Thursday, August 31, 2006
A Fascinating Question
Since the previous post got me thinking about starving people, let me share some of a conversation that my friends and I had over dinner in France last week. After a scintillating discussion of what office supply you would be and why, Tony V came up with a brilliant question that belongs in one of these books of questions to start conversations (at least if one is ever published for economists).
After various modifications, he essentially asked:
Given the opportunity of accepting an additional million dollars of salary for as long as you work or anonymously increasing the income of every person in country Z (we settled on China for the purposes of our discussion) by X%, how large does X need to be in order for you to consider giving up the millions of dollars?
I will allow you to ponder the question a bit before biasing your thinking with some of the key points of our discussion.
For those interested, here are some basic facts that we didn't know when having our discussion, China's GDP is approx. $7T, so an X of 1 would represent a total increase to Chinese GDP of $70B. Keep in mind that the $70B is distributed in proportion to current income, so someone making $500 a year would get an additional $5 and someone making $100K would get an additional $1,000. So, roughly using the figures in this paper, 81 percent of the $70B (or $56.7B) would go to people with above median incomes and 32 percent (or $22.4B) would go to the top 10 percent of earners. In Beijing, income at the 80th percentile is approx $3,600 and at the 20th percentile it is approx $890.
Update: Tony V. provides more details here.
After various modifications, he essentially asked:
Given the opportunity of accepting an additional million dollars of salary for as long as you work or anonymously increasing the income of every person in country Z (we settled on China for the purposes of our discussion) by X%, how large does X need to be in order for you to consider giving up the millions of dollars?
I will allow you to ponder the question a bit before biasing your thinking with some of the key points of our discussion.
For those interested, here are some basic facts that we didn't know when having our discussion, China's GDP is approx. $7T, so an X of 1 would represent a total increase to Chinese GDP of $70B. Keep in mind that the $70B is distributed in proportion to current income, so someone making $500 a year would get an additional $5 and someone making $100K would get an additional $1,000. So, roughly using the figures in this paper, 81 percent of the $70B (or $56.7B) would go to people with above median incomes and 32 percent (or $22.4B) would go to the top 10 percent of earners. In Beijing, income at the 80th percentile is approx $3,600 and at the 20th percentile it is approx $890.
Update: Tony V. provides more details here.
// posted by BW @ 11:00 PM 
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