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Feb. 7 2011 — 2:08 pm | 0 views | 0 recommendations | 1 comment

A More “Equal” Inequality: The falling tide.

There has been more than just a bit of attention to the gross increase in economic inequality in the United States over the past forty some years.

Notwithstanding a debate about the causes — from an increasingly regressive tax policy, the dimunition of American educational quality at even the best institutions, to the post-industrial financialization of the economy — or the effects — recalcitrant, persistent malaise, a surprising maladjustment of local and national budgets, or, as Nicholas Kristof puts it, a “melancholy of the soul” — there is an interestingly complementary collateral phenomenon in wealth and income inequality between and within American blacks and whites.

Using data on wealth and inequality from the University of Michigan’s Health and Retirement Survey (HRS) [i], via the Theil Index (an econometric measurement for inequality across and within groups) [ii], we find an apparent decrease in wealth (asset) and income (salary) inequality during the housing bubble boom years from 2000-2008.

This may not be surprising: while real differences between black and white household incomes and wealth remain shockingly disparate — we might expect some lessening of inequality in good times and worsening in bad.

More notable, perhaps, is the apparent increase in within group wealth inequality and the statistically significant increase in within group income inequality in the HRS data. This suggests a divergence of income and wealth share to the upper percentiles of the population, even after separating blacks from whites.

This seems to indicate the increasing presence of a black upper class, within the lower class status of blackness: blacks are becoming internally more unequal — more similar to whites vs. blacks — in income and wealth. [iii]

Any positive implications of these observations are not completely clear, especially as the barriers to black American wealth accumulation — employment, education, and parental support — have, if anything, grown larger.

More appropriately, perhaps, this phenomenon may be placed as further evidence of gross post-modern economic stratification, rather than some benign apparition of post-racial economic bonhomie.

This may not be the post-Obama society any of us are looking for, where even the poorest among us particulate into working poor and abjectly impoverished. It may be, sadly, the one we cannot avoid.

[i] Health and Retirement Study, public use dataset. Produced and distributed by the University of Michigan with funding from the National Institute on Aging (grant number NIA U01AG009740). Ann Arbor, MI, (2010).

[ii] Theil, H. (1967) “The Information Approach to the Aggregation of Input- Output Tables”, 49, 4, 451-462.

[iii]Abayomi, K and Darity Jr., W. “A Friendly Amendment of the Theil Index and Consequent Test for Across and Within Theil Inequality”
available here.

Jun. 16 2010 — 12:59 am | 1,242 views | 0 recommendations | 13 comments

Another (unintended) Consequence of BP’s Oil Spill

British Petroleum’s recent oil spill in the Gulf of Mexico is expected to cause both immediate and prolonged environmental disaster as well as long-term economic distress in the Gulf region.

In the urgent short run: the corruption of beaches, the despoiling of fisheries and the pollution of wetlands demand concentrated and immediate attention.

The protracted effects of the spill, however, may be as diffuse and indefinite as the plume itself.

In a recent paper with Georgia Tech Industrial Engineering graduate student Dexin Luo and Professor Valerie Thomas, we found strong evidence of competition between the constituents of corn yield – corn for food, feed stocks, and export – and the production of corn based ethanol for fuel.[i]

This competition between corn yield for fuel and other uses has greatly strengthened – even as the overall corn harvest has increased over the past thirty years.

The Energy Independence and Security Act (EISA) of 2007 mandated an increase in ethanol production to 36 billion gallons per year by 2022.[ii] In 2009, the United States produced about 11 billion gallons of ethanol fuel – an increase of more than 6000 percent since 1980.

At the same time, the total U.S. corn production has (only) doubled. The environmental impacts of this mandate (net energy budget, effect on corn based commodities, greenhouse emissions, etc.) are unresolved, significant, and addressed (better) elsewhere.[iii]

This was the landscape prior to the Gulf disaster.

A recent Slate column illustrates how the oil spill offers an especially advantageous occasion for ethanol producers to position ethanol fuel as a desirable, “clean” alternative.[iv]

President Obama himself, in a recent speech at an ethanol plant, called for a tripling of U.S. biofuel production over the next 12 years.[v]

We might have expected losses of oil output from the recent disaster in the Gulf – direct losses from production and indirect increased costs – to place additional pressures upon the fuel supply. We would then expect, in ordinary political terrain, for these pressures to further exacerbate competition among corn for feed stocks, exports and food and corn to ethanol.

The current and future mise en scène, a direct result of the spectacle of BP’s oil spill, may foster a growth in ethanol production far beyond previous expectation.

It is debatable whether it is a good idea to treat fuel as fungible and to increase the replacement of oil with ethanol. This is a debate that must be engaged, especially in view of the spectre of the oil spill.

The effects of increased ethanol production – on the energy budget, on the production of greenhouse gas carbon dioxide, on land use change – have not been fully accounted for.

These inadequately measured, and higher order, effects are another (unintended) consequence of BP’s oil spill.

[i] Abayomi K,. Luo D., Thomas V. “Statistical Evaluation of Effect of Bioenergy on Crops and Land Use” ISYE Working Paper, Georgia Institute of Technology. (2010)

[ii] Energy Independence and Security Act of 2007. Publication 110-140, 110th Congress, (2007).

[iii] Tilman, D.; Socolow, R.; Foley, J. A.; Hill, J.; Larson, E.; Lynd, L.; Pacala, S.; Reilly, J.; Searchinger, T.; Somerville, C.; Williams, R. “Beneficial Biofuels-The Food, Energy, and Environment Trilemma.” Science (2009), 325, 270–271.

[iv] Bryce, R. “The Ethanol Trap.” Slate Magazine (June 10, 2010). Available at: http://www.slate.com/id/2256461/pagenum/all/#p2

[v] Remarks of President Barack Obama at POET Biorefining in Macon, Missouri. April 28, 2010. The President touted a new “fighter jet” named the “Green Hornet” designed to run on a biofuel mixture.

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