Macro Roundup

James D. Agresti, "The Poorest 20% of Americans Are Richer on Average Than Most Nations of Europe," Just Facts, August 26, 2019, https://www.justfacts.com/news_poorest_americans_richer_than_europe.asp

The Poorest 20% of Americans Are Richer on Average Than Most Nations of Europe

A groundbreaking study by Just Facts has discovered that after accounting for all income, charity, and non-cash welfare benefits like subsidized housing and Food Stamps—the poorest 20% of Americans consume more goods and services than the national averages for all people in most affluent countries. This includes the majority of countries in the prestigious Organization for Economic Cooperation and Development (OECD), including its European members. In other words, if the U.S. “poor” were a nation, it would be one of the world’s richest.

Notably, this study was reviewed by Dr. Henrique Schneider, professor of economics at Nordakademie University in Germany and the chief economist of the Swiss Federation of Small and Medium-Sized Enterprises. After examining the source data and Just Facts’ methodology, he concluded: “This study is sound and conforms with academic standards. I personally think it provides valuable insight into poverty measures and adds considerably to this field of research.”

The “Poorest” Rich Nation?

In a July 1st New York Times video op-ed that decries “fake news” and calls for “a more truthful approach” to “the myth of America as the greatest nation on earth,” Times producers Taige Jensen and Nayeema Raza claim that the U.S. has “fallen well behind Europe” in many respects and has “more in common with ‘developing countries’ than we’d like to admit.”

“One good test” of this, they say, is how the U.S. ranks in the OECD, a group of “36 countries, predominantly wealthy, Western, and Democratic.” While examining these rankings, they corrupt the truth in ways that violate the Times’ op-ed standards, which declare that “you can have any opinion you would like,” but “the facts in a piece must be supported and validated,” and “you can’t say that a certain battle began on a certain day if it did not.”

A prime example is their claim that “America is the richest country” in the OECD, “but we’re also the poorest, with a whopping 18% poverty rate—closer to Mexico than Western Europe.” That assertion prompted Just Facts to conduct a rigorous, original study of this issue with data from the OECD, the World Bank, and the U.S. government’s Bureau of Economic Analysis. It found that the Times is not merely wrong about this issue but is reporting the polar opposite of reality.

Poor Compared to Who?

The most glaring evidence against the Times’ rhetoric is a note located just above the OECD’s data for poverty rates. It explains that these rates measure relative poverty within nations, not between nations. As the note states, the figures represent portions of people with less than “half the median household income” in their own nations—and thus—”two countries with the same poverty rates may differ in terms of the relative income-level of the poor.”

The upshot is laid bare by the fact that this OECD measure assigns a higher poverty rate to the U.S. (17.8%) than to Mexico (16.6%). Yet, World Bank data shows that 35% of Mexico’s population lives on less than $5.50 per day, as compared to only 2% of people in the United States.

Hence, the OECD’s poverty rates say nothing about which nation is “the poorest.” Nonetheless, this is exactly how the Times misrepresented them.

The same point applies to broader discussions about poverty, which can be measured in two very different ways: (1) relative poverty or (2) absolute poverty. Relative measures of poverty, like the one cited by the Times, can be misleading if the presenter does not answer the question: “Poor compared to who?” Absolute measures, like the number of people with income below a certain level, are more straightforward and enlightening.

Unmeasured Income and Benefits

To accurately compare living standards across or within nations, it is necessary to account for all major aspects of material welfare. None of the data above does this.

The OECD data is particularly flawed because it is based on “income,” which excludes a host of non-cash government benefits and private charity that are abundant in the United States. Examples include but are not limited to:

healthcare provided by Medicaid, free clinics, and the Children’s Health Insurance Program.
nourishment provided by Food Stamps, school lunches, school breakfasts, soup kitchens, food pantries, and the Women’s, Infants’ & Children’s program.
housing and amenities provided through rent subsidies, utility assistance, and homeless shelters.

The World Bank data includes those items but is still incomplete because it is based on government “household surveys,” and U.S. low-income households greatly underreport both their income and non-cash benefits in such surveys. As documented in a 2015 paper in the Journal of Economic Perspectives entitled “Household Surveys in Crisis”:

“In recent years, more than half of welfare dollars and nearly half of food stamp dollars have been missed in several major” government surveys.
There has been “a sharp rise” in underreporting of government benefits received by low-income households in the United States.
This “understatement of incomes” masks “the poverty-reducing effects of government programs” and leads to “an overstatement of poverty and inequality.”

Likewise, the U.S. Bureau of Economic Analysis explains that such surveys “have issues with recalling income and expenditures and are subject to deliberate underreporting of certain items.” The U.S. Census Bureau says much the same, writing that “for many different reasons there is a tendency in household surveys for respondents to underreport their income.”

There is also a wider lesson here. When politicians and the media talk about income inequality, they often use statistics that fail to account for large amounts of income and benefits received by low- and middle-income households. This greatly overstates inequality and feeds deceptive narratives.

Relevant, Reliable Data

The World Bank’s “preferred” indicator of material well-being is “consumption“ of goods and services. This is due to “practical reasons of reliability and because consumption is thought to better capture long-run welfare levels than current income.” Likewise, a 2003 paper in the Journal of Human Resources explains that:

“research on poor households in the U.S. suggests that consumption is better reported than income” and is “a more direct measure of material well-being.”
“consumption standards were behind the original setting of the poverty line,” but governments now use income because of its “ease of reporting.”

The World Bank publishes a comprehensive dataset on consumption that isn’t dependent on the accuracy of household surveys and includes all goods and services, but it only provides the average consumption per person in each nation—not the poorest people in each nation.

However, the U.S. Bureau of Economic Analysis published a study that provides exactly that for 2010. Combined with World Bank data for the same year, these datasets show that the poorest 20% of U.S. households have higher average consumption per person than the averages for all people in most nations of the OECD and Europe:

For instance, a Department of Agriculture study found that U.S. households receiving Food Stamps spend about 50% more on sweetened drinks, desserts and candy than on fruits & vegetables. In comparison, households not receiving Food Stamps spend slightly more on fruits & vegetables than on sweets.

Nonetheless, the fact remains that the privilege of living in the U.S. affords poor people with more material resources than the averages for most of the world’s richest nations.

Another important strength of this data is that it is adjusted for purchasing power to measure tangible realities like square feet of living area, foods, smartphones, etc. This removes the confounding effects of factors like inflation and exchange rates. Thus, an apple in one nation is counted the same as an apple in another.

To spot check the results for accuracy, Just Facts compared the World Bank consumption figure for the entire U.S. with the one from the Bureau of Economic Analysis. They were within 2% of each other. All of the data, documentation, and calculations are available in this spreadsheet.

In light of these facts, the Times’ claim that the U.S. has “more in common with ‘developing countries’ than we’d like to admit” is especially far-fetched. In 2010, even the poorest 20% of Americans consumed 3 to 30 times more goods and services than the averages for all people in a wide array of developing nations around the world:

Why Is the U.S. So Much Richer?

Instead of maligning the United States, the Times could have covered this issue in a way that would help people around the world improve their material well-being by replicating what makes the U.S. so successful. However, that would require conveying the following facts, many of which the Times has previously misreported:

High energy prices, like those caused by ambitious “green energy” programs in Europe, depress living standards, especially for the poor.
High tax rates reduce incentives to work, save, and invest, and these can have widespread harmful effects.
Abundant social programs can reduce market income through multiple mechanisms—and as explained by President Obama’s former chief economist Lawrence Summers, “government assistance programs” provide people with “an incentive, and the means, not to work.”
The overall productivity of each nation trickles down to the poor, and this is partly why McDonald’s workers in the U.S. have more real purchasing power than in Europe and six times more than in Latin America, even though these workers perform the same jobs with the same technology.
Family disintegration driven by changing attitudes toward sex, marital fidelity, and familial responsibility has strong, negative impacts on household income.
In direct contradiction to the Times, a wealth of data suggests that aggressive government regulations harm economies.

Many other factors correlate with the economic conditions of nations and individuals, but the above are some key ones that give the U.S. an advantage over many European and other OECD countries.

Summary

The Times closes its video by claiming that “America may once have been the greatest, but today America, we’re just okay.” In reality, the U.S. is so economically exceptional that the poorest 20% of Americans are richer than many of the world’s most affluent nations.

Last year, the Times adopted a new slogan, “The truth is worth it.” Yet, in this case and others, it has twisted the truth in ways that can genuinely hurt people. The Times makes other spurious claims about the U.S. in this same video, which will be deflated in future articles.

“…People have the idea that the universe started in a special, ordered state, and it's been getting disordered ever since then. We're suggesting it's completely the other way around. The universe, in our view, starts in the most disordered way possible and, at least up to now, it's been getting ever more interesting. This, on the face of it, looks like a more positive view of the world. It's not quite like that awful image of the heat death. Now it may be, nevertheless, that the universe in some senses will die, but in a very beautiful form. This is fairly speculative, but certainly we are suggesting that the universe, up to now at least, is not getting more disordered; it's getting more interesting and more structured, and this corresponds to what we see. Certainly, near the Big Bang you and I couldn't be talking to each other the way we are now. Here we are with modern technology talking to each other in London. It's a pretty amazing universe we live in, and my colloaborators and I think that we possibly have the underlying explanation of why that can be. It lies in certain mathematical theorems, which in the past, when you had to have steam in a box, led to the steam, if it was originally in a small corner of the box, spreading out and becoming very uniformly distributed in the box. You would have what is called equilibration taking place. However, if there's no box, the system can spread out, and as it does that, it can take a much more interesting shape. It's that removal of the box that seems to suggest why the universe is so extraordinarily interesting. This is potentially a totally different way of thinking about things. It's all to do with saying that there isn't a box there at all. There's a nice analogy with this back when Kepler was trying to work out what the planets did. He thought about certain observations that Tycho Brahe had made of a comet in 1577. Brahe had shown that the comet was very far away. It couldn't be up in the sky the way people had thought comets were meteorological things in the atmosphere of the Earth because Brahe had showed it was fairly far away. Kepler went further in saying it was very far away, and it must have gone clean through the crystal spheres, which people thought carried the planets around in the sky. Kepler said, "Henceforth the planets must find their way through the void, like the birds through the air. We must philosophize about these things differently."And what I'm suggesting is that, quite amazingly, all that we have thought about entropy and how disorder grows has all been because people have been thinking in terms of everything being in a box. If the universe is not in a box, just like Kepler said, we must philosophize about things differently. That changes things totally….”

Julian Barbour, "The Universe Is Not In A Box,"Edge, September 11, 2019, https://www.edge.org/conversation/julian_barbour-the-universe-is-not-in-a-box

The Universe Is Not in a Box

One of the great books in science was published in 1824 by a young Frenchman called Sadi Carnot. It is one of the most wonderful books, the title of which is Reflections on the Motive Power of Fire. In about six pages, Carnot explains how you would make a steam engine that would work with the absolute maximum efficiency possible. It was almost entirely ignored, and he died before anything much could come out of it. It was rediscovered in 1849 when William Thomson, who later became Lord Kelvin, wrote a paper that publicized this work. Within a couple of years, thermodynamics had been created as a science.

It caused a tremendous lot of excitement from the 1850s onwards. The key thing about this work of Carnot's is that if you have a steam engine, the steam has to remain in a cylinder in a box. You want the steam engine to work continuously, so you keep on having to bring the steam and the cylinder back to the condition it was before. It's remarkable that the development of what's called statistical mechanics—to understand how steam behaves—led to the discovery of entropy, one of the great discoveries in the history of science, and with it the mystery of the arrow of time. And it all followed out of this work of Carnot on how steam engines work. And moreover, it was very anthropocentric thinking about how human beings could exploit coal to drive steam engines and do work for them. At that stage, nobody was thinking about the universe as a whole; they were just thinking about how they could make steam engines work better.

This way of thinking, I believe, has survived more or less unchanged to this day. You still find that people who work on this problem of the arrow of time are still assuming conditions that are appropriate for a steam engine. But in the 1920s and early 1930s, Hubble showed that the universe was expanding, that we live in an expanding universe. Is that going to be well modeled by steam in a box? My belief is that people haven't realized that we have to think out of the box. We have to think in different ways. My collaborators and I keep on finding ways in which the mathematics that was developed before to understand systems confined in a box have to be modified with quite surprising consequences and, above all, possibly to explain why we have an incredibly powerful sense of the passage of time, why the past is so different from the future.

THE UNIVERSE IS NOT IN A BOX

I'm asking questions that I've been asking myself now for a very long time. Basically, what is time? What is motion? Even more so, why do we have such a strong sense of moving forward in time, and that things in many ways are getting more and more interesting in the universe?

This has been a puzzle for a long time in science. All the laws of physics suggest there's no distinguished direction of time. The laws of physics work in exactly the same way. For example, if you film two billiard balls colliding and run it backwards, it looks exactly the same. However, you take a film of someone diving into a swimming pool and run that back, it looks completely different. It's been an issue now for about 170 years—why that can be if the laws suggest it should be exactly the same.

About seven years ago, I got an idea that might solve that problem, which came out of more fundamental questions I'd been asking. Just how do you define distance? How do you define motion? We always see things relative to other objects in the universe. Newton had introduced this concept called absolute space. It's a little bit like a room with the walls taken away. In this room where I'm sitting with you now, my position relative to the chair and the walls is perfectly clear. You can see that. Newton somehow imagined that we move in a space, which is as if the room was there but the walls have somehow disappeared. This has been a mystery in physics for a very long time, and it was the stimulus that led Einstein to create his general theory of relativity, which, in the end, finished up in rather a muddled state because Einstein didn't try and do it directly; he worked indirectly.

I'd never forgotten this issue of why things seem to unfold in one direction when the laws that Newton first found, and then Einstein found, and more recent laws of particle physics all suggest that you can run things in either direction of time and it should look the same. As I said, when you run a film backwards of two billiard balls colliding, it looks exactly the same, but when you run a film of somebody diving into a swimming pool backwards, it looks totally different. This fundamental fact was noticed in a paper in 1852 by William Thomson, who later became Lord Kelvin. He published a short paper, the title of which was "On a Universal Tendency in Nature to the Dissipation of Mechanical Energy."

Everything seems to be running down, and we see this everywhere we look. We all get older in the same direction. We never meet anyone getting younger. Moreover, all the billions upon billions of stars that the astronomers see in the sky are all getting older in the same direction. Their ageing process is very well understood. Where does this fantastic sense of direction come from if you can't see it in the underlying laws?

Quite by chance, an idea came to me about seven years ago. There was a famous bit of work done in 1772 by the great Italian-French mathematician Joseph Lagrange, who was studying the Earth-Moon-Sun system. That was a problem that gave Newton headaches. Lagrange made the interesting discovery that if the system has either zero energy or positive energy—so, it's not a bound system like the solar system where the planets can never escape from the sun—as time goes on, the size of the system in both directions of time, both to the past and the future, will grow without limit. It will go up to infinity in both directions, and there's just one unique point where the size is at its minimum. I suddenly thought, well, maybe that's something to do with the problem of where the arrow of time comes from. Why? Because if you start from the central point, the system gets bigger and, under gravity, more structured. It's very uniform at the point of minimal size, and as you go away from it in one direction, it gets more structured. And as you go in the other direction, it also gets more structured. This applies not only to the three particles that Lagrange was studying, but any number of particles you have.

It occurred to me that if you're thinking about a system of objects in the real universe, the whole of the background universe defines the direction of time for you. And you just say, well, this system went through minimal size and then it grew again. That was the past, and that's the future. But if you're saying this is a toy model of the whole universe, that background arrow, with which we're all so familiar, just isn't there. This situation in which I have a uniform distribution of particles and in both directions away from it a more clustered, more structured distribution, if I was to show that to my grandson who's nearly five and say, "If you were to point to interesting things that are happening, which direction would they go?" He would say, "One arrow goes from here in that direction, and one goes in the other direction."

This then gave me the idea of a Janus point, from the Roman god Janus who looks in two opposite directions at once. If this was just my model universe and I was asked to say in which direction time flows, I would have to say there are two directions from that central Janus point. There's one arrow of time going this way and one arrow going that way. If we had observers inside this universe, they would think, well, maybe this is the beginning of time back here, this Janus point, and we're going forward to the future away from it. If they could look backwards, they would see confusion here where everything is rather uniform—a bit like a swarm of bees that are uniformly distributed and moving in all sorts of different directions at once. You can do the calculations on the computer and show this happening. Then there would be another universe on the other side where time is going in the other direction, but the people on this side couldn't see what's happening on that side and vice versa.

This has the potential to completely resolve the mystery of how the laws can be symmetric, but you can be in a situation where you only see asymmetric things happening, where there's a very pronounced sense of direction. The overall solution in this case is completely symmetric. The two halves are qualitatively similar; they differ in details, but they're basically the same. So, the solution is symmetric, but because observers can only be on one side or the other, they see things very asymmetrically. There's a profound sense of the direction of time on either side of the Janus point, although the symmetry of the law and the symmetry of the solution are respected. That was the idea that occurred to me back in 2012, and I've been developing that with collaborators since then.

Back in 1999, The End of Time came out, which was very much concerned with the same issue of where our sense of coming from a past and going to a future comes from. At that stage, I was still thinking that size had some real objective meaning. It's quite clear as I sit in this room that I'm smaller than the room, and you can see that because you can see the background of the walls of the room. Size is always relative to something else. My hands are basically the same size, but my fingers are shorter than my complete hand. Science should always be about ratios, particularly if you're thinking about the whole universe.

Twenty years ago, I was just beginning to develop these ideas that it's only ratios that count, and that overall size of the complete universe may be a dangerous concept. I was just beginning to develop these ideas in The End of Time. There are just three pages where I talk about shape space, and I can illustrate that idea quite easily. Think of a triangle, the simplest nontrivial geometrical object. It's amazing how much you can get out of a triangle. A triangle has a shape and a size, and in many ways the shape is clearly much more fundamental. Suppose I hold an equilateral triangle up in front of my face and move it backwards and forwards, the shape doesn't change, but the size does as the image is projected onto the retina of my eyes. I started then to think that it would be better just to think about the shape of the universe and how that changes, and not worry so much about the size.

In the course of developing these ideas, I had this new insight about how the universe might have a minimum size and grow either side of it and become more structured. One could characterize this change of structure in a way that tells you how the shape is changing, not how the size is changing. This has led to quite an interesting way of thinking about Einstein's great theory of general relativity, which is talking not about space-time and how the curvature of space and time changes, but how the shape of the universe at any instant changes. My collaborators and I call this shape dynamics. In many ways, it's a more fundamental way of looking at general relativity. It's removing all the parts of this wonderful theory that are not absolutely essential and leaving all the bits that you must have, otherwise it would fall apart. You've always got to have three sides of a triangle; if you take one of them away, you've lost your triangle. It's gone. The shape is absolutely minimum. You've got to have the three sides or two internal angles, and this is boiling things down to the absolute bare minimum.

Surprisingly, this hasn't been done in science before, in thinking about the universe. It's not been a way that people have thought about it. Though there are some important parts of general relativity that do rely upon that. I was lucky to work for several years with someone who had done important work on that. In fact, all the work that's now done with predicting what gravitational waves would look like when two black holes circle around each other and then collide and give off gravitational waves—all those predictions couldn't be done without this work, which is really talking about how the shape of the universe changes in accordance with Einstein's theory. Hidden inside that wonderful theory of Einstein's, there is a theory of shape dynamics, which I hope we have brought out.

An increasing number of people are taking that seriously, so this has been an important input in my story. Quite a lot of the ideas that I had in my book from twenty years ago have survived, with the redundant elements taken out. The most important ideas have survived. And this first step to thinking about the shape of the universes was already in the book then.

The End of Time made certain predictions that required very difficult mathematics to be done. In a way, that book of mine was based much more on intuition than the present ideas I've got, which do have solid mathematical results behind them in a way that the other book didn't. I'm very pleased about that. The starting point of the new ideas is a very important result in Newton's theory, which is now 250 years old, and it's a very solid result. It's not so much something being disproved by an observation as mathematical results being brought forward, which are much more secure and on a sure basis.

If we are on a promising new direction, we may be able to make predictions about the universe, which nobody has thought that the universe would look like. Maybe if things work out well in twenty years from now, a space probe might be sent up to make observations and confirm these things. Meanwhile, it looks as if the Janus-point idea has the potential to solve a very longstanding problem.

I've discussed this with some leading physicists. None of them have found anything wrong with it. The first paper was published in Physical Review Letters back in 2014, which is the top physics journal in the world. The editors must've been quite worried about our paper because we were making fairly big claims. They sent it to five referees, three of which said it was very interesting and definitely worth publishing. One referee just said it was wrong and can't be published, but didn't give any reason. And the fourth one was skeptical, but we won that referee round. Then the editors chose the paper as "Editors' Choice." They had a comment piece written about it by a well-known expert in quantum gravity. It attracted a lot of attention online, and there were a number of features about it, so it went down well. We've given talks at many seminars, and nobody yet has come up with a flaw.

I've got three main collaborators now. One is an Englishman, one is a German, and one is an Italian. The Englishman is David Sloan, who's a cosmologist and has also worked in quantum gravity with Abhay Ashtekar, who's fairly well-known in the quantum gravity field. Then there's Tim Koslowski, who also has a background in quantum gravity and was at the Perimeter Institute for several years. He's now in Germany. Then there's Flavio Mercati, the Italian.

One of the great books in science was published in 1824 by a young Frenchman called Sadi Carnot. It is one of the most wonderful books, the title of which is Reflections on the Motive Power of Fire. In about six pages, Carnot explains how you would make a steam engine that would work with the absolute maximum efficiency possible. It was almost entirely ignored, and he died before anything much could come out of it. It was rediscovered in 1849 when William Thomson, who later became Lord Kelvin, wrote a paper that publicized this work. Within a couple of years, thermodynamics had been created as a science.

It caused a tremendous lot of excitement from the 1850s onwards. The key thing about this work of Carnot's is that if you have a steam engine, the steam has to remain in a cylinder in a box. You want the steam engine to work continuously, so you keep on having to bring the steam and the cylinder back to the condition it was before. It's remarkable that the development of what's called statistical mechanics—to understand how steam behaves—led to the discovery of entropy, one of the great discoveries in the history of science, and with it the mystery of the arrow of time. And it all followed out of this work of Carnot on how steam engines work. And moreover, it was very anthropocentric thinking about how human beings could exploit coal to drive steam engines and do work for them. At that stage, nobody was thinking about the universe as a whole; they were just thinking about how they could make steam engines work better.

This way of thinking, I believe, has survived more or less unchanged to this day. You still find that people who work on this problem of the arrow of time are still assuming conditions that are appropriate for a steam engine. But in the 1920s and early 1930s, Hubble showed that the universe was expanding, that we live in an expanding universe. Is that going to be well modeled by steam in a box? My belief is that people haven't realized that we have to think out of the box. We have to think in different ways. My collaborators and I keep on finding ways in which the mathematics that was developed before to understand systems confined in a box have to be modified with quite surprising consequences and, above all, possibly to explain why we have an incredibly powerful sense of the passage of time, why the past is so different from the future.

In the modern age, certainly in physics and cosmology, there's tremendous competition for ideas. It's quite difficult for people to notice new ideas often because each scientist is working on his/her own idea, so they generally don't look at other things. There are certainly a lot of problems with confirming the speculative ideas that theoreticians in string theory and loop quantum gravity have been trying to develop.

Where things may become very interesting but will take time is from astronomical observations. It is amazing the new instruments that are being developed. Only a few days ago we had the results of the Event Horizon Telescope, which has shown us what a black hole looks like. That was a major project to get going. These things that rely on observations of the whole universe can take up to a couple of decades or longer from the first plan through to either building a huge telescope in Northern Chile in the Atacama Desert or putting a telescope in space. It takes a tremendous amount of time.

It's getting incredibly expensive and difficult now to go beyond this great discovery of the Higgs boson at the Large Hadron collider in Geneva. These take a lot of time. People are a bit discouraged by that. I'm hoping we might be able to find something that could be tested. Maybe the material is already there, it just needs to be looked at in a different way. Or maybe the Janus-point idea can suggest a new experiment that could be made.

The idea we have that the history of the universe consists of two parts where what we normally think of as the Big Bang, the start of time, is just a middle point in the timeline of the universe with two arrows of time pointing away from it in opposite directions, suggests that we should be able to say something rather precise about what the conditions are like at that critical central point. This would, say, give an idea of how the universe started in a way that's more precise than now, which then might lead to predictions as to what the universe should look like now. That's a hope that we're working on. We did have some ideas about that which are not totally discouraging, but it's a long way to develop them.

There is a theory called inflation, which explains the structure of the universe now. It's very widely accepted by cosmologists, but it's not without its difficulties. It's a little bit ad hoc. It makes one wonderful prediction, but a lot of other ones you have to know what the answer is and then adjust the theory to make sure it gives that. It's possible that the ideas we're developing could solve some of those problems for inflation, or show that inflation is not necessary at all. That would be definitely an interesting development. It probably wouldn't be welcomed by the people who work on inflation, but there are quite a lot of people who distrust inflation. One of the problems that people who do like inflation admit is that it doesn't have a rival theory at the moment. If we were able to develop some serious alternative to it, people would welcome that because it's never a healthy situation where you have just one theory and that theory isn't 100% predictive. It makes one prediction, which is confirmed very well indeed, but there are a lot of other things it can't predict and you have to put in by hand. People are not totally happy with inflation.

One of the things that is most interesting about this is how it completely changes the way people think about the universe ever since the law of entropy increase was discovered in the 19th century as a result of the work that Sadi Carnot had originally done on the steam engine. Then there was a great German scientist called Rudolf Clausius. He was the person who developed the notion of entropy and then said that the entropy of the universe tends to a maximum, and this also matched the idea of the heat death of the universe, that the universe is going to be a completely bleak future with nothing interesting there. We could completely change that by saying that there's a lot of evidence the universe has been getting a much more interesting shape.

This is maybe because of the anthropocentric way people thought about the steam engine. The steam engine was doing work for human beings. What may not have been noticed is that the steam engine was making the universe into a more interesting shape, a more interesting story. There's a very famous image of the evolution of the universe, which NASA has put out, showing how it starts from a mysterious quantum Big Bang, then there's an inflationary period, then stars and galaxies form, and finally you get life forming on the Earth and ever more detailed things happening. This goes completely counter to the idea that the entropy, which means the disorder of the universe, is increasing from the Big Bang to now.

People have the idea that the universe started in a special, ordered state, and it's been getting disordered ever since then. We're suggesting it's completely the other way around. The universe, in our view, starts in the most disordered way possible and, at least up to now, it's been getting ever more interesting. This, on the face of it, looks like a more positive view of the world. It's not quite like that awful image of the heat death. Now it may be, nevertheless, that the universe in some senses will die, but in a very beautiful form. This is fairly speculative, but certainly we are suggesting that the universe, up to now at least, is not getting more disordered; it's getting more interesting and more structured, and this corresponds to what we see.

Certainly, near the Big Bang you and I couldn't be talking to each other the way we are now. Here we are with modern technology talking to each other in London. It's a pretty amazing universe we live in, and my colloaborators and I think that we possibly have the underlying explanation of why that can be. It lies in certain mathematical theorems, which in the past, when you had to have steam in a box, led to the steam, if it was originally in a small corner of the box, spreading out and becoming very uniformly distributed in the box. You would have what is called equilibration taking place. However, if there's no box, the system can spread out, and as it does that, it can take a much more interesting shape.

It's that removal of the box that seems to suggest why the universe is so extraordinarily interesting. This is potentially a totally different way of thinking about things. It's all to do with saying that there isn't a box there at all.

There's a nice analogy with this back when Kepler was trying to work out what the planets did. He thought about certain observations that Tycho Brahe had made of a comet in 1577. Brahe had shown that the comet was very far away. It couldn't be up in the sky the way people had thought comets were meteorological things in the atmosphere of the Earth because Brahe had showed it was fairly far away. Kepler went further in saying it was very far away, and it must have gone clean through the crystal spheres, which people thought carried the planets around in the sky. Kepler said, "Henceforth the planets must find their way through the void, like the birds through the air. We must philosophize about these things differently." And what I'm suggesting is that, quite amazingly, all that we have thought about entropy and how disorder grows has all been because people have been thinking in terms of everything being in a box. If the universe is not in a box, just like Kepler said, we must philosophize about things differently. That changes things totally.

"... Household demographics, including the average number of earners per household and the marital status, age, and education of householders are all very highly correlated with American’s household income. Specifically, high-income households have a greater average number of income-earners than households in lower-income quintiles, and individuals in high-income households are far more likely than individuals in low-income households to be well-educated, married, working full-time, and in their prime earning years. In contrast, individuals in lower-income households are far more likely than their counterparts in higher-income households to be less-educated, working part-time, either very young (under 35 years) or very old (over 65 years), and living in single-parent or single households...."

Mark Perry, "Explaining US income inequality by household demographics, 2018 update," American Enterprise Institute, September 11, 2019, https://www.aei.org/carpe-diem/explaining-us-income-inequality-by-household-demographics-2018-update/

Explaining US income inequality by household demographics, 2018 update

Most of the discussion on income inequality focuses on the relative differences over time between low-income and high-income American households. But it’s also informative to analyze the demographic differences among income groups at a given point in time to answer questions like:

How are high-income households different demographically from low-income households that would help us better understand income inequality? For low-income households today who aspire to become higher-income households in the future, what lifestyle and demographic changes might facilitate the path to a higher income?

The chart above (click to enlarge) shows some key demographic characteristics of US households by income quintiles (five equal groups of 25,716 US households) for 2018, using Census Bureau available here and here. Below is a summary of some of the key demographic differences between American households in different income quintiles in 2018:

1. Mean number of earners per household. On average, there are significantly more income earners per household in the top income quintile households (2.10) than earners per household in the lowest-income households (0.40). It can also be seen that the average number of earners per household increases for each higher income quintile, demonstrating that one of the main factors in explaining differences in income among US households is the number of earners per household. Also, the unadjusted ratio of average income for the highest to the lowest quintile of 17.0-to-1 ($222,895 to $13,775) falls to a ratio of only 3.2-to-1 when comparing “income per earner” between those two quintiles: $111,379 for the top fifth to $34,438 for the bottom fifth.

2. Share of households with no earners. More than six out of every ten American households (63%) in the bottom fifth of households by income had no earners for the entire year in 2018. In contrast, only 4.2% of the households in the top fifth had no earners last year, providing more evidence of the strong relationship between household income and income earners per household.

3. Marital status of householders. Married-couple households represent a much greater share of the top income quintile (77.4%) than for the bottom income quintile (16.7%), and single-parent or single households represented a much greater share of the bottom one-fifth of households (83.3%) than for the top one-fifth (22.6%). Consistent with the pattern for the average number of earners per household, the share of married-couple households also increases for each higher income quintile, from 16.7% (lowest quintile) to 35.2% (second lowest quintile) to 47.8% (middle quintile) to 63.9% (second highest quintile) to 77.4% (highest quintile).

4. Age of householders. About 7 out of every 10 households (69.8%) in the top income quintile included Americans in their prime earning years between the ages of 35-64, compared to fewer than half (41.4%) of household members in the bottom income quintile who were in that prime earning age group last year. The share of householders in the prime earning age group of 35-64 year-olds increases with each higher income quintile, from 41.1% (lowest quintile) to 42.8% to 50.1% (middle quintile) to 58.9% to 69.8% (highest quintile). Compared to members of the top income quintile of American households by income, household members in the bottom income quintile were more likely (19.1% for the lowest quintile vs. 14.6% for the highest quintile) to be in the youngest age group (under 35 years), and nearly three times as likely (39.5% vs. 15.6%) to be in the oldest age group (65 years and over).

By average age, the highest three income groups are the youngest (about 50 years on average) and the lowest income group is the oldest quintile on average at 56 years.

5. Work status of householders. More than four times as many top quintile households included at least one adult who was working full-time in 2018 (77.5%) compared to the bottom income quintile (only 18.9%), and five times as many households in the bottom quintile included adults who did not work at all (68.6%) compared to top quintile households whose family members did not work (13.6%). The share of households having or more full-time worker increases at each higher income quintile (18.9% to 47.2% to 61.9% to 70.9% to 77.5%).

6. Education of householders. Family members of households in the top fifth of US households by income were 4.4 times more likely to have a college degree (67.0%) than members of households in the bottom income quintile (only 15.4%). In contrast, householders in the lowest income quintile were about 14 times more likely than those in the top income quintile to have less than a high school degree in 2018 (22.2% vs. 1.6%). As expected, the Census data show that there is a significantly positive relationship between educational attainment and household income.

Household demographics, including the average number of earners per household and the marital status, age, and education of householders are all very highly correlated with American’s household income. Specifically, high-income households have a greater average number of income-earners than households in lower-income quintiles, and individuals in high-income households are far more likely than individuals in low-income households to be well-educated, married, working full-time, and in their prime earning years. In contrast, individuals in lower-income households are far more likely than their counterparts in higher-income households to be less-educated, working part-time, either very young (under 35 years) or very old (over 65 years), and living in single-parent or single households.

The good news about the Census Bureau is that the key demographic factors that explain differences in household income are not fixed over our lifetimes and are largely under our control (e.g., staying in school and graduating, getting and staying married, working full-time, etc.), which means that individuals and households are not destined to remain in a single income quintile forever. Fortunately, studies that track people over time find evidence of significant income mobility in America such that individuals and households move up and down the income quintiles over their lifetimes, as the key demographic variables highlighted above change, see related CD posts here, here and here. Those links highlight the research of social scientists Thomas Hirschl (Cornell) and Mark Rank (Washington University) showing that as a result of dynamic income mobility nearly 70% of Americans will be in the top income quintile for at least one year while almost one-third will be in the top quintile for ten years or more (see chart below).

Most working Americans who were initially in the bottom 20% of income-earners, rise out of that bottom 20%. More of them end up in the top 20% than remain in the bottom 20%. People who were initially in the bottom 20% in income have had the highest rate of increase in their incomes, while those who were initially in the top 20% have had the lowest. This is the direct opposite of the pattern found when following income brackets over time, rather than following individual people.

MP: It’s highly likely that most of today’s high-income, college-educated, married Americans who are now in their peak earning years were in a lower-income quintile in their prior younger years when they were single and before they acquired education and job experience. It’s also likely that individuals in today’s top income quintiles will move back down to a lower-income quintile in the future during their retirement years, which is just part of the natural dynamic lifetime cycle of moving up and down the income quintiles for most Americans. So when we hear the media and progressive politicians talk about an “income inequality crisis” in America, we should keep in mind that basic household demographics go a long way towards explaining the differences in household income in the United States. And because the key income-determining demographic variables are largely under our control and change dynamically over our lifetimes, income mobility and the American dream are still “alive and well” in the US.

“…Yes, the “middle-class is disappearing” as we hear all the time, but it’s because middle-income households in the US are gradually moving up to higher income groups, and not down into lower-income groups. In 1967, only 9.7% of US households (fewer than 1 in 10) earned $100,000 or more (in 2018 dollars). In 2018, more than 1 in 4 US households (30.4%) were in that high-income category, a new record high. In other words, over the last half-century, the share of US households earning incomes of $100,000 or more (in 2018 dollars) has more than tripled! At the same time, the share of middle-income households earning $35,000 to $100,000 (in 2018 dollars) has decreased over time, from more than half of US households in 1967 (53.8%) to less than half (only 41.7%) in 2018. Likewise, the share of low-income households earning $35,000 or less (in 2018 dollars) decreased from more than one-third of households in 1967 (36.4%) to below one-third of US households last year (27.9%), a new record low…..”
Mark Perry, “Three charts based on today’s Census report show that the US middle-class is shrinking…. because they’re moving up,” American Enterprise Institute, September 10, 2019, http://www.aei.org/publication/animated-chart-based-on-todays-census-report-middle-class-is-disappearing-because-theyre-moving-up/

"... Median household income was $63,179 in 2018, an uptick of 0.9% that census officials said isn’t statistically significant from the prior year based on figures adjusted for inflation. The poverty rate in 2018 was 11.8%, a decrease of a half percentage point from 2017, marking the fourth consecutive annual decline in the national poverty rate. It was the first time the official poverty rate fell significantly below its level at the start of the recession in 2007.....The new figures showed that the number of full-time, year-round workers increased by 2.3 million. When looked at by race and ethnicity, median household incomes in America were essentially flat in 2018 for all groups except Asians, who saw theirs rise 4.6% from the previous year in real dollars. The report showed little change in the overall distribution of income, but it showed a gain for the second-lowest fifth of all households. The bottom fifth of households—with incomes up to $25,600—accounted for 3.1% of all household income last year. The top fifth of households, which had incomes topping $130,000, collected 52%. The top 5%, with incomes above $248,700, collected 23.1%...."
Janet Adamy and Paul Overberg, "Median U.S. Household Income Showed No Growth in 2018,"Wall Street Journal, September 10, 2019, https://www.wsj.com/articles/median-u-s-household-income-showed-no-growth-in-2018-11568126412

Bret Swanson, "Rising economic productivity - blip or boom?," American Enterprise Institute, September 12, 2019, http://www.aei.org/publication/rising-economic-productivity-blip-or-boom/