Yesterday I posted an observation about the relationship between democracy & taxes. But when compiling that data, I also pulled some data on “size of government” (as measured by the conservative Fraser Institute). Their Economic Freedom index includes a component for “size of government,” which gives a score of 10 to “small” governments and zero to “big” governments.

That relationship is even more interesting.

Again, pulling from The Economist Democracy Index (2011), I plotted country scores along the two variables: Democracy Index score and “Size of Government” score. The Fraser Institute data has fewer countries, so instead of 161 countries, this time I was only able to plot 138 countries.

Notice that the line is virtually flat. It’s slightly leaning towards the “wrong” end (democracy scores increase as size of government increases). But, statistically speaking, there is no relationship (Pearson’s r = -0.1086; p = 0.2048).

What does this mean? Well, basically, it means that there’s no reason to suggest that “size of government” has any relationship to whether a country is democratic or not. Like w/ yesterday’s data, this has no bearing on whether “big” government is “good” or not (those are ideological/philosophical debates you’re welcome to have). But, empirically, the evidence doesn’t support the assertion that “big” governments are bad for democracy.

For example, which countries scored the “best” according to the Fraser Institute in terms of “size of government”? Here’s the list of countries that scored a 9 (no country scored a 10):

• Togo
• El Salvador
• Madagascar
• Jamaica
• Haiti

And here’s the countries that scored the “worst” in terms of the “size of government,” according to the Fraser Institute:

• Sweden (3)
• The Netherlands (3)

For comparison, the United States scored a 7.

(I should note that the Fraser Institute did not give scores to a number of countries, including North Korea and Cuba. But the list of excluded countries also includes “small” states like Afghanistan, Libya, Somalia, and Yemen.)

I was compiling some data for some class exercises and lecture presentations for next semester, and wanted to make a small observation. This stems from the difficulty I find in explaining to my students why states (or “governments”—although there’s obviously an important conceptual distinction between state and government) are important. Many of my students have a fairly strong anti-government bias, which is reinforced by their biases against taxes.

Whether strong states (or “central governments”) are a good thing or not is a question for moral or political philosophy. Certainly, strong states can be authoritarian (although, ironically, many authoritarian regimes actually have weak states). 

Similarly, whether taxes are useful or not is also a question for moral or political philosophy. And certainly many countries (including our own) spend tax dollars wastefully and/or on things we’d rather they didn’t (e.g. pacifists still pay taxes that go to military spending).

But the question of whether high taxes erode, weaken, or otherwise undermine democracy is an empirical question. That is, we can test it with existing data. To compare taxes across the world, I used tax burden as percent of GDP (this is better than using tax rates, since it looks at the share of taxes as the share of the total economy). I used data from the conservative Heritage Foundation. I wanted to see if there was any relationship between taxes and democracy. I used the 2011 Democracy Index measure developed by The Economist (the higher the score, the higher the quality of democracy). 

Turns out, there is a relationship between taxes and democracy. But it’s not what some of you might expect. The figure below plots 161 countries on both dimensions; the red line is the statistically estimated relationship (or “trendline”) between the two variables. The quality of democracy increases as tax burden as percent of GDP increases. The relationship is fairly strong (Pearson’s r = 0.6553; p < 0.000). 

There are outliers, obviously. But for the most part, countries w/ high democracy scores have high tax burdens. In contrast, countries w/ the low democracy scores tend to have low tax burdens.

How low? The ten countries with the lowest tax burdens as percent of GDP are:

My friend Matt Shugart commented on my previous post on this subject that I should’ve used a logarithmic scale and forced the regression through the origin (since zero guns should equal zero gun deaths). He’s right of course, but I didn’t want to complicate things.

I hadn’t wanted to complicate things methodologically, but I went ahead and adjusted the simple bivariate regression making those changes. The picture is, perhaps, a little clearer. But it does (as expected) drop the R-squared slightly (so the model now explains only about 18 percent of the variation in the data). But the overall relationship stands: more guns, more gun-related homicides deaths.

And don’t forget: that red dot is the US.

States & Taxes

This week in POL 102, we’re discussing the state. As part of that discussion, students are looking at the 2012 Failed States Index.

One of the things I try to impress on my students is that the old adage “the government that governs least, governs best” is not necessarily true (ask a Somali refugee). The top ten “failed” states include a number of countries with little or no effective governance. One way to think about the positive attributes of states is to simply look at the relationship between state “strength” (operationalized by the Failed States Index) and “size of government” (operationalized as tax burden as a % of GDP, with data from the Heritage Foundation). The above graph shows that relationship.

The graph shows that states with smaller tax revenues tend to have higher Failed States Index scores. This simple statistical model explains about 36.5% of variation in the data (R²=0.36501), so the relationship is not particularly strong. The data reflects a representative sample of 62 countries. The orange dot represents the US.

Interesting—and important—story. Just one small problem with this graph. It’s deceptive. Notice how the bar for the Fed’s holdings of $6.328 trillion is only slightly larger than the bar for China’s holdings of $1.1519 trillion? Shouldn’t the bar for the Fed’s holdings be about six times taller? Wouldn’t that picture provide a different sense of perspective to the story?

From newshour:

What is Bernanke Doing about the Fed’s Stockpile of U.S. Debt?

Intragovernmental holdings include the Medicare Trust Fund and the Social Security Trust Fund. Oil exporters include Ecuador, Venezuela, Indonesia, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, Algeria, Gabon, Libya, and Nigeria. Caribbean Banking Centers include Bahamas, Bermuda, Cayman Islands, Netherlands Antilles, Panama and British Virgin Islands.

Hurray! They fixed it after a number of other data visualization nerds (like me) pointed out the error. Well done, internets!

Official statistics: Don’t lie to me, Argentina | The Economist

An interesting lesson in why statistics matter. When you play loose with evidence, you risk losing credibility. In the end, your greatest asset is credibility. Once it’s gone, it’s tough to get back. That’s true for countries, corporations, and people.

From westernhemisphereanalysis:

The homicide rate under President Calderon is far lower than nearly every previous Mexican president (via Calderón years trail others for Mexico homicides - El Paso Times)

Always interesting when statistics (i.e. reality) interfere with the dominant narrative.