Public knowledge and opinion on wealth inequality

Dan Ariely is an economist at Duke University’s Fuqua School of Business who has done some interesting recent research on the public understanding of wealth inequality among Americans along with Michael I. Norton at the Harvard Business School.

I won’t attempt to summarize all of it, but what I found most thought-provoking was a comparison of actual wealth distribution in the U.S. against the results of a survey about how those asked thought income was distributed and how wealth is distributed in Sweden. The survey results date back to the end of 2005 and I believe the economic data are from roughly the same period. Results would probably be a little different today, not least because the current dismal economy has almost certainly made wealth distribution even more skewed, but I’d expect the basic pattern to be roughly similar.

Share of total private wealth

Quintile USA Actual Survey Estimate Sweden Actual
Richest 1/5 84% 59% 36%
Second-highest 1/5 11% 20% 21%
Middle 1/5 4% 13% 18%
Second-lowest 1/5 0.2% 6% 15%
Poorest 1/5 0.1% 3% 11%

(As with any such chart, percentages don’t necessarily add up to a hundred because of rounding.)

Note that in the U.S., the richest 20% of the population own about five-and-two-thirds times as much as the entire remaining 80%.

Sweden is not necessarily the sort of place most Americans would prefer to live, but it does demonstrate that a successful, prosperous country can have a much more even distribution of wealth.

(For the record, while I know and have worked with a few economists at Duke, Ariely isn’t one of them.)

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