Rising Wealth Inequality: Introduction

Updated March 22, 2011 09:53 AM

Rising Wealth Inequality: Should We Care? NY Times

Introduction

Yarek Waszul

Many studies have shown that income inequality is rising. In several different types of communities, median family income is lower now than 30 years ago. Yet an intriguing survey by Michael Norton and Dan Ariely found that Americans believe wealth distribution to be far more equal than it actually is and, if given a choice, they would select an even more equitable scenario.

Why do Americans seem relatively unperturbed about growing income inequality? Is it a lack of awareness, or are there other factors?

Chinn_ Anger is Growing

Rising Wealth Inequality: Should We Care?

Why do Americans seem unperturbed about the growing gap between the rich and the poor?

Anger Is Growing

March 21, 2011

Dante Chinni is the director of Patchwork Nation, a project of the Jefferson Institute.

A better question is: Why do Americans seem relatively unperturbed about growing wealth inequality, so far?

Get ready for a populist movement in years ahead.

The journalism project I lead, Patchwork Nation, uses demographic and economic data to break the nation’s 3,141 counties into 12 types of communities, from wealthy suburban areas to small-town service centers. We recently looked at median family incomes in 1980 and 2010 in those communities, and the findings were troubling. Seven of the 12 county types actually had a lower median family income in 2010 than they did 30 years before in inflation-adjusted dollars. Not only had they not kept up, they’d fallen behind.
So wealth inequality is real, but where’s the outrage?
Until this latest recession, many Americans papered over the issue. They ran up credit card debt. They took equity out of their homes. In short, they found ways to at least keep up appearances. They got comfortable living beyond their means.
Those times are gone and, as a result, we’re starting to see some anger manifesting itself in different ways. We looked at online supporters of various Tea Party groups and found membership was strong in places hard hit by the recession. That’s what much of the Tea Party talk about “getting America back” is really about -- getting back a way of life. The sentiment is understandable, even if the goal is impossible. The world has changed too much.
The global economic changes underway mean the days of succeeding by “working hard” and “playing by the rules” are disappearing. You need education and, increasingly, a head-start financially. In some communities in America those things are readily available. In others, they’re barely visible.
Up to now, many Americans have been waiting to see if their current economic problems are temporary, or something more. As they begin to feel the larger forces involved, they will grow increasingly frustrated and, yes, angry.
Get ready for a populist movement in years ahead -- one that could take many forms -- and a very bumpy ride.

Cowan_ Keeping Envy Local

Rising Wealth Inequality: Should We Care?

Why do Americans seem unperturbed about the growing gap between the rich and the poor?

Keeping Envy Local

March 21, 2011

Tyler Cowen, a professor of economics at George Mason University, is the author of a new e-book, "The Great Stagnation." His blog, Marginal Revolution, covers economic affairs.

First, a lot of Americans live very well, even if they don’t enjoy all of the benefits of the lifestyles of the very wealthy. It is quite possible that a person in the upper middle class is happier than a billionaire. Even the middle class has access to penicillin, air travel, good cheap food, the Internet, and cable TV, not to mention a heart bypass operation, if needed.

People worry about how well they are doing compared with their neighbors and co-workers, not with Michael Bloomberg.

Bill Gates, of course, has a lot more than that, but a lot of Americans don’t feel they deserve a private jet, a private charitable foundation, or an invitation to Davos and they may not even want it. In terms of income, the gap between rich and middle class is growing, but in terms of happiness it is relatively low by broader historical standards.
Second, a lot of envy is local. People worry about how they are doing compared to their neighbors, their friends, their relatives, their co-workers, and the people they went to high school with. They don’t compare themselves to Michael Bloomberg, unless of course they are also billionaires. When the guy down the hall gets a bigger raise, perhaps by courting the boss, that’s what really bothers us. In other words, envy and resentment are not going away and they also do not stem fundamentally from the contrast between ordinary lives and the lives of the very wealthy.
Third, many Americans draw an important distinction between earned wealth and unearned wealth. If someone has become a billionaire, but he worked hard for it and supplied a good or service of real value (say Mark Zuckerberg of Facebook), for the most part Americans will respect and admire that person.
A lot of wealth today hasn’t been earned fairly, but still a lot of it has been the result of hard work and creativity, even if mixed in with good luck. The United States is still a society of business and a lot of businessmen provide great value to our economy. The weight has not swung to the point where there is more unearned wealth than earned wealth and so Americans identify with business and a business ethic, especially compared to attitudes in Europe.
Americans know that they have done well by their pro-business and pro-wealth ethic. Should they trade in those views for a bundle of envy and resentment? The case for that switch has not yet been made and fortunately there is still a lot of common sense out there.

http://www.nytimes.com/roomfordebate/2011/03/21/rising-wealth-inequality-should-we-care/keeping-envy-local-in-income-disparity

Freeland_ The Lottery Mentality

Rising Wealth Inequality: Should We Care?

Why do Americans seem unperturbed about the growing gap between the rich and the poor?

The Lottery Mentality

Updated March 22, 2011, 01:37 PM

Chrystia Freeland is the global editor-at-large at Thomson Reuters.

Americans actually live in Russia, although they think they live in Sweden. And they would like to live on a kibbutz. This isn’t the set-up for some sort of politically incorrect Catskills stand-up joke circa 1960. It is the takeaway from a remarkable study by Michael Norton and Dan Ariely on how Americans think about income inequality.

Americans are mistaken about income inequality because of national self-confidence and the lottery effect.

The right likes to argue that income inequality as an issue doesn’t win elections because Americans don’t begrudge the rich so much as they want to join them. The Norton and Ariely study suggests otherwise. Given a choice, the authors find, Americans would prefer to live in a society more equal than even highly egalitarian Sweden.
Another popular view is that income inequality isn’t experienced as acutely by most Americans as the numbers suggest because of how much can be “consumed” by the lower rungs of the nation’s socioeconomic ladder. No less a figure than Alan Greenspan, the maestro himself, once made this case at the Federal Reserve’s annual Jackson Hole conference, presenting data on the consumption of dishwashers, microwaves and clothes dryers showing that if measured by the possession of these goods – as opposed to the huge and growing income divide -- inequality was decreasing.
That interpretation is not without merit. But it turned out that allowing Americans to prosper by using their homes as A.T.M.'s and maxing out on their credit cards was maybe not such a great idea.
Personally, I lean toward two other theories. Americans are mistaken about income inequality because of national self-confidence and the lottery effect.
By national self-confidence, I mean the widespread conviction that the American way is probably right because all those other ways don’t seem to work out so well. This is a wonderful national quality and one of the reasons America has such resilience. But confidence in the American way can make it hard for the country as a whole to recognize when things aren’t working.
Take, for instance, the health care debate, when a politically effective criticism of what has come to be known as Obamacare was to argue that it would destroy the “best” health care system in the world. Mary Meeker, a Silicon Valley guru of impeccably capitalist and American credentials debunked that idea in her recent USA, Inc. presentation, in which she pointed out that “U.S.A. per capita health care spending is 3x OECD average, yet the average life expectancy and a variety of health indicators in the U.S. fall below average. But if you spend way more than everyone else, shouldn’t your results (a.k.a. performance) be better than everyone else’s, or at least near the top?”
Aside from faith in American national excellence, the other main reason Americans seem so unperturbed by the widening chasm between the rich and everyone else is what I like to call the lottery effect. Buying lottery tickets is clearly an irrational act -- the odds are hugely stacked against us. But many millions of us do, because we see the powerful evidence that an ordinary person, someone just like us whose only qualifying act was to buy a ticket, wins our favorite lottery every week.
For many Americans, the nation’s rowdy form of capitalism is a lottery that has similarly bestowed fabulous rewards on the Everyman. The current leading exemplar of self-made billions is Facebook’s Mark Zuckerberg, and he may soon be outstripped by the even more instant cyber-star Andrew Mason, the founder of Groupon.
But the problem with lotteries is that there are only a few winners. That is the story the numbers tell us about American capitalism today -- and unless that underlying reality changes, at some point all those folks who think they already live in Sweden will realize they live in a winner-take-all society, and that most of us aren’t winning.

http://www.nytimes.com/roomfordebate/2011/03/21/rising-wealth-inequality-should-we-care/the-lottery-mentalityre

Keister_ Why Rock the Boat?

Rising Wealth Inequality: Should We Care?

Why do Americans seem unperturbed about the growing gap between the rich and the poor?

Why Rock the Boat?

Updated March 22, 2011, 09:52 AM

Lisa Keister is professor of sociology and director of the markets and management program at Duke University. She is the author of "Wealth in America" and the forthcoming, "Social Stratification and Inequality" and "Faith and Finances."

There is no question that inequality in wealth and income are extreme today. Wealth inequality in the United States is particularly high, surpassing that of most other countries. Yet few Americans are outraged by these trends. There is some evidence that people would prefer more equality, but there is no sign of widespread outrage or pervasive demands for change. Why? There are at least four important reasons.

Many Americans believe: If I'm not moving up and doing better, it's my own fault.

1. Homophily. We tend to spend most of our time with people like ourselves. We are typically very similar to our friends and family members on most demographic traits: race, ethnicity, education, family structure, religious beliefs and political views. We also tend to be similar to our friends and family on income and wealth measures. As a result, on most days we encounter a small slice of the population and rarely see evidence of inequality. Even those who are extremely rich or extremely poor spend most of their time in the company of other very rich or very poor people, giving them little reason to think about inequality most of the time.
2. Rising tides lift all boats. Even as inequality worsens, most people have tended to have more income and wealth. Some segments of the population have done worse over time, but in general people are doing better than prior generations. In other words, individual well-being is improving even in the face of growing inequality.
3. Evidence of mobility. Despite overall trends in inequality, some groups have been upwardly mobile. White Roman Catholics, for example, have been upwardly mobile in terms of wealth, income, education and other measures of well-being in recent decades. Combined with the American belief that anyone can make it, evidence that some people are moving up suggests that if I am not doing well, it is my fault.
4. General happiness. Happiness is difficult to measure, but there is evidence that Americans are by and large satisfied with their circumstances regardless of income, wealth, education, etc.
Taken together, these processes predict that very few people will become overly dissatisfied with the high levels of income inequality. After all, why rock the boat when things could be worse?