I’m looking forward to the LEANZ session on 24 August. Max Rashbrooke, author of Inequality: A New Zealand Crisis (2013) will present. This inequality issue has long interested me, starting with passionate student egalitarianism.

Max is universally respected as a nice and well intentioned man, but the Spirit Level believers (financial inequality causes social pathology) have a lot of explaining to do. Recent reports suggest that New Zealand ‘inequality’ in spending power terms has not deteriorated over many years.  Max will undoubtedly comment on those reports.

I hope he also addresses others, such as the Spirit Level’s flawed statistics on health correlations with inequality.

My main concern about The Spirit Level emerged on first reading. It appeared to show strong correlations, but it assumed causation. That might be fair enough, but my first edition did not contain anything convincing on the direction of causality.

I’m told that  a new edition has a chapter on the direction of causality. Hopefully Max will have evidence on whether poverty causes poor personal and human capital (e.g. lack of persistence and other characteristics that accompany, and seem responsible for relative wealth and economic outperformance). Or do cultures that fail to train for such traits come first and cause inequality?

That is a far more important question than whether there is a correlation. Because if the culture causes the inequality, and not the other way round, the poverty may not be remediable by financial transfers to reduce inequality. If the transfers merely subsidise and cement poor cultural values in place, they may exacerbate poverty.

If that is the case (which became the subject of bitter argument after disclosures of decades of huge transfer payments to the population of rioting Ferguson, Missouri) then investment should be in forms of education that are explicitly culture changing.  That is if there is evidence that such efforts work, presumably when targeted at the right time of life (for example young mothers).

After billions spent in 40 years of our DPB, and a great deal of good will and hope, it seems to me our increases in inequality (where established) suggest a causality in the direction our grandparents would have thought, intuitively.

But of course the first requirement in all this is an open mind, trained to recognise the power of self delusion.

Former Auckland Medical School man Graham White QSO reminded me of this when he sent a link to the 2014 IEA paper (linked above) with:

“The Unnatural Nature of Science”  –  Lewis Wolpert  –  “The capacity for self-delusion, even among scientists, should never be underestimated: conviction can have profound effects on observation.”

and

“Thinking Fast and Slow” – Daniel Kahneman  – “The prominence of causal intuitions is a recurrent theme in this book because people are prone to apply causal thinking inappropriately to situations that require statistical reasoning …     System2 (viz., thinking slow) can learn to think statistically but few people receive the necessary training.”