Americans' hugely distorted wealth perceptions

(Originally published 5/31/12)

Image: ocregister.com

On the David Pakman Show yesterday, David and friends talked about a 2011 study by Michael I. Norton (Harvard) and Dan Ariely (Duke) titled "Building a Better America−−One Wealth Quintile at a Time." I'd read about this study a few months back. The study highlights the wide disparity between (a) how "regular Americans" think the distribution of wealth in the U.S. breaks down, (b) what their ideal distribution would be, and (c) what the actual distribution of wealth really is. As Norton and Ariely explain, they:

ask[ed] a nationally representative online panel to estimate the current distribution of wealth in the United States and to ‘‘build a better America’’ by constructing distributions with their ideal level of inequality. First, respondents dramatically underestimated the current level of wealth inequality. Second, respondents constructed ideal wealth distributions that were far more equitable than even their erroneously low estimates of the actual distribution. Most important from a policy perspective, we observed a surprising level of consensus: All demographic groups—even those not usually associated with wealth redistribution such as Republicans and the wealthy—desired a more equal distribution of wealth than the status quo.

David uses a different graph on his show, but I think the one below from Norton and Ariely's study (available on p. 11) does a better job showing just how distorted Americans' perspectives on wealth distribution actually are:

For the most part, David is just highlighting the findings from this study, which are worth a listen or a read; however, I think he does a nice job raising the question about the practical policy implications of these dynamics:

It's really easy to see how the misperception about wealth distribution affects policy, right? Because when we hear about people saying, "We like the Bush Tax Cuts for people making more than $250,000 per year--." It's perfectly fair to have that position. But have that position based on an understanding of reality, not based on an understanding where you think that wealth is significantly more evenly distributed than it actually is.

Overall, I think this is a nice illustration of ideology at work. As Sut Jhally explains, ideological institutions, including media, culture, and the schools, "work to legitimate the existing distribution of power by controlling the context within which people think and define social problems and their possible solutions." In this case, not understanding a problem presumably makes it quite difficult for self-governing people to make fair and just decisions. There seems to be a silver lining in this study, though. People have an ideal picture of a world that is more equitable, and presumably we want what is ideal. Perhaps a more thorough understanding of how inequitable things actually are will spur Americans to consider ways to pursue and achieve that ideal. The Occupy movement is an ongoing case study in these processes.

Here's the clip from yesterday's show: