How Americans Think About Wealth

OK, so I confess I woke myself up at 3:45 AM to watch the royal wedding, and I thoroughly enjoyed it. Who doesn’t like a good fairy tale? But in order to savor the spectacle, I had to temporarily suppress my discomfort in the face of such opulence. Behind the fairy tale is some of the most obscene wealth inequality in the world.

And it’s not just England. Wealth inequality is at historic highs in the U.S. as well—with some estimates suggesting that 1 percent of Americans control nearly half the nation’s wealth. Or to put it in starker terms, the bottom 20 percent of Americans hold a measly one-tenth of 1 percent of everything—real estate, stocks, bonds, art, anything of value.

This feels wrong to me. And as it turns out, it feels wrong to a wide swath of Americans, regardless of party or income level. That’s the somewhat surprising conclusion to come out of a new study by Michael Norton of Harvard Business School and Dan Ariely of Duke University. Norton and Ariely surveyed more than 5000 Americans from 47 states, whose incomes and voting records were representative of the country in 2005. The researchers asked these Americans to estimate the actual distribution of wealth in the U.S. and devise an ideal wealth distribution. Here’s more detail on the studies:

In the first study, the researchers created three unlabeled pie charts showing different distributions of wealth. The first was a perfectly equal distribution—that is, every one-fifth of the population controlling exactly one-fifth of the wealth. The second reflected the actual wealth distribution in the U.S. The third reflected the wealth distribution in Sweden, which falls between the U.S. and total equality. The respondents were asked to choose which “nation” they would prefer to live in, with the stipulation that they could end up anywhere in the distribution, “from the very richest to the very poorest.”

Remember that the respondents were looking at unlabeled pie diagrams. Strikingly, the actual wealth distribution in the U.S. was seen as far less desirable than either the perfect distribution or Sweden’s. Indeed, more than 9 of every 10 preferred Sweden’s wealth distribution to that of the U.S. Just as important, this preference was shared equally by men and women; Bush voters and Kerry voters; and citizens of all income levels. Interestingly, respondents also showed a slight preference for Sweden over equal distribution, suggesting that Americans do prefer a little inequality in wealth.

The researchers wanted to drill down a bit more into Americans’ values and preferences. So in the next study, they asked respondents to estimate the actual distribution of wealth in the U.S.—and to “build a better America” by devising the ideal distribution. To do this, they indicated what percent of the nation’s wealth each one-fifth of the population controlled—and ought to control—from the top one-fifth to the bottom one-fifth. So they could, if they wanted, give all of the nation’s wealth to just the wealthiest one-fifth of Americans, or distribute it exactly evenly—or anything in between.

The respondents clearly have a distorted grasp of wealth in America—and they just as clearly want serious change. As reported in a forthcoming issue of the journal Perspectives on Psychological Science, they vastly underestimated the actual wealth inequality in the U.S.—believing that the top one-fifth of Americans control 59 percent of the wealth, when in fact it’s closer to 84 percent. What’s more, their own ideal wealth distributions for the country are far more equitable than even their distorted perceptions of wealth in the U.S. The typical respondent would like to see the top one-fifth of American owning only 32 percent of the wealth. And here’s the really interesting part: All the respondents—including the wealthiest—said they would redistribute the nation’s wealth by moving a large amount of money from the very top to the bottom layers of society, suggesting concern for the nation’s least fortunate. And all of the respondents—even the poorest—said they preferred some inequality to perfect equity.

All of this taken together suggests that there may actually be more consensus among Americans on an ideal for wealth distribution—one that’s much fairer than the American reality today. With the highly polarized policy debates on taxes and safety nets currently heating up our politics, this shared norm is worth celebrating. Americans long ago rejected the monarchy as no more than a fairy tale.

Wray Herbert’s book, On Second Thought, is published by Crown. Excerpts from his two blogs—“Full Frontal Psychology” and “We’re Only Human”—appear regularly in The Huffington Post and in Scientific American Mind.