Sunday, January 9, 2011

Gini Coefficient

I was watching a lecture and heard the term "Gini Coefficient". See A very interesting concept. Lecturer linked Gini with how developed the country is, the better (lower) the coefficient, the better the country is developed. The reason is simple, the system will became more efficient when people gets closer to their fair share of the game.

Actually, in a real world, the coefficient will never reach to 0. Also it will be inefficient if the coefficient gets to 0, because that means no one is getting rewards when they work harder. And I think that is one of the main reasons that even in the most developed countries, the coefficient is around 0.3.

However in a developed world, it should never be too high. The reason is if the place is fair, all people should have the same access to education etc, so with a even start, the majority of people should be around the same level.

It is also interesting to note that the lecturer noted that during the 1930's, when the Soviet Union was doing their X year progressive plans, the system works so much better that even the intellects in US think it is the way to go. However the system of government central planning didn't stand the test of time, and eventually the pitfalls shows up, the system is so inefficient that the Soviet union has to import food because of production problems.

Anyway, as I am from a communist country, here is from my high school political book "The system that gives better productivity will replace the less efficient ones". That was a rough translation. Only in the original book it was predicating communism will over take the world. Just amazing what 10 or 20 years of time can prove.

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