Earlier this month I published a 10-part Slate series (PDF; serial version; slide show) about the 30-year rise in income inequality that Princeton's Paul Krugman has dubbed "The Great Divergence." In the first installment, I noted that in 1915, when the richest 1 percent accounted for about 18 percent of the nation's income, the prospect of class warfare was imminent. Today, the richest 1 percent account for 24 percent of the nation's income, yet the prospect of class warfare is utterly remote. Indeed, the political question foremost in Washington's mind is how thoroughly the political party more closely associated with the working class (that would be the Democrats) will get clobbered in the next election. Why aren't the bottom 99 percent marching in the streets?
One possible answer is sheer ignorance. People know we're living in a time of growing income inequality, Krugman told me, but "the ordinary person is not really aware of how big it is." The ignorance hypothesis gets a strong assist from a new paper for the journal Perspectives on Psychological Science: "Building a Better America—One Wealth Quintile at a Time." The authors are Michael I. Norton, a psychologist who teaches at Harvard Business School, and Dan Ariely, a behavioral economist (and blogger) at Duke. Norton and Ariely focus on the distribution of wealth, which is even more top-heavy than the distribution of income. The richest 1 percent account for 35 percent of the nation's net worth; subtract housing, and their share rises to 43 percent. The richest 20 percent (or "top quintile") account for 85 percent; subtract housing and their share rises to 93 percent. But when Norton and Ariely surveyed a group whose incomes, voting patterns, and geographic distribution approximated that of the U.S. population, the respondents guessed that the top quintile accounted for only 59 percent of the nation's wealth.
In his book The Wisdom of Crowds, James Surowiecki cites example after example in which collective judgment proves remarkably accurate. When a finance professor polled his class about the number of jelly beans in a jar, individual answers were all over the map, but when he averaged them, the group estimate was less than 3 percent off. When a British statistician reviewed tickets from a contest to guess the weight of an ox at a livestock fair, he found similarly diverse answers, but when he averaged them, the group estimate (1,197 pounds) was less than 0.1 percent off. Such "crowd-sourcing," however, turns out to be a terrible method for estimating the distribution of wealth. Norton and Ariely's respondents were off by 31 percent, even though wealth distribution (unlike income distribution) has remained essentially unchanged for a generation.
Norton and Ariely broke down the responses by income group and found the guesses became slightly more accurate as you moved up the income scale. But more striking was the uniformity among income groups. All five quintiles imagined the top quintile to possess about 60 percent of the nation's wealth. (Again, the real figure is 85 percent.) More surprising still, the average guess of a respondent who'd voted for George W. Bush in the 2004 presidential election was not appreciably different from the average guess of a respondent who'd voted for John Kerry. The Kerry voters imagined the top quintile's share to be larger than the Bush voters did, but again, both figured it was about 60 percent.
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