How U.S. feels about wealth gap
Most everybody has lost economic ground the past few years, but some people are still wealthy while others are getting by on less. Monthly contributor Dan Ariely talks with Kai Ryssdal about wealth distribution.
Dan Ariely (predictablyirrational.com)
More on America's Financial Crisis
TEXT OF INTERVIEW
Kai Ryssdal: Most everybody has lost economic ground over the past two years or so. But before the recession and the financial crisis and the wealth destruction that they brought, people in the upper reaches of society were proportionately way better off than most of the rest of the country. While over the past decade or two everybody else has been figuring out how to get by with less. Dan Ariely polled more than 10,000 people -- including, via our Web site, some of you -- to discover how we feel about the ever-increasing U.S. wealth gap. Dan, it's good to talk to you again.
DAN ARIELY: Same here, as always.
Ryssdal: So it is the haves and the have nots, a little wealth distribution that you've been looking at.
ARIELY: Yes, and the first thing I should tell you is that you don't have many people listening to you.
Ryssdal: To this show?
ARIELY: Yeah, only about 600 people filled out the survey.
Ryssdal: All right. So tt's actually 601 because you gotta count my mom.
ARIELY: OK, so aside from the fact that not many people are listening or at least not many people filled the survey, here is the question that we're interested in. The philosopher Rawls proposed a long time ago that a fair society is a society that if you knew everything about it, you'd be willing to join it in a random place in the distribution. You would be willing to toss the dice and put you in one bin of wealth, for example. So we posed people two questions, we said: What do you think the wealth distribution in the U.S. is? And what do you think is the ideal wealth distribution?
Ryssdal: So in other words, what do you think in the United States now, who has most of the money and then what ought it be, right?
ARIELY: That's right. And what happened is that first of all, people dramatically underestimate the wealth inequality in the U.S.
Ryssdal: Underestimate. So the fact of the matter is fewer people have more of the money.
ARIELY: That's right. So if you look at the whole world in terms of wealth distribution -- before the recession, I don't have data about after the recession -- but before the recession we're basically between the Western world and South America. We were the most skewed distribution of the Western world in terms of the haves and the have nots. But now the more interesting question is what do people think it should be. And what we found was that actually there's a huge agreement between people in terms of what it should be. And this happened to both your listeners and the general sample population. You would take, for example, Republicans and Democrats, and you would think that they would vary dramatically, and they don't, I mean they differ but they don't differ so much. So you take Republicans and they basically agree with Democrats, and you take people with low income versus high income, and they basically agree.
Ryssdal: Can you quantify what we have right now? I mean, what percentage of people have what percent of the wealth?
ARIELY: Right now the top 20 percent of the people have about 85 percent of the wealth. People think that they only own 68 percent of the wealth, so people underestimate the inequity, but if you ask them what's kind of an ideal world in the Rawls kind of sense that you would actually want to participate in, they say 33 percent. So they say in an ideal world, we want the top 20 percent to own more than 20 percent, we want them to be wealthier, but we want them to own about 33 percent of the wealth.
Ryssdal: That's so interesting. They still want the rich to be rich, but just not as rich?
ARIELY: Yeah, you know, actually, rich to be rich is a perfectly reasonable idea, right? I mean, people that have money can create jobs, they can create factories, so there is benefit in non-equal distributions of wealth, the question is what is the ideal?
Ryssdal: I'm stuck on the idea that there is a segment of society out there that thinks that inequality is the way it ought to be.
ARIELY: Yeah, you know, everybody thinks inequality is the way to be. The main lesson for me from this whole study is that when we look at the political arena, we kind of have this huge polarization, and yet when we ask people a question that is not tainted by saying Republicans or Democrats -- it's just formed and here are the numbers, and what kind of society do you want to live in -- the answers come out quite close. And for me that's kind of the optimistic outcome of all of this is in fact as a society, I think we're much more similar to each other than the political arena plays out how it looks like.
Ryssdal: You learn something new everyday. Dan Ariely teaches behavioral economics at Duke University. Dan, thanks a lot.
ARIELY: My pleasure.
Comments
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02/27/2010
You're right Ashley... they have affixed human characteristics to inanimate objects (corporations) with the same rights as us (PEOPLE)... and the right pimps out religious cohorts who have, I assume, co-signed for this (animism) in the name of God?
02/18/2010
Excellent piece of disinformation! Next topic: Rich people are paying too much taxes. Followed by: Why corporations need free speech.
From Kent, OH, 02/17/2010
This is a very interesting little survey, but is there any way to see this work? Any forthcoming publications or at least something to look at instead of just listening to Kai? Not that I didn't enjoy this interview, I'd simply like to look at the methods and results a little more.
02/12/2010
I believe it was the President Bartlett character on the TV show, "The West Wing" who said it best...but I'll have to paraphrase: people support the rights of the rich, believing one day, they too will be rich.
We watch TV and movies, and we see what its like to be at the top of a zero-sum society. If we see a poor character in a movie or TV, its rarely a feel-good movie, is it? So we want to be like what we see on TV or in movies. We want the fantasy.
Just like when you ask people about feudal times. Many say they wouldn't mind being stuck in those times, because the people don't realize, if they are not nobility now, they wouldn't be back then, either. There was no middle class, just a workman's class between the farmers and the landowners.
But people will still assume they would be a knight or a king, living in the court--not in the huts of farmers, eating the stale bread.
From CO, 02/11/2010
"What question we were being asked to answer? Should the rich get a bigger piece of the wealth cake just because they are wealthy or should they get a bigger piece of the wealth cake because they have earned it?"
Cakes/pies are terrible analogies for total wealth. First, cakes/pies are static, wealth is not. People focus too much on how big their slice is vs. how big the overall pie is. They assume if someone else has a big slice they must settle for a small slice.
But if we want to use a cake/pie analogy, let's be very clear who and how much each person contributed to making it. The cake/pie analogy assumes everyone contributed equally, or that everyone deserves a slice of something that really belongs to someone else. The total wealth of a nation, or the world for that matter isn't collectively owned. Bill Gates and Warren Buffet have far more wealth than me, but they don't owe me anything! Their slice is not mine, and the size of their slice doesn't limit how big of a slice I could have.
The reality is a whole bunch of Americans are at the table devouring a cake they contributed little if anything to. They only believe they contributed to it.
From Lake Forest, CA, 02/11/2010
Because I hear the 80/20 rule tossed around regularly in every imaginable situation, I would have expected that everyone would have assumed that the top 20% had 80% of the wealth.
I am further surprised that Kai said "I'm stuck on the idea that there is a segment of society out there that thinks that inequality is the way it ought to be." Honestly, Kai, when was the last time you offered to pool the salaries of everyone at Marketplace and cut it evenly?
The only time someone suggests that is when they think they will get more from the deal. Wouldn't that be "ill-gotten gains?"
From Los Angeles, CA, 02/10/2010
The discussion touches on interesting public attitudes toward wealth but focussing on public thoughts about what proportion has it and what proportion doesn't But an important adjunct question might be personal attitudes toward those individuals who the public thinks have wealth. Are they envious of the wealthy? Do they think the inequality is harmful or unfair? Was it earned and therefor "good' or inherited or achieved by "good luck"and therefor undeserved? Do they think it harmful to their own welfare or their own chances for comfort and safety? Or if not harmful at least diminishing their own chances at wealth accumulation? Do economists, or psychologists or sociologists or whomever have an opinion of the public attitudes toward those who they regard as wealthy? Do the academics explain that the use of wealth almost always must eventually benefit the total society since it can only be used for purchasing material goods made by the labor and capital of others, or for savings and/or investments that recirculate money for useful purposes. Unless wealth is stored under the mattress in cash, it must of necessity find its way for public use, and often to create some benefit to the total society. Perhaps the only obvious negative use of substantial wealth is to provide power by unlimited influence of wealth owner's personal views but even those most extreme views are to some extent legally restricted. Is it not possible that the majority proportion of non-wealth owners has achieved their degree of "pursuit of happiness" and spend only a passing amount of time thinking about the wealthy however many there are?
From Kensington, MD, 02/09/2010
I was struck by Kai Ryssdal's comment: "I'm stuck on the idea that there is a segment of society out there that thinks that inequality is the way it ought to be." That comment strikes me as almost a total misreading of the survey results. Americans, this survey shows, want to see a level of inequality that's half of what we have now -- and the level of inequality we have now, they believe, is significantly less than the level of inequality we actually do have.
From Stamford, CT, 02/09/2010
To the extent that our wealth concentration is a result of monopolies, of privilege, of some of us somehow being more entitled to natural resources than others, or to some of us owning awesomely valuable -- and appreciating -- urban land and riding it up, our wealth concentration is wrong.
Henry George wrote about this 130 years ago in a book called "Progress & Poverty." It still reads well in 2010 and has a distinctive and important message for us today. It is a "third way" -- neither left nor right -- which can produce the setting for the sort of economic justice Rawls described.
You might look for "Peace, Justice and Economic Reform" online.
02/09/2010
I dislike Ariely, and my feelings grew after this segment. How dare he base his a$$umptions about the marketplace listeners based on his badly-designed survey. I'm surprised he got any responses at all. Maybe this sounds good if you're an economist or if English is not your first language but asking a normal person to make assumptions about "the standard deviation" of wealth is stupid. I think he tried to make Kai look dumb (I love KAI) and he only managed to annoy me more than usual. Pls find another economist or whatever this snob purports to be to fill this segment! Standard deviation indeed.
From Macon, GA, 02/09/2010
I was one of the 600 listeners who took this survey. I was very confused about the wording of the questions because it seemed to ask how we should divide a birthday cake. You asked us whether we felt it was right for the rich to get a bigger piece of the cake just because they are rich. However, another question asked if we thought that the deck was stacked in favor of rich people.
I think the issue of wealth distribution is fundamentally different than the division of birthday cake, when everyone ought to get the same size piece of cake. It seems to me that the inherent issue with the present distribution of wealth has to do with honest personal efforts and risks taken.
In short I think you have mixed apples and oranges. What question we were being asked to answer? Should the rich get a bigger piece of the wealth cake just because they are wealthy or should they get a bigger piece of the wealth cake because they have earned it? Those are very different questions and I think you biased the survey results by precluding any discussion personal efforts and risks taken as if they were not germane to the issue at hand. The question I thought I was being asked to answer was: If the rich deserved no more than the rest of us – not withstanding if they worked harder and risked more than the rest of us; and that made no sense at all.
One final comment: I think that while many people are ignorant of just how wealthy the rich are they would agree that some of what they do have did not come from their honest hard work and risk taking alone. Perhaps they think that the rich deserve a 68% slice of the pie rather than the 85% they actually have and that the excess 17% is ill-gotten gain and is not deserved.
From KY, 02/09/2010
Whether your are the richest of the rich or the poorest of the poor, it's a sin to answer the survey. The distribution of wealth in the world is totally up to God. It is none of our business. Thous shalt not covet but thou shalt love thy neighbor as thyself. Find people who are less fortunate than yourself and help them. One of the best ways you can love your neighbor is to employ someone. Enrich them, yourself and everybody else simultaneously! Work is just as much a blessing as the increase that comes from it. Governments can encourage the love between neighbors by not taxing relationships based on commerce. A bureaucrat who exists only to consume oxygen and collect a paycheck is the antithesis of neighborly love.
From Green Bay, WI, 02/09/2010
This story came as I just stumbled onto a website that reports some of the social ills that appear to go along with social inequality.
http://www.equalitytrust.org.uk/
But as most have commented, the idea that if you work hard, you should be rewarded is not a bad thing. This principle encourages people to do their best and work hard. Those that would rather sit on the couch get a little less piece of the pie.
I disagree that this however means that we can't have getter equality in America. Equality does not have to equal Socialism!
Most Americans are very hard working, and I believe that this is one of the principle traits that has strengthened the US economy. However, I also believe that politicians have been earmarking funds for years which benefit corporations. As a result, our tax money is being redistributed to the rich. This redistribution is what needs to stop.
People need to start getting more involved with their government and end this type of corporate coercion. The recent overturning of (Austin v. Michigan Chamber of Commerce, 494 U.S. 652) by the Supreme Court is just one more example of how this country is ensuring the separation of wealth never gets any smaller. By giving corporations getter ability to fund campaign elections, they are able to assert greater control over our candidates once they reach Washington, and our voices, opportunities, and freedoms are jeopardized.
From WInters, CA, 02/09/2010
@ J.Lovelace -- The result of socialism is that "Political elites control the wealth". Isn't that the same thing as the wealthy controlling the political elites, which is what we have in the U.S. where the candidate with the most contributions wins the election? The point is that our system is rigged to favor the wealthy. If you are wealthy (20% of population), you think this is okay. Because we live in a "democracy", the wealthy must convince the non-wealthy (80%) that their point of view is correct. Thus, we have laws that allow the wealthy to buy elections, own all the media outlets, and otherwise ensure that the government does not suddenly fall into the hands of the 80% who are not wealthy.
Two brilliant and hardworking children, one rich and one poor, do not have the same opportunity in our society despite their skills and talents. Get real.
From CA, 02/09/2010
Ryssdal: "I'm stuck on the idea that there is a segment of society out there that thinks that inequality is the way it ought to be."
I'm stuck on the idea that you don't think so. What's the alternative?
That the rich have less money than average — that's logically impossible.
That the rich have the average — that's economically impossible. Talent, motivation, luck, etc. aren't equally distributed. Societies have tried to mandate equality of wealth; they haven't ended well. The nomenklatura may redistribute wealth, but not power.
From Honolulu, HI, 02/08/2010
a correction to my last posting:
...there was and still is "no" good regulations on derivatives...
From Honolulu, HI, 02/08/2010
Interesting subject. I grew up under Communism and now live in the US. So i know exactly what is like under both of these worlds. Neither one of these worlds do well if taken too far extreme.
In a communist society, there’s less worrying about loosing your job, at the same time, your “dreams” (house by the beach, travel the World...) are just pure fantasies, that if you do even have a dream there. On the other hand, anything is possible in a super Capitalist society as long as you work hard enough or be smart enough to make that happen--only problem here is that the weak and unfortunate get trampled to the bottom by the fat boys fighting their way to the top.
Idealistically, I think a more socialist flavored (not to be confused with Communist) system would be best. This is a model where capitalists still run the show but under tighter government supervision to make sure they don’t run amok like just what happened in the banking industry. I.e., there was and still is good regulations on derivatives, so the banks with their greed took things too far and drove off the cliff with their suicidal mission. In this model the government also needs to make sure everyone has an “affordable yet decent” education and health care program. Some other countries especially in Europe (Norway and Sweden?) seem to have already adapted this model and are doing well--their people are happy as recent research indicated.
The 20/80 or 10/90 wealth distribution ratio is nothing new. Check out the Rich Dad and Poor Dad series which came out many years ago. You just need to know some powerful principles in an unequal (not the same as unjust) capitalist society to harness your riches.
From Augusta, GA, 02/08/2010
The comment that the top 20% of the people have 85% of the wealth does'nt make sense to me. Please define top 20% of the people? What exactly does that mean? Do you mean that 85% of the country's wealth is held by 20% of the population? If so, I think we,re making progress. I have always heard that 90% of the country's wealth is held by 5% of the population. If it has grown to 20% then that's good.
I don't necessarily believe that being rich is bad, just the opposite I think it's motivating for others. I just think the rich should pay their taxes and not have every loop hole in the world at their disposal. That's the reason I'm against a fixed flat rate taxation, because it does not have a fair and reasonable impact on everyone. Ex. a tax rate of 15% on 1 million dollars, leaves $850,000 spending money; this wage earner would barely notice they were even taxed. However, compare that with someone earning $50,000 taxed at 15%, leaves them only $42,500; that $7,500 has a greater impact on someone in this income bracket; probably this persons annual gas budget to get back and forth to work. So it would seem more equitable to tax the wealthy at higher rates, let's say 50%. That would still leave the million dollar wage earner with a healthy $500,000; who couldn't live on that?
One last thing. There is nothing wrong with being poor, the Bible says that "you will always have the poor among you" it's inevitable for obvious reasons. The pure fact of being poor can be motivating, again in His wisdom, the Bible says, (pp. that hunger pains will motivate one to work). Think about it!
From Wichita, KS, 02/08/2010
I am shocked that Kai Ryssdal was surprised by the fact that most people are comfortable with the concept of wealth inequality. Does Kai not understand the basis on which capitalism operates? Does he not understand that capitalism and economic freedom result in a higher level of prosperity for all in society?
He or she who assumes risk, acquires knowledge, makes good business decisions, manages well, and creates value should be rewarded accordingly...not equally!
If we lived in a society where wealth was distributed evenly regardless of the amount of value created or destroyed and where there was no incentive for taking risk, our quality of life would be significantly lower.
The opportunity to be rewarded disproportionately causes people to work harder and create more value...increasing economic prosperity for everyone.
From Austin, TX, 02/08/2010
Wealth inequality is fine by me. I'm comfortable with the concept of young students being poor (as I was) and eventually earning and saving wealth over time, or choosing an easier and simpler lifestyle rather than working for more comfort and them faintcy toys.
I want a society that provides the basic needs as a floor, but allows people the opportunity to grow and accumulate beyond that. (How to get that out of our current political system is beyond me.)
From Houston, TX, 02/08/2010
Where is the 20% cut off in dollar terms. Do people who earn $200k a year fall into that class? $300?
Also, I am curious if there is any adjustment for what I see as the great generosity of the American rich. Do the stats account for the hundreds of billions in philanthropic dollars given by the top 20%? I don't think the same level of giving exists elsewhere in the world, but perhaps I am wrong. I don't begrudge a Bill Gates or Warren Buffet their wealth because they do not appear greedy or selfish. Because of this I wonder if the stats relied upon here are really meaningful.
From Saint Paul, MN, 02/08/2010
There's a big difference between thinking it's ok for some people to have more than others and thinking it's ok to have the kind of unequal wealth distribution we have in the US.
Although some might wish for it, we are never going to have a society where everyone has exactly the same (and based on the survey results that's not what most people would want anyway), so that means there has to be some unequal distribution of wealth, and the top 20% will always have more than 20% of the wealth. That's just common sense math. So the only question is what percent above 20% would represent a fair distribution of wealth for that group?
The survey seems to say that most people understand this and think it's fair for the top 20% to have somewhat more than 20% of the wealth. Why does Kai seem to have such a hard time with that? It doesn't seem that out of line to me. Certainly seems more reasonable than what we really have today.
From Milan, MI, 02/08/2010
First, even in a fair society as Rawls defined it there will be a great deal of inequality. Who would choose to live in a society where people who do nothing, or who work incompetently, get rewarded exactly the same as those who work hard? Americans tend to believe in equality of opportunity, but equality of results regardless of effort is rightly unpopular. And if 20% of the people own 85% of the wealth even with the government confiscating large portions of their income and giving vast sums to the other 80%, I don't think we'd like the results of increased redistribution.
Second, in reply to Ms. Yazbek: Communism and socialism are "dirty words" in this country because we've seen their results: the political elites control the wealth, while the masses starve, largely because there's no incentive to work hard.
Third, this piece talks about "wealth," but in this country the government doesn't do much to *wealth*. The government taxes *income*, so the truly rich--Gates and Soros, for instance--can keep their wealth and express their gratitude by donating to their (usually liberal) political campaigns.
From Ausitn, TX, 02/08/2010
@Corinna: From wikipedia, on Rawls second principle:
Social and economic inequalities are to be arranged so that (Rawls, 1971, p.303):
a) they are to be of the greatest benefit to the least-advantaged members of society (the difference principle).
b) offices and positions must be open to everyone under conditions of fair equality of opportunity
So inequality is just - as long as it fulfills both A and B. I believe our current system fulfills neither a, nor b, thus is unjust.
I suspect Ariely is OK with inequality, but not with injustice.
@Jack: What if you stay at home and watch Survivor, then later go out and party with your trust fund money, while, oh, say, David Brown hits the books - do you deserve a better outcome? I but jest. No I don't.
Actually, most thoughtful observers believe there should be equal opportunity, not equal outcomes. And our system is doing a worse and worse job of allowing equal opportunity.
@Jim - I recently saw it argued that one party argues the facts, and the other party counters with emotion. Guess which, and guess who wins? If a candidate presents an emotional argument about inequality, they are accused of class warfare.
From Fountain City, WI, 02/08/2010
It is ironic that we collectively believe that rich people deserve their 85%, because of the wealth they have created. Economic theory (i.e. Nobel prize winning economist Robert Solow)posits that productivity growth primarily results from:technological innovation, rule of law and education, not capital investment.
From Metairie, LA, 02/08/2010
Ryssdal: I'm stuck on the idea that there is a segment of society out there that thinks that inequality is the way it ought to be.
I'm comfortable with that opinion. If I stay home and watch Survivor while you are hitting the books because you want to be a surgeon; why should I expect an equal outcome?
02/08/2010
Thank you, Kai, for challenging Ariely's assertion that "everybody thinks inequality is the way to be." I do not think that and neither do hundreds of people I know and respect. What he failed to mention is that we are taught from birth to believe in a meritocracy and/or that class equality is communism or socialism (which are dirty words throughout our country). To me, we do not live in a just world as long as there is class inequality. Perhaps Ariely is comfortable with injustice... but maybe that's class his privilege talking.
From Boise, ID, 02/08/2010
If most Americans in the wealth gap survey prefer a 33% distribution of wealth to the top 20% of the population; why do so many Americans support politics that maintain the 85/20 status quo? I don't get it.
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