George Orwell, Call Your Office
August 10, 2012
Sometimes the mind just boggles.
The Atlantic has an article this month with the title “Americans Want to Live in a Much More Equal Country (They Just Don’t Realize It).” I am always curious when intellectuals announce that the people (who in the American constitutional system serve as the sovereign power) don’t know what’s good for them (What’s the Matter with Kansas?) or don’t even know what they want.
Implicit in all of these revelations, of course, is the firmest, if never directly expressed, belief of the Left: That the average person is too stupid to run his own life, let alone make public policy decisions. Those few, those happy few, that band of liberal intellectuals, must do that for them.
The author of the Atlantic article, Dan Ariely—a professor of psychology and behavioral economics at Duke—divided the American population into quintiles according to wealth. He then asked a representative sample of more than 5,000 Americans to guess how the country’s wealth was distributed amongst these quintiles.
He doesn’t say exactly how he determined the population’s wealth. Are the hundreds of billions of dollars in union and government pension funds that will fund the retirement of millions of blue-collar and government workers considered an asset of those workers? I’d guess not. Does this money greatly improve their standard of living? You bet, just like a trust fund improves the standard of living of some rich man’s grandson. But let that go.
It turns out that the overwhelming majority of the sample population thought the distribution of wealth was much more equal than in fact it is. The average guess was that 9 percent of the country’s private wealth belonged to the bottom 40 percent and that 59 percent of it belonged to the top 20 percent. According to the author, it is in fact 0.3 percent of American privately held wealth that belongs to the bottom 40 and 84 percent that belongs to the top 20. But, again, without some insight into the methodology, these figures are impossible to evaluate. They are simply declared ex cathedra.
Ariely then asked people in the sample population to pick an ideal distribution of wealth among the quintiles. The average of their choices was much more egalitarian than is the American reality. The average proposed distribution was 11 percent for the poorest quintile and 32 percent for the richest.
The rest of the article is devoted to a discussion of how best to get to that preferred distribution.
A few points:
1) As long as no one lacks the wherewithal for a decent standard of living, is a very unequal division of wealth necessarily a bad thing and a more evenly distributed pattern of wealth necessarily a good thing? Professor Ariely blithely begs this fundamental question.
2) American society is notoriously fluid. Rising from a log cabin to the presidency is American folklore. It is also American reality. The majority of the Forbes 400 created their own fortunes.
But there is not an inkling here that individuals often transition through different quintiles during their lives. Someone might start off in the top quintile, living with his affluent parents. Then he graduates from college, gets an entry-level job and a studio apartment in a crummy part of town, and bam! He’s in the bottom quintile. He works hard, gets ahead, saves some money, and he’s in the next-to-bottom quintile. He marries a woman with a good job and moves up another. His parents help with the down payment on a house and 20 years later, once the mortgage is paid off, he’s in the next quintile. His father dies, leaves him a million dollars, and he’s in the top quintile. Then the market goes to hell, his net worth declines drastically, and, as a result, he drops down a notch or two. And so on.
Instead, there is an unmistakable implication in the article that the various quintiles are self-perpetuating, with the proletariat at the bottom leading lives of quiet desperation and a few fat cats at the top lighting cigars with hundred-dollar bills. That might have been true in the 1840s when Marx began writing (although the early 19th century was also a time of many new fortunes). It sure isn’t true in today’s America, where a bright idea for an iPad app can make you rich practically overnight (just ask the guy who invented Angry Birds) and talent is far more valued than ancestors.
3) How on earth are 5,500 people chosen from all walks of life—from janitor to rocket scientist—supposed to have the faintest idea what the ideal distribution of wealth should be in today’s rapidly changing economy? These people are picking numbers out of the air and saying, “Oh, that seems right.” Is it? Professor Ariely simply assumes that it is….