What is the Lorenz Curve? What Does Gini Coefficient Mean?

Does anyone know who Hendrik Lorentz is?

He is a Dutch physicist. His full name is Hendrik Antoon Lorentz, he lived between 1853-1928. For elucidating the Zeeman effect, he and his colleague Pieter Zeeman were awarded the Nobel Prize in Physics in 1902, and they received the award together.

The Zeeman effect is a highly theoretical issue and would now take quite a long time to explain. It's a topic about light spectrums. Maybe I'll write an article about this in the future.

Hendrik Antoon Lorentz is a scientist who has made significant contributions to the world of science with his studies, especially on electromagnetism, mechanics, thermodynamics, hydrodynamics, kinetic theories, light and its propagation, electron theory and relativity.

Hendrik Lorentz is a scientist who also developed a coefficient known as the Lorentz coefficient and benefited greatly from Albert Einstein's coordinate transformation formulas, especially known as Lorentz transformations, to develop his theory of relativity.

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However, in this article, I will talk about another subject developed by Hendrik Lorentz and another scientist who has a similar surname and is often confused with each other.

Max Otto Lorenz was an American economist who lived between 1876 and 1959.

There is only one letter difference between their surnames and Hendrik Antoon Lorentz.

In fact, another reason for the confusion is another Lorenz, Danish physicist and mathematician Ludvig Valentin Lorenz, who lived between 1829 and 1891.

Ludvig Lorenz developed a formula for the polarization of light in 1869, and Hendrik Antoon Lorentz independently developed the same formula 9 years later, in 1878.

That's why today this polarization formula is called the Lorenz-Lorentz formula.

In short, although Hendrik Lorentz and other Lorenzs are confused because they put forward formulas on many subjects and because of the similarity of their surnames, today I would like to talk about an interesting subject put forward by Max Otto Lorenz and which is well known in the world of economics.

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Lorentz curve!

The Lorenz curve is a curve that shows the imbalance in income distribution, and this curve is used to calculate a coefficient called the "Gini coefficient", which is obtained from the ratios of the areas calculated from a graph showing the population rates of the society on the horizontal and the percentage distribution of the total income on the vertical.

The Gini coefficient is a ratio between zero and one. In some places it is also shown as a percentage.

When its value is "zero", it means that there is an absolutely balanced income distribution in society.

On the contrary, when its value is "one", it indicates that the income distribution in the society is completely unbalanced.

Since absolutely balanced or completely unbalanced income distribution can never happen in practice, the Gini coefficient always takes a value between zero and one.

I will not go into the details of the calculation method in this article, but TÜİK publishes income distribution statistics for Turkey every year.

This Gini coefficient is also given in the published statistical information.

While the Gini coefficient was 0.451 in 2013, this coefficient increased to 0.487 in 2022.

There has been a continuous upward trend in the intervening years.

Only in 2014, it decreased from 0.451 to 0.446, then it started to increase again, and in the meantime, it was 0.473 in 2018 and decreased to 0.463 in 2019, but then it continued to rise again and reached the rate of 0.487 in 2022 statistics.

What did we say?

We said that as this coefficient approaches one, the imbalance in income distribution in the country increases.

Apparently, during this period of power, the imbalance in the country's income distribution tended to increase.

In other words, during this period of power, while the incomes of the poor and middle-income people decreased, the rich increased their wealth.

This government is a government that favors the rich! Statistics prove this!

This coefficient is not a simple information that appears in graphs and belongs to a certain part of the society, such as how much of the income is obtained by the first percent of the population.

Gini coefficient is an indicator that fully reveals income imbalance by taking the whole society into account.

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Of course, the government is trying to eliminate this imbalance with social aid.

When we included social aid, the Gini coefficient could be reduced from 0.451 to 0.400 in 2013.

In fact, the social aid rate was constantly increased the following year and in the following years.

Although the social assistance rate was slightly reduced in 2020, the peak occurred the next year, that is, in 2021, and there was a slight decline again in 2022.

Apparently, social aid was intended to reduce this income imbalance in the country, but given the current state of the economy, social aid was not sufficient to eliminate the income imbalance.

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Let's take a look at the Gini coefficients in Germany for comparison.

I could not find information on the adjustment made with social benefits for Germany, but Germany's Gini coefficient for 2022 was 0.288.

The maximum was 0.312 in 2021 and the lowest was 0.283 in 2012.

These values mean that Germany's income distribution curves are in a good state, incomparable to Turkey's.

Remember, the smaller the coefficient, the more equitable the income distribution.

The lowest Gini coefficient in Europe in 2021 was Austria's with 0.267.

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This Europe is jealous of us, brother, look, we have captured the championship in Gini coefficient.

Especially Germany is jealous of us.

Although Russia's situation is worse than ours. It is not in European statistics, but as far as world statistics show, Russia's Gini coefficient was 0.645 in 2020.

So we can say that Russia is in a worse situation than Turkey in terms of income distribution.

What about America?

America is neither balanced like Europe nor unbalanced like Russia.

Look, I can say that we are more or less at the same level as America regarding Gini.

Am I surprised by this information?

No of course, I live in Russia, I already knew it was like this here. But I honestly expected the situation to be better in America.

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The situation in our country, let alone the rest of the world, is truly catastrophic. I don't know if this is a deliberate policy implemented by the government, but our income distribution is deteriorating day by day, this is a fact.

The government may be trying to improve the situation by providing more social aid day by day, perhaps it does not care about the situation, its main purpose in social aid may be to connect people to itself. I don't know that either.

By the way, I think social aid should be provided to those in need.

In fact, I have written before, as technology advances, countries will be obliged to do so in the future and will only be able to protect people from hunger with social aid.

Or, in the future, we will be prosperous as humanity, and all needs, including what we eat, transportation, and housing, will be met by the state free of charge.

But those days are still far away. For now, if we want to live, we have to work.

Why will we have to live with state support in the future?

Because as factories modernize and their technologies improve, it will become more and more difficult for people to find jobs in factories.

Since there are no longer as many jobs as before, those who cannot find a job will have to make ends meet with the social aid they receive from the state.

For now, the solution may be to reduce working hours. In some countries, this has already started to be implemented.

I don't know when we will start such a practice, but eventually we will have to reduce working hours. It is not possible to find a solution to the unemployment problem in any other way.

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However, one way or another, it is obvious that income distribution is getting worse day by day with this government.

Moreover, these statistics are TURKSTAT statistics.

Since many people do not understand what the Gini coefficient means, they may not have felt the need to manipulate these statistics.

Although Turkey's Gini coefficient was shown as 0.551 in 2020 on worldeconomics.com, which publishes world economic statistics, and TÜİK statistics were shown as 0.470 in the same year.

So, it seems that TURKSTAT has made an adjustment.

Anyway, we are now used to conscious distortions in TÜİK information.

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What is important in the economy is not to increase social aid, but to make income distribution more balanced.

Isn't it sad that a government that started out with three "Y" has failed in all three "Y" issues today?

The elections passed and the people elected this government again. I respect the people's choice.

But I wanted you to know, people already know it, so I thought I would present the situation scientifically through graphics.

I hope this information was useful.

I wish you all a future with a low Gini coefficient.

With love and respect to everyone from Moscow.