Quote:
Originally Posted by links  Supposed Pareto said 20% owns 80% of the wealth in the world in last century..but now become 10% own 80% of the wealth in the world..wealth gap is sarcastically wide...
There is something call Gini Coefficient in measuring the fairness level in the income distribution.
scale of Gini Coefficient:
below 0.2 means the income are very fairly distributed；
0.2-0.3 means fairly distributed；
0.3-0.4 means acceptable；
0.4-0.5 means slightly unbalance；
0.6 and above means very unbalance
The current Gini coefficient relased by UN is 0.66 which is the worse case in the income distribution gap.....
In the past, when the wealth distribution gap go too wide and there will be high chance of rebels. Hopefully the world will be peaceful......
I am not an economist myself, please correct me if I mis-interpreted anything. |
Your interpretation is correct with some caveats:
1) The Gini coefficient is defined as a ratio of the areas on the Lorenz curve; it is more relevant to study monolithic economies. When the ratio is generalized for across the world it becomes less precise because it does not factor the inequalities of tax rates and social welfare systems and other motivational factors that drive the economic behavior.
2) Every society has different mode of contributions to the "wealth" - in typical developing societies, the wealth can also be measured the support of family members that do elderly care or work in farms - compared against western societies, that has institutionalized the support systems.
3) Due to vagaries of statistics and associated differential equations - the ratio is more sensitive to the income of medians.
4) It does not factor the efficient usage of wealth, case in point - the world would be a better place if 100% of wealth resided with M/S Buffet & Gates.
Having said that, the ratio is one of the most basic tools utilized for credit risk management.
The Armchair Economist.
