We can´t always rely on Bill

In this on-going philanthropic stage in his life, Bill Gates’ endeavor (along his beloved wife, Melinda) seeks to claim victory in the most difficult fights against the enemies of humanity.

Think what you like about economic theory and defend whichever standpoint you’ve chosen to defend but, regardless of left or right, libertarian or statist, the world cannot afford to build the sustainability o its economic systems and economic development based on the altruism and donations of the likes of Bill Gates.  In the essay titled:  “Here’s my plan to change the world”, Bill addresses some of the aching problems of our world that are killing millions of human lives and hopes… and the way he plans to solve them, something that only a person in his position can devote time to plan realistically with a shot to success. But, he also makes a case for philanthropy and tries to teach the whole world a lesson:

I have been sharing my idea of catalytic philanthropy for a while now. It works a lot like the private markets: You invest for big returns. But there’s a big difference. In philanthropy, the investor doesn’t need to get any of the benefit. We take a double-pronged approach: (1) Narrow the gap so that advances for the rich world reach the poor world faster, and (2) turn more of the world’s IQ toward devising solutions to problems that only people in the poor world face. Of course, this comes with its own challenges. You’re working in a global economy worth tens of trillions of dollars, so any philanthropic effort is relatively small. If you want to have a big impact, you need a leverage point—a way to put in a dollar of funding or an hour of effort and benefit society by a hundred or a thousand times as much.

We have to think beyond the immortal paradigm of economic inequality deriving from the idea of causality of the “immoral wealth of the rich” being accumulated at the expense of the "impoverish of the poor". Surely, not all (not even “most”, maybe just a “handful”) of the wealthiest people in the world are as committed as Bill in changing the world and helping the ones who suffer most, but let’s say we made the rich pay more and more taxes, diminishing their capital to amounts which become unattractive to engage in charity, who or what is going to fill up that void? Which government, institution or company is willing to do what the “Bill and Melinda Gates Foundation” is doing? If by any chance willing, which of them are capable of doing it? Ethically, power requires accountability and responsibility, which is not in any way synonym of “taxability” and definitively is no warranty for investment in charity. The other path is to enforce transparency and pressure our governments to be more efficient in their spending and commit to invest in their people, why not delegating such tasks to private institutions with public accountability.

We love you, Bill and Melinda Gates. The whole world is grateful for having you, the many lives you’ve saved and enhanced, the abundant knowledge you have shared and divulged; each and every one of the people that have strived and triumphed thanks to your charity and are now active in changing the world for the better. But even your philanthropy has a cost and that just might be people, companies and governments bailing out of charity and investment in education and social responsibility because that is “for the rich to give back to the communities of the world” and “Bill is already on his way”. 

Mining (Peru)

From a thought provoking and controversial paper on mining in Peru by Loayza, Mier y Teran, & Rigolini: 

Mining activity has had a positive impact on local communities. Mining has brought higher levels of average income, lower poverty, fewer households with basic necessities uncovered, and lower illiteracy rates. The high level of disaggregation of our analysis, and the various checks we perform, indicate that these effects can be interpreted causally. Why, then, is mining creating so much discontent and conflict?

The title of the paper is "Poverty, Inequality, and the Local Natural Resource Curse." 

More from the conclusions:

Our analysis highlights several aspects of mining that may counteract its benefits, and which may be at the source of the observed societal tensions. First, the positive impact of mining activity appears to differ between producing districts, and their neighbors. Our analysis consistently points out that districts where the mines are located have substantially better socioeconomic outcomes than their neighbors do. This is the case even with respect to districts located in the same province, which in principle should also strongly benefit from mining through positive spillovers and generous transfers through the Canon. Second, mining is not only generating higher inequalities across districts (with producing districts benefiting the most), but is also generating an increase in district-level inequality that extends beyond producing districts, and reaches their non-producing neighbors. Not everybody is thus benefiting as much from mining. Finally, despite their generosity, and reflecting a trend that is emerging in many countries (Caselli and Michaels, 2009), the redistributive arrangements that have been put in place to share the revenues from mining with local communities have had only a limited impact on social outcomes, increasing average expenditures but having a weaker impact on poverty alleviation.

There could be at least a couple of ways to look at inequality as a consequence of mining: 1) as something that is perceived as repugnant, which has been examined in different contexts by Alvin Roth in his paper "Repugnance and constrains on markets," or 2) as something that is economically inefficient, which is probably a weaker interpretation. Both interpretation can be colored by the (colonial) history of mining which in Latin America, for example, brings unpleasant memories. 

When diamonds were discovered in Botswana Seretse Khama went around the country meeting local chiefs and leaders, and convinced them that the revenues where going to benefit all regions of the country evenly. For the most part he fulfilled that promised transparently and effectively - good governance was crucial. He was probably aware of possible "moral constrains" to mining and mineral markets. Botswana is seen as a relatively successful case of mining by many analysts. 

Income growth and inequality (South America)

We investigate in this paper whether income growth has played any role on in- equality in all nine young South American democracies during the period 1970-2007. The results, based on dynamic panel time-series analysis, robustly suggest that income growth has indeed played a progressive role in reducing inequality during the period. Moreover, the results suggest that this negative relationship is even stronger in the 1990s and early 2000s, a period in which the continent achieved macroeconomic sta- bilisation, political consolidation and much improved economic performance. On the contrary, during the 1980s (the so-called "lost decade"), the negative income growth experienced by the continent at the time has hit the poor the hardest, or alternatively speaking, it has played a regressive role on inequality. All in all, we suggest that con- sistent growth, and all that it encompasses, is an important equaliser which should not be discarded as a serious option by policy makers interested in a more equal income distribution.

From this paper by Manoel Bittencourt (January 2013).

He explains:

The data set we use covers the period 1970-2007 and all nine South American young democracies, namely: Argentina, Bolivia, Brazil, Chile, Ecuador, Guyana, Paraguay, Peru and Uruguay (T=38 and N=9). The Gini coefficients (GINI) of income inequality come from the UNU-WIDER files. Income per capita (GDP) and the economic growth rates (GROW) come from the Penn World Table (PWT) 6.3 files.

HT: Maximo Rossi. 

Top income shares and crime (the US)

From a new paper by Brzezinski Michal (I did not find the full paper online): 

This article estimates the relationship between income inequality approximated by the top 10% and 1%income shares derived from income tax return data and nine crime categories for the US states between 1979 and 2003. We fail to find a positive relationship between inequality and crime, except for the case of the top 10% share and motor vehicle theft.

Research tribune

The effect of education on crime (in the UK). 

The effect of crime on economic growth. 

. . . [W]hy caste remains a persistent feature of the Indian marriage market.

Impact of rising world rice prices on poverty and inequality.

Universal health care in Thailand. 

Determinants of China's Outward Direct Investment. 

HT: Maximo Rossi and Mark Lee.