A Plea to Redistribute Wealth (2010 Dec)

by Barry A. Liebling

One of the most cherished obsessions among leftists is the notion that the United States has too much inequality of wealth and the solution is to forcibly transfer money from the wealthiest Americans to those who have less money. This viewpoint is so pervasive that leftists take it as an article of faith, but the problem for committed collectivists is how to make the transfer occur. They are frustrated that too many “unenlightened” people object to confiscating personal property to further “noble” utopian goals.

Of course, if you understand and appreciate the real world you know that equality or inequality of wealth is not an essential issue. If someone comes by her wealth legitimately – either by making money or by receiving gifts – the wealth is hers by right. It does not matter whether her neighbors have much more or much less than she does. Alternatively, if someone has wealth that was obtained through theft, or by the initiation of force, or by fraud she deserves none of it – even if her neighbors are richer than she is.

Still, leftists stubbornly stick with their fixation that something has to be done “to repair” the inequality problem, and the common people have to be nudged to accept the collectivist vision.

One tactic for coaxing people into supporting wealth redistribution is the argument by consensus (argumentum ad populum). A leftist pundit asserts that most people agree that money should be taken from the wealthy, and the majority opinion – fallaciously – “proves him right.”

Recently two professors have been touting their research which claims that Americans want inequality of wealth to be reduced.


Michael I. Norton of Harvard Business School and Dan Ariely of Duke University report that they surveyed more than 5,000 adults and asked them two questions. The first question was whether they would prefer to live in a country with as much wealth inequality as the United States, or a country with no inequality of wealth, or a country with as much wealth inequality as Sweden. The authors report that most Americans would want “to live in a country that looks more like Sweden than the United States.”

The second question was how much inequality of wealth survey participants believe the United States actually has and how much inequality it should have. The authors found that most Americans underestimate the disparity between the richest and least wealthy. Furthermore, survey participants say that ideally the distribution of wealth should be more equal than it is.

Taken on their own terms how well does the authors’ research support their conclusions?

Consider first the findings about the ideal country to live in. The professors constructed three pie charts showing how much of the total wealth each quintile of the population possesses. In the equal case each quintile has exactly 20 percent of the nation’s total wealth. For the chart depicting the United States the top quintile has 84 percent of the wealth, and the chart for Sweden depicts the top quintile as having 36 percent of the wealth.

Before we get into how the professors framed the question consider how the pie charts themselves bias the findings. Wealth inequality is measured by how much of the “nation’s wealth” various people have. And the expression “nation’s wealth” suggests that the nation itself – not individual people – is the legitimate owner of it. From that misconception it is a short step to view anyone with more than an equal share of the “nation’s wealth” with suspicion. Note that if the proportion of the “nation’s wealth” a person or group possesses is accepted as a proper metric, we are in a zero-sum game. No matter how large the pie is, one person’s gain subtracts from the pie and is a loss for everyone else. This perverse way of looking at things pits everyone against everyone.

In the real world, especially in the United States, the size of the pie is not fixed. It grows as people create more wealth. If a talented rich person makes a lot of money it in no way diminishes the wealth of others. On the contrary people who generate a lot of wealth are usually instrumental in making everyone else better off.

Here is what the professors asked the survey participants. The authors showed three pie charts that were not labeled; there was no references to the United States, Sweden, or the fictitious “equal wealth country.” Only the professors knew that one of the charts reflected wealth distribution in the United States and another portrayed income in Sweden. Participants were told that each chart represents some country, they were asked to “imagine that if you joined this nation, you would be randomly assigned to a place in the distribution, so you could end up anywhere in this distribution, from the very richest to the very poorest.” They were told to indicate which nation they would rather join. The unlabeled United States pie chart was least likely to be selected, and the unlabeled Sweden chart was most likely.

How should we interpret these results? First, the survey participants were not told that two of the charts represented real countries – the United States and Sweden. It is a stretch to conclude that favoring the unlabeled Sweden chart implies that Americans would rather “live in a country that looks more like Sweden than the United States.”

The distribution of wealth is only one of many attributes that a country possesses, and the authors surely realize that if the charts were labeled many Americans would select the United States because its positive features outweigh any “problems of inequality.” But the professors are intent on “proving” that Americans are repelled by wealth inequality. At the same time they want to say that Americans prefer Sweden precisely because Sweden is the favorite role model of progressive leftists who yearn to see the American welfare state expand.

Especially telling is the artificially contrived circumstances under which the survey participants were asked to make their selection. Who deliberately moves to a country with the expectation that she will be randomly assigned to a place on the wealth distribution? Typically, a person leaves one country for another because she anticipates her circumstances will be improved. The United States has a long history of attracting ambitious people who enter with the intention of bettering themselves.

But the survey participants are explicitly told to discount completely – ambition, talent, hard work, and the possibility of doing well. Thus they were engaged in a parlor game that is inconsistent with reality. What is the solution to this game? The least affluent segments in the “United States chart” are razor slim indicating that you might be “randomly assigned” to having the least amount of wealth. The corresponding segments in the “Sweden chart” and the “Equality chart” are thicker suggesting you might be better off even if you are forced into the bottom category. So you play the game by avoiding the “United States chart” to minimize your potential losses.

Consider the professors’ second question – how much inequality of wealth participants believe the United States has and how much it should have. The authors report that most Americans underestimate wealth disparity and suppose that the top quintile has about 59 percent of the total when, in fact, it has around 84 percent. That is fair enough. Unless someone is familiar with current population statistics it is not obvious what the wealth distribution is.

It is also not obvious what the federal income tax burden is on various categories of Americans. According to 2007 IRS statistics the top 10 percent earned 48 percent of adjusted gross income and paid 71.2 percent of all income taxes. While the bottom 40 percent of earners paid on average no federal income tax at all. The professors prudently do not give survey participants this type of information because it tends to dampen the case for redistribution.

Participants were asked to indicate what the ideal wealth distribution of the United States should be and generally indicated that they wanted it more equal than their estimate. For the most part they shifted wealth from the top quintile to the bottom two quintiles. But the question is loaded. In their parlor game survey the professors only allowed the participants to help the bottom quintiles by taking wealth from the top quintiles. In the professors’ world the way to make the poor better off is to make the rich worse off.

In real life the lowest quintiles could have a larger share of the entire pie without any redistribution at all. It is likely that many of the 5,000 people who were in the survey would like to see the bottom quintiles become better off because of their industrious efforts rather than through state intervention, but the survey did not consider that possibility. Through a combination of ambition, motivation, clear thinking, and hard work even the least affluent people can improve their lot – without unleashing the rapacious confiscating state.

Professor Norton and Professor Ariely attempted to show that Americans would rather live in a country that resembles Sweden and would like to see wealth in the United States redistributed. While their research is open to interpretation, there is no question that the authors passionately embrace these sentiments.

*** See other entries at AlertMindPublishing.com in “Monthly Columns.” ***

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