Business

Derek Tonin

Craig Wright takes on the Gini Index

Dr. Craig Wright is a man of many passions, but a central focus of his has been economics for some time. That focus was what lead him to conceive of Bitcoin as an evolution of global currency in 2009, and more recently, its lead him to question the Gini coefficient.

The concept of the Gini coefficient, or index, is fairly simple. “It compares what it calls a measure of wealth (falsely) in different classes of populations,” Wright explains. The problem with it, as Wright sees it, is that it conflates and confuses the ideas of income and wealth. He writes:

 The Gini index is one of the most flawed statistical lies used in the pursuit of socialism as a goal. It makes so many false assumptions - it is not funny. It does not class people by age and gender, and does not account for differences in the distribution of age over time.

As Wright sees it, the use of these false assumptions sets up the idea that countries like the U.S. are unfair societies. He argues that the tricks played by socialists with their equation tell am misleading story:

The wealth distributions of males—being that the decision to exit the workforce or not is in itself a determining factor for wealth, and also many Third World countries do not have large working populations of females with independent incomes—at the age of 45 would be a far superior measure of inequality than the Gini coefficient as it is used, yet which, of course, also has its problems (though there are far fewer issues here than with the Gini coefficient).

Taken to the extreme end point of having no differentiation for age, countries that have attempted total income equality have led to totally corrupt systems. “Many socialist societies have no age-based income differentials, and the earning capacity is based more on class, rank, and party affiliations/positions—a truly unequal system,” Wright notes.

He further notes that countries where people are able to enjoy long periods of retirement reflect poorly on the Gini index when compared to “equal” socialist nations.

Although he starts the article with this line, it’s a fair conclusion for Wright’s thoughts on the matter, and a great metaphor for his views on Bitcoin: “It is better to aim for a society where people eat than to strive for one where all individuals are equally poor and destitute.”

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