? Are there any major differences in the poverty rates? Such things do need to be established before I could make such a decision.

On the face of it, with none of that information on hand, I would opt for B, and agree with Beet in that Country B can always take it's greater wealth and redistribute it, assuming (again) it was willing or able to do so. We of course don't know this however.

Country A will have more fair income equality rates, but slower economic growth. Economic growth, however, (and I may put some people off by saying this) is not always desirable above other priorities. This is why I struggle with making the decision. Country B has better economic growth, but there is no guarantee that Country B takes care of it's citizens any better, or that the quality of life is any better.

Good economic numbers do not necessarily mean that the lives of the citizens are any better, and can sometimes mean the exact opposite. Look at the last Administration. The economy clearly grew in many areas of it's time in power, but the average family incomes dropped around 2,000 dollars over this time and debt shot through the roof. States like Texas have wildly booming economies and are very prosperous on paper, but poverty, healthcare, and education are all incredible problems for the state, due in part to a barebones safety net and healthcare system. While a state like Minnesota, a state with a slower pace of economic growth, maintains some of the best healthcare and education in the country.

If a country like Country A is able to have a stable society, one that takes care of it's people and maintains a decent state of healthcare and poverty, then there is nothing wrong with choosing the slower pace of economic growth. I choose stability and the general welfare above economic growth.

In the end, Country A, if we assume the situation is stable for it, will likely make better decisions that benefit all of the people, rather than those at the top of society, as Country B would be more inclined to do. For that reason, I vote Country A.

[phk]

(115.1287, 3162.2214) is the intersection that you see.

So in 115.1287 years with an income of $3,162.22 is where the bottom 25% of Country B has the same income as the top 25% of Country A.

When t > 115.1287. Everybody in Country B will have a higher income than everybody in Country A.

[opebo]

A obviously, though both countries are fairy tales.

[Frodo]

Country A for developed countries, and Country B for developing countries. 

[Bo]

B can always redistribute the wealth.

[phk]

Country A for developed countries, and Country B for developing countries. 

Assume that the bottom 25% make $100/year and the top 25% make $1,000 an year in both countries.

[Tetro Kornbluth]

That depends.

Which country is more fun?

[opebo]

What you're missing phnkrocket, is that humans measure their condition vis-a-vis other humans, and thus suffer terribly from the abuse which is inequality.

[phk]

What you're missing phnkrocket, is that humans measure their condition vis-a-vis other humans, and thus suffer terribly from the abuse which is inequality.

Opebo if one was a poor, wouldn't the most rational thing to do is to accumulate income at as fast of a rate as possible?

Seeing your paycheck grow by 3% per year does seem better than 1.25% per year.

[KuntaKinte]

You are the father of two boys (Billy and Jimmy) and they ask you for some money.

a) You give 2$ to each Jimmy and Billy.

b) You give 3$ to Jimmy and 6$ to Billy.

Do you think Jimmy will be happier in scenario a) oder b)?

[Bo]

You are the father of to boys (Billy and Jimmy) and they ask you for some money.

a) You give 2$ to each Jimmy and Billy.

b) You give 3$ to Jimmy and 6$ to Billy.

Do you think Jimmy will be happier in scenario a) oder b)?

If Jimmy knew about each of the two options, he'd probably be happier with B. However, if Jimmy didn't know about both options, he'd probably be happier with A.

[opebo]

What you're missing phnkrocket, is that humans measure their condition vis-a-vis other humans, and thus suffer terribly from the abuse which is inequality.

Opebo if one was a poor, wouldn't the most rational thing to do is to accumulate income at as fast of a rate as possible?

Seeing your paycheck grow by 3% per year does seem better than 1.25% per year.

No, the rational thing to do is to fight for political power - anything less is to be duped and co-opted.  From political power flows all income.

[memphis]

http://en.wikipedia.org/wiki/Strawman

[phk]

http://en.wikipedia.org/wiki/Strawman

?

[opebo]

I think he's saying that the suggestion that greater inequality leads to higher growth (either overall or for the powerless), is rubbish.