Thursday, October 14, 2010

What You Don't Know Can Hurt You

I have wanted to write about a study which found Americans uninformed about the actual levels of wealth inequality in this country for some time, but other things intervened. Hence this post is a little late.

Here is one write-up of the study:

Americans generally underestimate the degree of income inequality in the United States, and if given a choice, would distribute wealth in a similar way to the social democracies of Scandinavia, a new study finds.

For decades, polls have shown that a plurality of Americans -- around 40 percent -- consider themselves conservative, while only around 20 percent self-identify as liberals. But a new study from two noted economists casts doubt on what values lie beneath those political labels.

According to research (PDF) carried out by Michael I. Norton of Harvard Business School and Dan Ariely of Duke University, and flagged by Paul Kedrosky at the Infectious Greed blog, 92 percent of Americans would choose to live in a society with far less income disparity than the US, choosing Sweden's model over that of the US.

What's more, the study's authors say that this applies to people of all income levels and all political leanings: The poor and the rich, Democrats and Republicans are all equally likely to choose the Swedish model.


Recent analyses have shown that income inequality in the US has grown steadily for the past three decades and reached its highest level on record, exceeding even the large disparities seen in the 1920s, before the Great Depression. Norton and Ariely estimate that the one percent wealthiest Americans hold nearly 50 percent of the country's wealth, while the richest 20 percent hold 84 percent of the wealth.

But in their study, the authors found Americans generally underestimate the income disparity. When asked to estimate, respondents on average estimated that the top 20 percent have 59 percent of the wealth (as opposed to the real number, 84 percent). And when asked to choose how much the top 20 percent should have, on average respondents said 32 percent -- a number similar to the wealth distribution seen in Sweden.

"What is most striking" about the results, argue the authors, is that they show "more consensus than disagreement among ... different demographic groups. All groups – even the wealthiest respondents – desired a more equal distribution of wealth than what they estimated the current United States level to be, while all groups also desired some inequality – even the poorest respondents."

And one graph from the study (p. 12, left-click to make larger):

The study also offers the information in this graph by by the respondents' income levels, by their voting habits and by gender (p. 13). It turns out that men prefer a slightly more unequal wealth distribution than women but the differences are slight. And nobody prefers as much wealth inequality as the US currently has!

This is all quite astonishing. What's probably most astonishing is that nobody much seems to have cared to remove the ignorance these findings suggest:

Americans' ignorance about wealth (and, probably, income) distribution is encouraging in the sense that it offers hope that most voters might opt for government policies more conducive to equality if only they knew how unequal things were. But it's dismaying in the sense that people who occupy a position of relative privilege seem to go out of their way to avoid acknowledging it. A recent example is M. Todd Henderson, a law professor at the University of Chicago whose annual household income exceeds $250,000, putting him comfortably ahead of 98 percent of his fellow Americans. Henderson was foolish enough to write a blog post venturing that even though he and his wife earn more than $250,000, his Hyde Park neighbor Barack Obama shouldn't raise his taxes because "we can't afford it" after paying the mortgage, the kids' private school tuition, the nanny, etc. You can imagine the response he got.
I would have thought all this would be an obvious weapon for the Democrats to use when defending the Health Care Reform, for example, or the minimum wage or umpteen other possible political acts. But no.