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Mere data can both inform and mislead

Mere data can both inform and mislead
The Data Driven Optimist

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At the time of when Jesus of Nazareth was crucified, when 25% of world’s population was in the hands of Rome, the GDP per capita was equivalent to the US $463 in 1990 globally. Around 1000 years later, GDP per capita decreased by a little more than $10. And 500 years later, the world’s GDP has increased by a mere 25%. It was only in 1800 that GDP per capita finally increased to $600. This means that for around 2000 years and even before that, according to researchers, the global economy was almost inert.

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Then with the advent of Industrial Revolution, the GDP got a sudden boost. In the year 2000 it soared up to $6000 with the advancement of new technologies, improved productivity and cross-border travel, trade, and communications. Today it stands as tall as $7000.

There exists another set of statistics which are closely related to the rising GDP figures. 95% of the world was under poverty in 1820 and by 1929, this figure fell down to 75%. In 1980, half of the world population survived on less than $1.25 per day. Today, this percentage has decreased by more than 66%.

The above statistics can tell us a lot about overcoming inequalities in income. It is the handiwork of a research fellow at Oxford Martin School at the Institute for New Economic Thinking, Max Roser. Our World in Data and Chartbook for Economic Equality are two websites where Roser has posted a number of charts that provide a timeline for the various changes related to economic growth.

Roser holds that the structure of economic principles should be determined by data rather than the data being used only to support a theoretical point of view. Roser generates a wide array of information from dozens of sources. Some of the information are completely unconnected but combine to address a large set of conclusions.

Roser’s work on the fields of income and wealth disparity is his most ambitious and controversial works. Roser published charts based on tax returns from 25 countries dating back to 1900 in some cases. The charts depicted the percentage of earnings by income as well as a percentage above the median for topmost 10% earners. The data paints a picture of income inequality. One example: The share of total income held by top 1% has ballooned since 1990 in English speaking countries. This trend was not seen in European nations and Japan. The English-speaking countries also witnessed GDP increase, increased stock market valuations and real estate price rise – gains which benefit the rich more. This explains the accelerated income expansion of top 1% even when wages decreased.

Another chart depicts the US adoption of new technologies and products. Cellphones in households increased from 2% in 1990 to 90% in 2005. Microwave ownership also rose at the same pace. But when refrigerator and washing machine came to market, it took them twice the effort to make similar profits. The ability to afford mass products is a factor that mitigates wealth disparity.

Roser believes that we can do something about the varied levels of inequality in different countries depicted by his empirical research. The nub of the problem in the US can be found in 2 data points: the higher proportion of poor literacy and numerical skills among people in US as compared to other countries and the socio-economic background that determines these skills.

As per Roser’s deduction, one way to curb this inequality is to target educational efforts regarding desirable skills and productivity tool. This would add to the benefit of increasing growth at the same time. Also, the education price should be decreased. According to Roser, the link between skills and family background implies that increasing cost of education enhances the possibility of current inequality to extend to future inequality. Minimizing education cost would ensure that even the poor are able to afford education and earn higher incomes later in life that would diminish inequality to a great extent.

Being an optimist, Roser says that the statistics articulated in his charts depict that our world is evolving for the better. Food availability and consumption has increased, and child mortality has decreased around the world. Another illustration of Roser’s depicts that the literacy rate among youngsters is about 90% higher than the senior group.

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The only thing Roser is worried about is whether policy makers would make use of such historic data to develop sound economic policies and principles. Using this data, we should aim to build a future that incorporates equalized and improved education and tax measures and policies and provides support to raise children belonging to all social strata.

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