It’s a relatively new science, and one which binds together many different academic disciplines: mathematical modelling, economics, sociology and history. In economic terms, it is to what economists in financial institutions spend most of their time focusing on – the short to medium term – as climate science is to weather forecasting. Cliodynamics (from Clio, the Ancient Greek muse or goddess of history (or, sometimes, lyre playing) and dynamics, the study of processes of change with time) looks at the functioning and dynamics of historical societies, ie societies for which the historical data exists to allow analysis. And that includes our own.
Peter Turchin, professor of ecology and mathematics at the University of Connecticut and Editor-in-Chief of Cliodynamics: The Journal of Theoretical and Mathematical History, wrote a book with Sergey Nefedev in 2009 called Secular Cycles. In it they took the ratio of the net wealth of the median US household to the largest fortune in the US (the Phillips Curve) to get a rough estimate of wealth inequality in the US from 1800 to the present. The graph of this analysis shows that the level of inequality in the US measured in this way peaked in World War 1 before falling steadily until 1980 when Reagan became US President, after which it has been rising equally steadily. By 2000,inequality was at levels last seen in the mid 50s, and it has continued to increase markedly since then.
The other side of Turchin’s and Nefedev’s analysis combines four measures of wellbeing: economic (the fraction of economic growth that is paid to workers as wages), health (life expectancy and the average height of native-born population) and social optimism (average age of first marriage). This seems to me to be a slightly flaky way of measuring this, particularly if using this measure to draw conclusions about recent history: the link between average heights in the US and other health indicators are not fully understood, and there are a lot of possible explanations for later marriages (eg greater economic opportunities for women) which would not support it as a measure of reduced optimism. However, it does give a curve which looks remarkably like a mirror image of the Phillips Curve.
The Office of National Statistics (ONS) are currently developing their own measure of national well-being for the UK, which has dropped both height and late marriage as indicators, but unfortunately has expanded to cover 40 indicators organised into 10 areas. The interactive graphic is embedded below.
Graphic by Office for National Statistics (ONS)
I don’t think many would argue with many of these constituents except that any model should only be as complicated as it needs to be. The weightings will be very important.
Putting all of this together, Turchin argues that societies can only tolerate a certain level of inequality before they start finding more cooperative ways of governing and cites examples from the end of the Roman civil wars (first century BC) onwards. He believes the current patterns in the US point towards such a turning point around 2020, with extreme social upheaval a strong possibility.
I am unconvinced that time is that short based solely on societal inequality: in my view further aggravating factors will be required, which resource depletion in several key areas may provide later in the century. But Turchin’s analysis of 20th century change in the US is certainly coherent, with many connections I had not made before. What is clear is that social change can happen very quickly at times and an economic-political system that cannot adapt equally quickly is likely to end up in trouble.
And in the UK? Inequality is certainly increasing, by pretty much any measure. And, as Richard Murphy points out, our tax system appears to encourage this more than is often realised. Cliodynamics seems to me to be an important area for further research in the UK.
And a perfect one for actuaries to get involved in.