Fallout: The Financial Crisis

How U.S. feels about wealth gap

Marketplace Staff Feb 8, 2010
Fallout: The Financial Crisis

How U.S. feels about wealth gap

Marketplace Staff Feb 8, 2010


Kai Ryssdal: Most everybody has lost economic ground over the past two years or so. But before the recession and the financial crisis and the wealth destruction that they brought, people in the upper reaches of society were proportionately way better off than most of the rest of the country. While over the past decade or two everybody else has been figuring out how to get by with less. Dan Ariely polled more than 10,000 people — including, via our Web site, some of you — to discover how we feel about the ever-increasing U.S. wealth gap. Dan, it’s good to talk to you again.

DAN ARIELY: Same here, as always.

Ryssdal: So it is the haves and the have nots, a little wealth distribution that you’ve been looking at.

ARIELY: Yes, and the first thing I should tell you is that you don’t have many people listening to you.

Ryssdal: To this show?

ARIELY: Yeah, only about 600 people filled out the survey.

Ryssdal: All right. So tt’s actually 601 because you gotta count my mom.

ARIELY: OK, so aside from the fact that not many people are listening or at least not many people filled the survey, here is the question that we’re interested in. The philosopher Rawls proposed a long time ago that a fair society is a society that if you knew everything about it, you’d be willing to join it in a random place in the distribution. You would be willing to toss the dice and put you in one bin of wealth, for example. So we posed people two questions, we said: What do you think the wealth distribution in the U.S. is? And what do you think is the ideal wealth distribution?

Ryssdal: So in other words, what do you think in the United States now, who has most of the money and then what ought it be, right?

ARIELY: That’s right. And what happened is that first of all, people dramatically underestimate the wealth inequality in the U.S.

Ryssdal: Underestimate. So the fact of the matter is fewer people have more of the money.

ARIELY: That’s right. So if you look at the whole world in terms of wealth distribution — before the recession, I don’t have data about after the recession — but before the recession we’re basically between the Western world and South America. We were the most skewed distribution of the Western world in terms of the haves and the have nots. But now the more interesting question is what do people think it should be. And what we found was that actually there’s a huge agreement between people in terms of what it should be. And this happened to both your listeners and the general sample population. You would take, for example, Republicans and Democrats, and you would think that they would vary dramatically, and they don’t, I mean they differ but they don’t differ so much. So you take Republicans and they basically agree with Democrats, and you take people with low income versus high income, and they basically agree.

Ryssdal: Can you quantify what we have right now? I mean, what percentage of people have what percent of the wealth?

ARIELY: Right now the top 20 percent of the people have about 85 percent of the wealth. People think that they only own 68 percent of the wealth, so people underestimate the inequity, but if you ask them what’s kind of an ideal world in the Rawls kind of sense that you would actually want to participate in, they say 33 percent. So they say in an ideal world, we want the top 20 percent to own more than 20 percent, we want them to be wealthier, but we want them to own about 33 percent of the wealth.

Ryssdal: That’s so interesting. They still want the rich to be rich, but just not as rich?

ARIELY: Yeah, you know, actually, rich to be rich is a perfectly reasonable idea, right? I mean, people that have money can create jobs, they can create factories, so there is benefit in non-equal distributions of wealth, the question is what is the ideal?

Ryssdal: I’m stuck on the idea that there is a segment of society out there that thinks that inequality is the way it ought to be.

ARIELY: Yeah, you know, everybody thinks inequality is the way to be. The main lesson for me from this whole study is that when we look at the political arena, we kind of have this huge polarization, and yet when we ask people a question that is not tainted by saying Republicans or Democrats — it’s just formed and here are the numbers, and what kind of society do you want to live in — the answers come out quite close. And for me that’s kind of the optimistic outcome of all of this is in fact as a society, I think we’re much more similar to each other than the political arena plays out how it looks like.

Ryssdal: You learn something new everyday. Dan Ariely teaches behavioral economics at Duke University. Dan, thanks a lot.

ARIELY: My pleasure.

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