Inequality and the real world

Via Dan Ariely (author of the terrific Predictably Irrational) and friend, there’s an interesting Op-Ed in the LA Times about their latest research.  Apparently, most Americans dramatically underestimate the amount of inequality in our society:

According to an analysis this year by Edward Wolff of New York University, the top 20% of wealthy individuals own about 85% of the wealth, while the bottom 40% own very near 0%. Many in that bottom 40% not only have no assets, they have negative net wealth….

We recently asked a representative sample of more than 5,000 Americans (young and old, men and women, rich and poor, liberal and conservative) to answer two questions. They first were asked to estimate the current level of wealth inequality in the United States, and then they were asked about what they saw as an ideal level of wealth inequality.

In our survey, Americans drastically underestimated the current gap between the very rich and the poor. The typical respondent believed that the top 20% of Americans owned 60% of the wealth, and the bottom 40% owned 10%. They knew, in other words, that wealth in the United States was not distributed equally, but were unaware of just how unequal that distribution was.

When we asked respondents to tell us what their ideal distribution of wealth was, things got even more interesting: Americans wanted the top 20% to own just over 30% of the wealth, and the bottom 40% to own about 25%. They still wanted the rich to be richer than the poor, but they wanted the disparity to be much less extreme.

Like so much of the dysfunctional nature of American politics, I think a key fact is not what Americans don’t know, but rather what they think they know (hello, cutting waste, fraud, abuse and foreign aid to save the budget), but is simply wrong.  Presumably, if Americans realized the incredibly disproportionate (and growing) nature of American inequality, they’d be more open to Democrat’s efforts at redistribution, aka, “socialism.”

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About Steve Greene
Professor of Political Science at NC State http://faculty.chass.ncsu.edu/shgreene

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