Americans Dramatically Underestimate Wealth Inequality

There were some flutters last week in the blogosphere caused by an academic paper authored by Michael Norton and Dan Ariely on perceptions of wealth inequality in America.

Basically, the authors found that when asked to describe the distribution of wealth, estimates were remarkably off the mark. Wealth is much more concentrated than most people realize. Further, when asked what they thought the ideal distribution would be, they identified a pattern much more equal than their estimate and much, much more equal than the actual. Who knew Americans would rather live in Sweden.

This was summarized in a lovely chart. The data in the paper is a bit old, 2005, and I wonder what would happen if they repeated the survey today. Still, it is a revealing observation. And this morning I woke up to hear one of the authors, Michael Norton, talking about it on NPR. For those of you with a different alarm clock setting, here is a link to the radio piece.