The Inequality Delusion

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Political equality is a sacred idea to Americans; economic equality, however, is not. Spreading the wealth is what Marx wanted to do, and Mao. One rallying cry of the Tea Party has been that health-care reform, the stimulus, and the proposed climate change legislation all amount to stealthy ways to redistribute billions of dollars downward. The impending elections are expected to sweep into Congress a crop of Republicans vehemently opposed to the leveling effects of activist liberal government.

...

So it might be surprising to learn that Americans are in broad agreement on the need for a more equal distribution of wealth. Yet that's what a forthcoming study by two psychologists, Dan Ariely of Duke University and Michael I. Norton of Harvard Business School, has concluded. First, Ariely and Norton asked thousands of Americans what they thought the nation's actual wealth distribution looks like: how much is owned by the wealthiest 20 percent of the population, the next-wealthiest 20 percent, and on down. The researchers then asked people what, in an ideal world, they would like the nation's wealth distribution to be.

Ariely and Norton found that Americans think they live in a far more equal country than they in fact do. On average, those surveyed estimated that the wealthiest 20percent of Americans own 59 percent of the nation's wealth; in reality the top quintile owns around 84 percent. The respondents further estimated that the poorest 20 percent own 3.7 percent, when in reality they own 0.1 percent.

And when asked to give their ideal distribution, they described, on average, a nation where the wealth distribution looks not like the U.S. but like Sweden, only more so—the wealthiest quintile would control just 32 percent of the wealth, the poorest just over 10 percent. "People dramatically underestimated the extent of wealth inequality in the U.S.," says Ariely. "And they wanted it to be even more equal."

The United States, according to this study, is a nation of people who would like to spread the wealth around. They just don't know it.

...

The U.S. now has the world's second-lowest level of income mobility between generations, after England, according to research by economist Miles Corak at the University of Ottawa. Yet studies have also shown that voters have an impressive ability to absorb information that contradicts their beliefs without letting it change their minds. People support the abstract goal of equality, it seems, while staunchly opposing specific government measures—whether increasing tax rates or limiting executive pay—designed to impose it.

...

Economists ... agree that the degree of wealth equality that the study's respondents identified as ideal would be disastrous, because it would seriously retard growth—sapping incentives to work and innovate.

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"It's probably a good thing that the public underestimates how much wealth inequality there is," says Bryan D. Caplan of George Mason University, since "they tend not to understand the ways that wealth inequality is good."

http://www.businessweek.com/magazine/content/10_44/b4201008238184.htm

[chri'stina 190]

"People support the abstract goal of equality, it seems, while staunchly opposing specific government measures—whether increasing tax rates or limiting executive pay—designed to impose it."

Yes like the article says, just because people would like to see more equality of wealth doesn't mean they want the government in charge of making it happen.

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"People support the abstract goal of equality, it seems, while staunchly opposing specific government measures—whether increasing tax rates or limiting executive pay—designed to impose it."

Yes like the article says, just because people would like to see more equality of wealth doesn't mean they want the government in charge of making it happen.

Actually, the real point of the article is that Americans have no idea what kind of country they have and if they actually got the kind of country they want, it would be a disaster.

[mawilson 2,133]

Equality is overrated.

[chri'stina 190]

Actually, the real point of the article is that Americans have no idea what kind of country they have and if they actually got the kind of country they want, it would be a disaster.

Yeah, I got that part too.

I was talking about the one quote.

[one...two...tree 2,762]

Actually, the real point of the article is that Americans have no idea what kind of country they have and if they actually got the kind of country they want, it would be a disaster.

Sweden is a disaster?

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Sweden is a disaster?

Does the phrase "only more so" mean anything to you?

And when asked to give their ideal distribution, they described, on average, a nation where the wealth distribution looks not like the U.S. but like Sweden, only more so...

Also, seeing how you are so trusting of experts when it comes to climate change, why sneer at them now? Is it because their opinion is contrary to your beliefs?

[one...two...tree 2,762]

Does the phrase "only more so" mean anything to you?

And when asked to give their ideal distribution, they described, on average, a nation where the wealth distribution looks not like the U.S. but like Sweden, only more so...

Also, seeing how you are so trusting of experts when it comes to climate change, why sneer at them now? Is it because their opinion is contrary to your beliefs?

If 'only more so' and 'experts' are all it takes to make your kitty purr, count me out.

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If 'only more so' and 'experts' are all it takes to make your kitty purr, count me out.

I found the actual study. Here is a bit of elaboration on the "more so" part.

... we created three unlabeled pie charts of

wealth

distributions, one of which depicted a perfectly equal distribution of

wealth

. Unbeknownst to respondents, a second distribution reflected the

wealth

distribution in the United States; in order to create a distribution with a level of inequality that clearly fell in between these two charts, we constructed a third pie chart from the

income

distribution of Sweden ... We used Sweden’s income rather than wealth distribution because it provided a clearer contrast to the equal and United States wealth distributions; while more equal than the United States’ wealth distribution, Sweden’s wealth distribution is still extremely top heavy.

...

The (unlabeled) United States distribution was far less desirable than both the (unlabeled) Sweden distribution and the equal distribution, with some 92% of Americans preferring the Sweden distribution to the United States.

Does that help? The preferred distribution is of a wealth distribution that is even 'more equal' than Sweden.

Edited October 22, 2010 by \

[one...two...tree 2,762]

Does that help? The preferred distribution is of a wealth distribution that is even 'more equal' than Sweden.

Ok. I'd be curious to see how people would respond to the notion of economic opportunity vs. economic equality. Capitalism, by default, is top heavy and I don't think anyone would argue that it isn't. In America though, people have long believed in economic opportunity for all, it's just that some have different ideas of how to maintain it or even define it.

Edited October 22, 2010 by El Buscador

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Oh, I can't believe I forgot to share this nugget with you. From the same study:

...creating a society with the precise level of inequality that our respondents report as ideal may not be optimal from an economic or public policy perspective (Krueger, 2004).

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Oh, I can't believe I forgot to share this nugget with you. From the same study:

...creating a society with the precise level of inequality that our respondents report as ideal may not be optimal from an economic or public policy perspective (Krueger, 2004).

And here is an excerpt from the paper cited above as Krueger, 2004:

...societies must strike a balance between the beneficial incentive effects of inequality and the harmful welfare-decreasing effects of inequality. The optimal balance will differ across societies and time, but too much inequality can be harmful in any society, just like too much equality can suppress innovation and drive.

Edited October 22, 2010 by \

[one...two...tree 2,762]

And here is an excerpt from the paper cited above as Krueger, 2004:

...societies must strike a balance between the beneficial incentive effects of inequality and the harmful welfare-decreasing effects of inequality. The optimal balance will differ across societies and time, but too much inequality can be harmful in any society, just like too much equality can suppress innovation and drive.

That makes sense. IMO, the EITC (earned income tax credit) has been more harmful than beneficial. The working poor would feel more empowered by fairer labor laws.

[mawilson 2,133]

Sweden is a disaster?

For entrepreneurs and businesses, it sure is.

[Peikko 1,575]

For entrepreneurs and businesses, it sure is.

That's based on your in depth knowledge of the state of entrepreneurial and business activity in Sweden is it? Or just a sound bite piece of fluff?