The 1% Question
We started off trying to kill time by answering questions like "If you had to be an office supply, which would you be?" (my answer: a TI-83 graphic calculator) and "Fill in the blanks: Oregon is the ____ of ____?" (I won't reproduce my answer...). But we eventually got to a question that evolved into this:
If you faced the choice of increasing your income by $1 million per year in perpetuity or increasing the income of everyone in Country Z (we settled on China after a while) by X%, how big would X have to be to make you choose to raise the incomes of others?
- This assumes that if X=0 you would choose the $1 million.
- The increase in income is proportional. So if X=1%, then someone earning $500/year would see an extra $5, while someone earning $1,000,000/year would see an extra $10,000. That is, the Gini curve would be unchanged.
- You can do whatever you want with your $1 million/year- spend it, invest in, give it to charity, send it to China, whatever.
- If you choose to raise incomes in China by X%, no one would ever know that you did that.
Some issues that came up in our debates:
- Would you really notice a 1% increase in income? Or, as it was put at the dinner table (which may not be the right way to look at it), if you had 1% more food at each meal, would you notice?
- How valuable is it to see the effects of your charity? For us, at least, we wouldn't witness those income increases in China. If I chose the $1 million, I could do a lot of good locally, and see the impacts. (Is this a "Think globally, act locally" question?)
- And, of course, how selfish are you? That is, in the utility function you are maximizing here, what's the relative weight of others vs. you (and your family).
- The size of China's economy is $8.8 trillion in GDP in 2005, with GDP/capita equal to $6,800.
- The distribution of income in China: a Gini of .415 in 2001, and the bottom 10% of the population earned 2.4% of income and the top 10% earned 30.4% in 1998.
Tough question.... If there's any readers left after that long absence, I'd love to know what you think. I'll give you my answer in a bit. (ETA: Here it is.)
ETA: Oops, Bryce let the world know our question first!