the gap between rich and poor in the
world is enormous
whether you make comparisons between
countries
or look at variations within a country
differences in people's life experiences
are huge
one of the wealthiest countries in the
world is the united states of america
and yet side by side with considerable
wealth
is substantial poverty
some having a living standard far above
the mean average and others far below
the reasons for such disparities and
their possible effects have always been
of great interest to social scientists
many of them feel that there's a link
between material prosperity and
happiness do you see a close link
between the level of income that people
enjoy and their happiness i think the
newest research in that area generally
show two things
one that richer countries are happier on
the average and poorer countries
and that richer people in the same
country are on the average happier than
poorer people in that country and these
results are kind of consistent with each
other so i think the most latest
research i think is questioned the
questioning of whether there's a link
between happiness and income you know
it's not a perfect link by any means we
all know quite wealthy people really
miserable um and so on and uh people are
not wealthy or poor who are quite
content so there's a lot of deviations
but i think on as an average as a
statistical relation
yes i am confident that the data show a
positive relationship between happiness
and income
but we need to be able to measure the
degree of disparity and for that we need
some statistical techniques
we'll look at one or two of those
techniques in this film and then one or
two more advanced techniques in later
films
first we need to distinguish wealth and
income
wealth is a stock
like the amount of water in the bath
income is a flow it's so much per period
of time like the extent to which the tap
is turned on
if i earn a million pounds a year that's
my income
if i have 10 million pounds in the bank
that's part of my wealth
wealth and income are clearly related
but they're different
so in almost all societies there are
differences in income
but even bigger differences in wealth
in this film we concentrate on
differences in wealth
we've come to sweden to look at the way
that wealth is distributed here
here we are in the beautiful stockholm
suburbs some lovely houses here
but not everybody can afford to live in
a house like this
the distribution of wealth in sweden is
quite uneven
despite its reputation as a society
which is largely egalitarian
but if we're to look at some data to
understand how even the distribution of
wealth is
we need to know what counts as wealth
there are different ways of defining
wealth
in the uk
wealth usually means
marketable wealth
so it would
include stocks and shares
you can always sell them
your house
you can always trade it
but it would exclude your pension rights
because you can't sell them
also tends to exclude
consumer durables fridges washing
machines and so on because it's very
hard to estimate their value
but here in sweden
they do include these things because
they get the evidence they require
from surveys
there's a difference between what we
theoretically would like to include
and what we typically have in terms of
of data what we're measuring is very
narrow sort of in terms of the material
wealth you have so it's your financial
assets it's your real assets it's it's
your things
i mean some things are difficult to
include because they're not observable
what economists call your human capital
so
investments that you've made that make
it possible for you to
work a sort of well-paid job for example
this is typically not accounted for when
someone looks at your wealth you know
what do you own
then
whatever education you have is is not in
there
so some things like the exclusion of
human capital are common to the
definition of wealth in the uk and
sweden
but other things like the treatment of
consumer durables can be different
now we know what we mean by wealth in
the swedish context
let's look at its distribution here
the total number of households in sweden
is four million six hundred and twenty
eight thousand nine hundred and ninety
two
the data shows these households grouped
into deciles so the first row of data
tells us that the mean average wealth of
the poorest 10 percent of those
households the poorest 462
899
is minus
441 000 swedish krona
the 10th decile shows that on average
the wealth of the richest 10 of
households is plus
6866 000 swedish krona
notice
we don't know the spread of wealth
within any group only the mean average
for the whole class
it may be surprising to see
minus numbers but this figure is a net
figure wealth minus liabilities such as
debts from bank borrowing or education
loans still owed to the government
so typically the poorest have less than
no financial assets they are net debtors
we have a total wealth for sweden of
5652
billion swedish krona
and the total number of households of
4628
nine nine two
so mean average swedish wealth is
five six five two
zero zero zero zero zero zero zero zero
zero divided by
four six two eight nine nine two
which is
one two two one
thousand swedish kroner
that's the mean average wealth for all
swedish households
but the mean is only one kind of average
there are other measures of average
which we need to explore that will give
us further insights into this data
when we use the term average
we mean one of three things usually
either we mean the mean average
or we mean the
modal average
or we mean the
median average
it's very easy to understand the
difference between these
especially if you've played darts before
i threw two lots of three darts
and in my six darts i scored a two
three threes
a 12
and a 13.
now let's see if we can work out the
mean
the median and the mode
first of all the mean
we take the total of all the six scores
and divide by the number of observations
and that's the mean
if we want the modal score we simply
look for the most common score
the most common number of observations
if we want the median score
we write the scores down in ascending
order and then look for the middle value
now there's a slight problem here that
we have an even number of observations
so we take the two middle values and
work out the mean average of those two
so for my not very good dark playing
our scores were two three
three three twelve thirteen
the mean
is
two plus three plus three plus three
plus twelve plus thirteen divided by six
thirty six over six
equals six
the mode
is three
the median
since we have an even number of
observations
is
three
plus three
the middle two observations divided by
two
which equals three
notice if the dark player had scored say
nineteen instead of thirteen
the mean
increases to seven
but the mode and the median score
is unchanged
now let's use this idea of the median to
see something important in the context
of our swedish wealth data
what's the wealth of the median
household here
we don't know the wealth of the median
household because we've got grouped data
but we can estimate it
we need the household 50 percent of the
way along the distribution
so we can take the mean average of the
fifth and sixth decile
then the median average wealth
calculation gives us
five six five thousand
plus
two five six thousand
which we then divide by two
which gives us four hundred and ten
thousand five hundred swedish kroners
now often it won't be as easy as this to
estimate the median often we have
grouped data where the groups are of
different size classes
for a small island economy we've got a
wealth distribution for the 200
inhabitants as shown in the table
now we need to find the median wealth
the wealth of the middle person
the hundredth by rank
now it's clear that the person has
wealth of between 40 and 100 euros
because the group from 80 to 130 all lie
within that range
but to estimate the income of the 100th
person we need to use a formula
and the formula is this that the median
is given as
xl
plus
xu minus xl
which we then multiplied by n plus 1
over 2
minus f
over little f
where
xl is the lower limit of the class
interval containing the median
x u is the upper limit of this class
interval
n is the number of observations
capital f is the cumulative frequency of
the class intervals up to but not
including the one containing the median
little f is the frequency for the class
interval containing the median
let's see how that works in our example
the median will be
40.
plus
100 minus 40
times
201
over 2
minus 80
which we then divide by 50.
so that gives us
40
plus
60 times
20.5
over 50
which is
40 plus
60 times
0.41
which equals
64.6
the median wealth holder
has
64.6
euros worth of wealth
coming back to our swedish data
we have that the mean average wealth was
one two two one thousand swedish kroner
the median average wealth
is just
four hundred and ten thousand five 500
swedish kroner
so the great majority of swedish
households
has less
wealth
than the mean average
so sweden seems to be a country with a
very uneven distribution of wealth
yet there's very little poverty compared
with many other societies
what explanation can we offer for this
well the evidence is suggesting that
wealth inequality is much more
pronounced in sweden
which is surprising to most people
because sweden is
typically thought of as a much more
equal country
but the reason for that is precisely
that
most suites don't have private wealth
they don't have that much assets
why do people save in the u.s
well they save because they want to send
their kids to college they save because
in case they get laid off or because
they get sick anything like this many of
these things
you save for in the u.s context
in sweden you don't save for these
things before because the state covers
many of these things
it's because many of these reasons for
holding wealth are not present in sweden
higher education you can get very
generous loans
so now i owe them a lot of money but the
conditions for this loan are very sort
of good but it stays with me so in
these accounting terms
i think i still own very little even
though i obviously i have a home i have
a refrigerator i have a car all of these
things but that for an average person
this can
very well sort of end up in in being
even negative wealth
you're not really comparing sort of
people's
situation in life
there are two important conclusions to
be drawn from our analysis the first is
that the concept of the average needs to
be used with caution it's a lot trickier
than we might think but the second
conclusion is this
we always have to look behind data data
seems so
objective
here are the facts
but the facts can sometimes mislead how
to interpret data
is not always straightforward
you