More on the Wealthy Poor and a "Fair" Society

The report I'm about to mention has been actively discussed in other parts of the online world, so by my normal triage rules I shouldn't say anything about it. But I hadn't heard about  it until yesterday, and on the chance that's true for others, I'll point it out.

The context is the previous discussion, here and here, about the capacity for feeling short-changed and ill-treated, even among some of the most materially-fortunate people ever to live on Earth. No doubt it's a primal human trait, but for various reasons (as explained here) the ever-polarizing distribution of wealth and income in America has allowed more people to feel bad about their own situation by looking at the handful who are stratospherically better off.

To some extent this is an "information" problem: people don't know where they really stand. A creative way to demonstrate that is with a forthcoming paper by Michael Norton of Harvard Business School and Daniel Ariely of Duke, which compares: (a) how wealth actually is distributed in America; (b) how people think it's distributed; and (c) how they think it should be distributed. The paper is available in PDF here.

The chart below conveys the central point: people think the distribution of wealth is more equal than it actually is; and they think it should be much more equal than their already unrealistically-equal notion of its current state. Eg: the top 20% of the US wealth distribution actually controls nearly 85% of total wealth; people think the top 20% controls under 60%; and they think it should control just over 30%


Similarly: people feel that the bottom 20% of the economic pyramid "should" have about 10% of the total pie; they think it actually has about 3% or 4%; in fact, its share appears to be too small to show up on the chart.

After the jump, another chart showing how these misperceptions break down among income groups. The de-middle-classing of America is a familiar story, but since it will be seen as one of the huge trends of this stage of history it deserves even more attention than it gets.

Another chart, showing estimates of what that wealth distribution is, and what it should be, among people in three income groups (under $50,000, $50,000 to $100,000, and above $100,000.) Main variation: the more money people make, the larger the share they think should go to the top 20%.