Wealth Distribution For Dummies, AGAIN

In November 2010, I posted the original “Wealth Distribution for Dummies.” As the election approaches, an updated version, reflecting the shift in wealth ownership since the end of the recession, seemed appropriate. Also, given how the distribution has become even more skewed, I figured a remedial session couldn’t hurt.

This is very straightforward. I’m going to let 100 people represent 100% of the U.S. population, and $100 represent the country’s wealth. One person will represent the top 1% of the population. The next 19 people are the rest the top 20%. The other 80 folks are the bottom 80%. Now let’s distribute $100  accordingly.

One person (above), gets $35.60 all to him/herself.

Ouch! That's quite a jump. That's one-thirteenth of what the super-rich guy has! No wonder regular rich folks don't think they should pay more taxes. Together these 19 people own $51.60. That's about half of the $100. The top 20% as a whole, owns $87.20 of the $100.

But wait! Here’s something to make them feel better. 

As a group, their total share of the $100 is $12.80. The 19 rich folks each have 17 times the wealth of each of these 80, and for the super-rich guy, it's a factor of 223. (So when Romney wanted to make a $10,000 bet with Rick Perry at the debate between the Republican candidates, it was the same as a regular guy offering to wager $45.)

New York Times columnist, Nicholas Kristof recently wrote about the topic of wealth distribution and very effectively had us imagine 100 kindergarteners sharing toys according to how wealth in the U.S. is actually distributed.

One avaricious little boy is jealously guarding a mountain of toys for himself. A handful of other children are quietly playing with a few toys each, while 90 of the children are looking on forlornly — empty-handed. The one greedy boy has hoarded more toys than all those 90 children put together!

Naturally, I was curious to see what toys can be purchased at the $35.60, $2.72, and $0.16 levels.

For toys under 20¢ you are on the low end of party favors bought in bulk. So things like a tiny cupcake-shaped eraser, or a mini pencil is all you can hope for there. 

Even the $2.72-level is not really all that thrilling for toys. Think basic water gun or a yo-yo.

For $35.60, however, there’s tons of stuff. Remote-control helicopters, fancy super-soakers, electric guitars, microscopes, and in the $25-$50 range for Lego, look what’s for sale--a White House!

The $50 price tag is tad out of reach for poor little rich boy. He will have to use a line of credit, or borrow from the other kids to make up the $14.40 he doesn’t have.

Believe it or not, there is good news for the 80 kids with mini erasers. The one super-rich kid only has one vote, and the next 19 kids only have 19 votes. But the 80 kids have 80 votes. That's four times the votes, the 20 rich kids have. 

DON’T WASTE YOUR VOTE BY ...

1.  NOT VOTING

2.  VOTING FOR SOMEONE

WHOSE ONLY INTEREST IS GETTING

HIMSELF INTO THE WHITE HOUSE

What got me started on trying to represent this disparity in wealth in the first place, was the study published a couple of years ago by Michael I. Norton and Dan Ariely about just how clueless Americans are as to how wealth is actually distributed in this country. Kristof also refers to the study and wonders if “perhaps nothing gets done because, in polls, Americans hugely underestimate the level of inequality here.”

I will spare you my rant from the original WDFD post, but I place a fair amount of blame for the warped perception of the American public, on the conventional data visualization used for charting wealth distribution. Below is a version of such a chart from the Economic Policy Institute. 

The image we see (and retain) is of the gently decreasing bands of wealth from top to bottom.  But we must read (and mentally imagine) what is most dramatic about the chart, namely the vastly incomparable populations being pictured (1%, 4%, 15%, 80%).  You can read the original rant here.

Wealth Distribution For Dummies

Let’s use 100 people to represent one hundred percent of the U.S. population, and $100 to represent the country’s wealth. Now let’s distribute the $100 among the 100 people in proportion to how it is spread out within the population.
What got me going on this, was that as alarming as the statistics are about the disparity between the wealthiest and poorest in this country, the graphic representations tend to feel less urgent. And that, ironically, has to do with the magnitude of the inequality. Charts using equal size increments, say, each 1% of the wealth-holders plotted on a bar chart, or even quintiles, for that matter, simply don’t read. So we need to resort to more abstracted depictions, i.e. charts that compare different size groups.
Above left, is a classic wealth distribution chart that compares the shares of different size groups. Sometimes it will be top 1% vs. bottom 99%, sometimes 10% vs. 90%. This 1-4-15-80 chart is from the Economic Policy Institute. The gradated layers amble across an expanse of years with some gentle dips and rises along the way. The meaning of the chart can only be accessed when you read “Top 1%” in the biggest layer and “Bottom 80%” in the smallest layer, and then mentally process the fact that we are being shown a comparison between different size groups. It always frustrates me, because the image doesn’t provoke amazement and outrage. The visual message is one of even distribution.

Drake Bennett, in a Bloomberg Businessweek commentary, 'The Inequality Delusion', points to a study by Dan Ariely and Michael I. Norton about Americans’ perceptions of the country’s wealth distribution by quintile (right chart). Concerning ourselves here with only the top two bars, the top bar shows the actual breakdown, and the second shows the estimations by those interviewed. As the note at the bottom of the chart points out, quintiles four and five on the actual breakdown are not even visible. I wouldn’t be surprised if the pervasive use of different-size-group layer chart (on the left), has graphically reinforced the delusion of those interviewed (on the right).

So I’m throwing this idea of '100 dollars/100 people' out there as yet another way to visualize this information. Yes, it too compares different size groups, but I’m hoping that by using 100 people (an amount we can all fathom), breaking the groups into individuals, and using real money in a way that is familiar (as opposed to $34.60 in pennies or even a stack of dollar bills), we might get a bit closer to getting our heads around, how concentrated the wealth in the U.S. really is.

The really bad news, however, is how much worse off the ‘Nonwealthies' are than they used to be. Bob Herbert’s Election Day column in the New York Times, covers a new book called Winner-Take-All Politics: How Washington Made the Rich Richer — and Turned Its Back on the Middle Class. Briefly, the book’s authors, Jacob Hacker and Paul Pierson explain that the economic struggles of the middle and working classes in the U.S. since the late-1970s have been due to government policies that favor the rich.

Furthermore, the book “explores the vexing question of how this could have happened in a democracy in which — in theory, at least — the enormous number of voters who are not rich would serve as a check on policies that curtailed their own economic opportunities while at the same time supercharging the benefits of the runaway rich.”

In other words, why do so many Americans continually vote against their own best interests? Hint: the answer has to do with the interconnectedness of the superrich, the power of their focused ability to organize, and the amount of influence that extreme wealth can buy. After all, the total wealth of the bottom 80% combined doesn’t even begin to come close to what the top wealth-owners have socked away.

Bennett reminds us of what John McCain said during the Presidential campaign two years ago. "That is what change means for Barack the Redistributor: It means taking your money and giving it to someone else …"

Telling voters that their money was to be taken from them proved so catchy, that Tea/publicans repeated it endlessly throughout the most recent campaign season.

What McCain and the other “anti-distributors” always neglect to mention, is that they are only addressing between 1% and, at most, 10% of the population. The other 90% have been having their wealth “redistributed” for the last three decades.