Sunday, February 17, 2008

Economic inequality as the best predictor of mugging rates

I came upon a post by Ron Guhname at Inductivist from a little over a year ago in which he looks at mugging rates by country as reported in the International Crime Victimization Survey. His impetus was a reader who apparently suggested that free market economies breed criminality. The guy clarifies in the comments section of Ron's post that he was referring only to the US relative to other developed nations.

His qualified assertion is still not satisfactory--the glaringly obvious reason that the US fares poorly relative to other developed European and Asian countries on a host of social attributes is that one-fourth of the US population is black or brown. As detailed in response to a paper by Gregory Paul that suggested religiosity was at the root of many social problems (he focused primarily on the US and to a lesser extent Portugal versus the rest of Europe), when NAM statistics are removed, the US falls in line with the rest of the pack, alongside other Anglo countries.

Ron's interpretation of the reader's original assertion--that free market economies breed crime--is baseless. The correlation between the percentage of a country's population that had been mugged in the last year and its economic freedom index score correlate inversely at .50. They trend in opposite directions, and pretty vigorously.

This doesn't necessarily rule the commenter's idea out, as there are a host of other differences between the 37 countries touching each of the six settled continents that Ron looks at. There's more than just economic freedom separating Japan from Uganda! But it suggests that, if anything, economic freedom reduces criminality.

In the body of the post and the subsequent discussion in the comments, there is more speculation on what is influencing the differences in rates. The same commenter who spurred the post suggests that wealth inequality might be a driving factor, specifically in that Latin American countries have higher mugging rates than African countries do.

He appears to be on the money this time. I looked at the gini coefficient (a measure of income inequality in which higher values indicate less economic parity), economic freedom as measured by the Heritage Foundation's index, purchasing power parity, estimated average IQ, and median male age to see how these interact with mugging.

All five of the factors correlate expectantly with the rate of mugging. A nation's level of economic equality (.70), level of economic freedom (.50), higher purchasing power (.61), higher average IQ (.52), and older male population (.59), all reduce the likelihood of a denizen being mugged. That these relationships are robust isn't surprising--the attributes are all measures that characterize the first-world on the 'high' end and the third-world on the 'low' end.

But when each factor is looked at with the other four being controlled for, economic equality is the only one that retains statistical significance (p<.01), losing less than one-fifth of its stand-alone 'explanatory' power. The other factors do not even come close. Their coefficients all approach zero with the lowest p-value at .37. In fact, estimated IQ and median male age actually correlate inversely with mugging rates. Botswana is an outlier of this trend, with considerable wealth inequality but a relatively low mugging rate. I imagine this has something to do with lots of security for the diamond interests that have all the money, as well as low population density. If it is removed from the analysis, the gini-mugging correlation increases to .76. This meshes with the finding that, at least in the US, people gauge their level of happiness based on wealth relative to that of their peers more than they do on measures of absolute wealth. It follows that the greater the disparity between what others have and what you have, the more likely you are to want to take stuff from them to even things out and reduce the tension that disparity creates within you.

It also suggests that immigration by those who are poorer (and likely to remain poorer after they've settled) than the average resident of the receiving nation is unwise as far as thievery against persons is concerned. Further, higher birthrates among those lower on the economic ladder relative to those who are higher up on the ladder will accentuate the mugging rate.

A few strategies for the US to attain greater economic parity (as well as greater absolute wealth per capita):

- End illegal immigration. Build a physical barrier along the US-Mexico border and enact and enforce tough laws against illegal immigrants and those who employ them. The former has been tremendously successful in Israel, along another first-world/third-world border that attracts members of the latter to cross into the territory of the former. In the US, local and state laws have sent hundreds of illegals packing each day before even going into effect, giving lie to the strawman that a massive deportation effort is necessary to get the illegal population to leave.

- Institute a merit immigration system. After blotting out illegal immigration to the maximum extent possible, expand things like the EB-5 Visa program that grants residency and then citizenship contingent upon at least a $500,000 investment in a 'distressed' area ($1 million otherwise) and the creation of at least 10 American jobs. Why not leverage the value of American citizenship by getting as much is possible in return for it, while working to ensure that its valuation remains high going forward by bringing in people who have $500k to put down on projects with uncertain returns?

- Make the child tax credit ($1,000 per, at least through 2010) progressive. Currently, it is reduced once a MFJ couple's combined income reaches $110,000. Tax strategies designed to alter birthing patterns historically have not been of major consequence. Still, anything that reduces the number of children birthed on the low end of the economic spectrum and increases the number of children born on the high end will reduce economic inequality. It's better for a retired CEO to spread his millions across six children than to leave it all to one, and better for a retired janitor to devote a modest life savings to his only child than to spread it even more thinly across six of them.

All of these ideas, along with a host of others like them, share a commonality that makes them attractive--they reduce the size of the under- and working-classes relative to the size of the professional and entrepreneurial classes. Simple economics dictates that as supply increases, prices will decrease. More CPAs means that each CPA cannot charge as much as he otherwise would in the face of less competition. This also applies to the unskilled labor market in terms of wage rates. Fewer workers means higher wages for workers. Overall, it means more total wealth creation.

Forced wealth redistribution is only a temporary fix that doesn't get at the heart of the problem. It must be repeated in perpetuity. As the natural income gap continues to widen, the magnitude of redistribution similarly must grow. Better to go for fundamental changes underlying the natural wealth distribution occuring from differences in wealth creation than to just redistribute that wealth once it is created.

Another reigning leftist solution for the last half-century has been an emphasis on greater education to move those on the lower end of the economic spectrum into higher echelons. But simply put, this just hasn't worked. There is literally no relationship between educational expenditures and scholastic performance*. Demographic data are far more reliable predictors of performance than are a host of conventional attributes like per-student expenditures, average class size, and teacher salaries.

*Although there is a meaningful relationship (.65) between a state's standard-of-living at its NAEP performance. To the extent that greater real spending is associated with better performance, it's a symptom of a smarter, more productive population. A state's standard-of-living, not educational expenditures, is what's important. That's not surprising, given that monetary SoL proxies quite well for IQ.

10 comments:

Sleep said...

Ah, the word NAM is spreading =)

John S. Bolton said...

Fascinating point about redistribution... one could wonder that the left and the power-greedy in general, might see envy as ineradicable and even desirable, as it allows for growth power to redistribute. One striking feature of contemporary culture and politics is the fierceness of opposition to restriction of immigration, as if it were thought that without enhancing inequality, the chances for power would weaken.

Temporary Name said...

I like your blog, even if I disagree with your opinions. I admire your compulsive empiricism highly.

I find it interesting that you seem to acknowledge that economic inequality is a problem, but your only proposed solution to it is to essentially keep the population of poor people down on your side of the border.

Does it not matter what happens on the other side of the border? You talk about the need to get at underlying problems, not just temporary fixes, but in my humble opinion, your proposed solutions to illegal immigration don't embody that principle.

The underlying pressure that drives immigration (both legal and otherwise) is wage disparity across borders. By building up fences, you're only exacerbating that inequality.

Your other idea--to encourage richer people to have more babies, and poorer people less--is an interesting one. But it seems to be an uphill battle. I haven't done the research myself, but I understand that the number of children people have runs inversely to their income. The pervading economic interpretation of this is that children are more valuable when you're poor. True, they cost money, but they also provide labor and income. For the rich, this labor is largely useless, but for the poor, children are actually quite economical.

I don't pretend to have the answers. But I think a good start would be to increase the inheritance tax, and use that money to create incentives for poor and moderate income families to save. This could take the form of automatic IRAs and/or college funds with matching contributions up to a certain amount.

Wealth redistribution? Yes, but it is hardly a left wing idea. Many free market types like the idea of an inheritance tax because it reinforces the idea of wealth earned by merit rather than luck. And if the money is spent encouraging lower income people to save, I don't think it's merely a temporary fix. Broadening the base of stake holders in the economy makes it more likely that a greater share of economic growth will go to the people who need it.

Justin Halter said...

Why not just stop all immigration? Let's stop undermining our own wages. I'm curious if you think that would be a bad idea.

Audacious Epigone said...

JSB,

Agreed. Immigration increases inequality. Housing affordability, for example, is inversely correlated at ~.60 with the size of the foreign-born population at the big-city level.

Temporary,

I have to choose some level at which I care the most. I'm a nationalist, and I make that distinction at the national level. It's not that I don't want whats good for Mexico, but those concerns take a backseat to what's good for the US. Although if we are to believe the WSJ op/ed board, illegal Hispanic immigrants are an unfettered economic boon, so we must be quite selfish for taking them in, since Latin America would be more prosperous if we restricted immigration!

Have you by chance read World on Fire? The problem is relative inequality. From outside the first-world, the global reach of media communcications is making the first-world seem nearer to the rest of the world than it did just a few decades ago. Is that avoidable? While low-skilled immigration might (Mexico's ppp has stayed at about one-fourth that of the US' for several years, even with $25 billion--over 3% of GDP--injected in through remittances from the US) reduce inequality between countries, it accentuates it within them.

Re: wealth and fecundity, I agree that it is an uphill battle. Both internationally and within the US, Idiocracy-esque birthing trends are occuring. That appears to have only been the case in the West post-Industrial Revolution.

Justin,

I have mixed feelings on that. There is a lot of value placed on being able to live in the US. Should we leverage it? If a successful Londoner wants to come stateside to escape what is occuring in GB, should the US be closed to him? Seems to me the EB-5 Visa program has many benefits, not least of which is pointing out how inane our tolerance of unskilled immigration is.

Al Fin said...

US governments of the past, present, and foreseeable future, do not have to will to do what should be done.

As poverty and crime blend into more violent narco-terrorism and religious terrorism, the third world's problems become the problems of North America.

Failure to foresee the problem and act in a timely fashion dooms future generations of affluent psychological neotenates to distressingly serious problems that they will not have been prepared to deal with.

The bureaucracies of North American governments are increasingly nepotistic--affirmative action, anti-meritocratic--and incompetent to perform necessary actions. Under an Obama presidency in the US, such incompetent nepotism would accelerate until the US government began to resemble the government of Kenya in efficacy. (including military and law enforcement)

US cities will begin to resemble Detroit or Harare.

Still, political solutions are all that is left for most North Americans, in spite of the flawed instrument.

John S. Bolton said...

They are lacking in will, or do they deliberately worsen exactly such problems, as much as can be got away with? If Obama and the anti-merit activists are the Change, doesn't that imply that the anti-merit policies favoring the disadvantaged minorities are regarded by them as grossly inadequate?

Audacious Epigone said...

JSB,

Yes, I think so.

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MikeFrizzi said...

I just wonder why you picked mugging...Is that some known indicator that represents crime rates on the whole? As far as stopping ALL immigration goes...you must be joking. Are you aware of the eb5 visa program? This program is directly responsible for putting THOUSANDS of AMERICAN workers in full-time jobs. That alone makes as strong a case for immigration as I have read in these reader comments.