Monday, October 11, 2010

The Unequal American Pie

84 percent of wealth in the American pie chart goes to the top 20 percentThe pie chart of American wealth distribution is a picture of inequality.

There are supposed to be five pieces, each representing 20 percent of the people -- the top 20 percent or quintile, second quintile, and so on. But the last two quintiles are so small they're hardly visible because they have so little wealth. (Wealth includes savings, investments, or real estate minus credit card or mortgage debt.)

Anyone familiar with the American Gini Coefficient will not be particularly surprised by this pie in the face. But it turns out most Americans would be very surprised.

Researchers Dan Ariely and Michael Norton asked a large, representative sample of people to pick their ideal pie chart from a group of three, then asked them to estimate what the U.S. wealth distribution is actually like. It turns out, the ideal and the actual have little in common -- but the people's guesses at the actual also have little in common with the reality of American wealth disparity.

I'm not surprised that Americans are unaware of how unequal we've become. I was surprised by people's preferred wealth distributions.

What Norton and Ariely did was show their subjects three unlabeled pie charts. One showed a completely equal apportioning of wealth, while the other two showed a slightly unequal one and a very uneven one. The subjects were given what's called a Rawlsian constraint for determining a just society:

Imagine that you are going to be born into one of the countries represented by these pie charts, and you have no control over which quintile you will be part of. Given that set up, which pie chart best represents the country you would want to be born in?

43 percent went for the completely equal society; 47 percent for the slightly unequal one, and 10 percent for the extremely unequal one. In case you were wondering, people surveyed included a higher number of people who voted for Bush than Kerry in 2004, and they represented a wide range of income levels (their median income was just slightly below the U.S. median).

American, Swedish and comletely equal wealth distributions as pie charts
The kicker is that the slightly uneven pie chart represents the stats for Sweden, while the extremely unequal chart is the U.S. 90 percent of Americans rejected the U.S. situation out of hand as unfair if they thought it would apply to them.

Given the Rawlsian constraint, I can understand anyone choosing either the Swedish or completely equal pie chart. Both seem like rational choices. What I can't understand is the 10 percent who chose the U.S. chart.

Who are the people in that 10 percent? Do they assume it wouldn't matter which quintile they were born to, because they would claw or cheat their way into the top quintile? Is it willful disobedience to the constraint, the same way that everyone who believes they've had a past life was a queen or a prince? Did they not understand the question, or want to mess with the telemarketer who called them during dinner?

Maybe they're the same 10 percent of commenters who destroy civility on so many blogs.



Becky said...

I think they didn't understand what was going on. They thought the bigger part of the pie meant there was a bigger likelihood that they would be a part of the high earning group. Or something. I can't otherwise understand why anyone would choose that chart.

Daughter Number Three said...

Yes, that's one of my two suspected reasons. They're either stupid or sociopaths. Probably a mixture of the two.

jim said...

The unequal chart is probably the most fair. If you distribute wealth evenly you would end up with a pure socialist society. The largest portion of people with the least income are there by choice. And no one would pick sweden as a place to model their society on

Daughter Number Three said...

Jim, no one really advocates the completely equal pie chart, but if you were to be born into one of these societies with no control over which 1/5 it was, can you really say you'd prefer to be born into the most unequal version?