Excellent piece of work here by Samuel Bowles and Arjun Jayadev showing the correlation between inequality and guard labor across countries. Why didn’t I think of making this graph?!
A few notable points:
–The authors stress that they are observing correlations but neither do they shrink from suggesting obvious causal linkages.
–They note in passing that this same relationship exists across American states, which underscores the validity of the relationship.
–It’s not hard to imagine, as they suggest, that there are cultural, political, and policy differences that lead a Scandinavian country, like Demark, to have both low inequality and fewer guards as a share of employment; this doesn’t disprove causality at all—it just points out that these relationships have more causes than you can plot on two axes.
–They note another correlation not shown here: higher social welfare spending, less guard labor. I’m reminded of a pretty solid literature showing that some of the net benefits of investment in quality early childhood education comes from reduced costs associated with crime.
–There is a school of thought that higher inequality increases the incentives for rewards and innovation, since it increases the benefits of “winning” and the costs of “losing.” Perhaps, though there’s certainly no evidence in correlations between the growth of inequality and that of productivity. But I find this connection more compelling and concerning:
“You have money spent on guarding stuff rather than making stuff,” said Michael Hood, an economist at Barclays Capital. “There’s a large population standing around in blue blazers rather than engaged in more productive activities.” He was talking about Latin America, but could have been describing things in the United States.
Source: NYT, link above.