Thursday, May 23, 2013

Tweakin' the bull

From the Congressional Research Service: The Fall and Rise of Household Saving, a PDF by Brian W. Cashell, Specialist in Macroeconomic Policy:

From Do the Rich Save More?, a PDF by Dynan, Skinner, and Zeldes:

From Rama Bijapurkar, a breakdown of income, saving, and spending in India:
Household income and savings distribution, from NDSSP (adjusted), 2003 -4, and expenditure distribution
from NSS
Deciles Income Distribution(%) Saving Distribution(%) Expenditure Distribution(%)
1 (lowest) 2.0 0.6 2.5
2 3.2 1.4 3.8
3 4.1 2.2 4.7
4 5.4 3.6 6.0
5 6.2 4.5 6.8
6 8.8 7.3 9.3
7 8.4 7.1 8.9
8 11.9 11.1 12.2
9 15.8 16.8 15.5
10 (highest) 34.1 45.3 30.4
Total 100 100 100
Top 20% 49.9 62.1 45.9
Top 5% 22.7 31.4 19.9
Top 1% 8.6 12.6 7.3

The higher the income per capita per household, the higher their savings as well. 34% of total income is earned by top 10% of the households. When we look at the saving pattern across economic status, it is found that as high as 45.3% of the savings comes from the richest 10% of the households.

The poorest 20% of the households contribute just 5% to India's total personal disposable income. In case of household saving also, only 2% of the savings come from these households

How I interpret the numbers: The first decile receives 2.0% of the income, does 0.6% of the saving, and does 2.5% of the spending. The second decile... etc.

Note that the lower 8 deciles all spend more and save less than their share of income. The top two deciles spend less and save more than their share.

But I guess no matter how much data you gather in support of the Marginal Propensity to Consume, none of it matters because as Paul Krugman says, "It’s true that at any given point in time the rich have much higher savings rates than the poor. Since Milton Friedman, however, we’ve know that this fact is to an important degree a sort of statistical illusion."

To an important degree.

To what degree. Half? Let's say half. So then half of the evidence supporting the MPC is a statistical illusion. It has no significance.

So the other half is *not* illusion. It is clear, it has significance, and it stands in support of the MPC.

It's all in how you tweak the bullshit, isn't it?

1 comment:

Anonymous said...

This is the elephant in the room that mainstream economics chooses to ignore.

Krugman "can't see" how inequality effects growth because he refuses to look at the elephant.

If you look at the elephant , you're immediately banished from the "club" , and PK treasures his membership.

Progressives who see him as an ally are blind to elephants of their own.