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Americans Are Horribly Misinformed About Who Has Money

221 points by Hoff 16y ago

byoung2 16y ago
What’s interesting here is the extent to which the public vastly overestimates the prosperity of lower-income Americans. I bet this is due in large part to the availability of credit over the last few decades. Credit has allowed lower-income people to "play the part" of the wealthy, giving rise to the distortion. In particular, interest-only, 0% down mortgages, low or no-interest credit cards, and car leases let someone making $50,000 a year drive a Mercedes, live in a million-dollar house, and buy fancy toys like flat-screen TVs and Jet Skis. I think the vast majority of the public would base their perception of wealth on material possessions such as cars, houses, and boats rather than the amount of money in savings or investments. This could explain the discrepancy.
- smhinsey 16y ago
  Over the last 30 odd years, "wealthy" has gradually morphed from "compound interest" to "credit approved."
- ctdonath 16y ago
  Most lower-income americans make more than the world median income. Our "poverty line" is 20x the income line for half the planet. Of late in Atlanta, one news story about someone unable to pay to heat more than one room had a dramatic photo of her showing her heating bill in her living room - with a 55" HDTV and Xbox360 in the same room. Problem with that chart is scale: while 20% may have most of the money, the poorest still have enough to live in world-relative luxury.
  - steveklabnik 16y ago
    But someone with $10k here and someone with the equivalent of $10k in Africa have vastly different buying power.
  - michaelchisari 16y ago
    someone unable to pay to heat more than one room had a dramatic photo of her showing her heating bill in her living room - with a 55" HDTV and Xbox360 in the same room. There's a difference between the ability to purchase one-off consumer goods and the kind of situation this person is in. Consider that those consumer goods may have been purchased before an economically catastrophic event such as an illness or a layoff, or they may have been a gift from someone who is willing to purchase consumer items, but not willing to provide the household stability that they require. Also consider that, second-hand, these items are not particularly expensive, and even if they were sold, they may only provide a heating bill for a month or two. Especially in places like Atlanta, which are particularly badly insulated, and ill-equipped for severe cold. So what we have is a situation of economic precarity, an instability in which the existence of consumer good purchases does little to remedy a unstable situation. I have a lot of gadgets and toys, but the overall value of them depreciates daily, and if I lost my employment or well-being tomorrow, they would do little to stabilize my financial situation, even if I fully liquidated all of them at a good market rate.
    - skorgu 16y ago
      My inner libertarian is unable to comprehend the confusion of ideas that allows the purchase of a 55" HDTV et cetera without ~six months of rent in the bank. My inner liberal fires back with the complete, utter and deplorable lack of financial education and hence literacy in this country which is at the very least a partial cause of the most recent subprime financial kablooie. My inner conspiracy theorist mutters something about that being awfully profitable for those able and willing to profit from said illiteracy.
      - krschultz 16y ago
        My dad worked at one company for 28 years. He was fired. He had a year of emergency money in cash in the bank. Not rent, 12 months of money to cover every last little expense they had. They should have been set for any emergency, afterall, who has that much cash in the bank? And no outstanding car, credit card, or mortgage debt (lived in the same house for over 30 years) It took him over 18 months to find a job. Sure, there was a 42" HDTV in their house too. They still weren't spending money on ANYTHING. And he was working 50+ hours a week trying to find a job. Their expenses went up a little because he was traveling for interviews and networking at executive events. (Oh sorry, forgot to mention he was CEO of a 500 person company that was beating its targets even during 2008 when the stock market dropped like a stone). So yea, if it can happen to him, it can happen to you. Tell your inner libertarian 6 months is nothing, and maybe he should find out what this current economy is really like.
  - jonhendry 16y ago
    "Of late in Atlanta, one news story about someone unable to pay to heat more than one room " Meaning she probably was using an inefficient electric heater, in a poorly-insulated home in a normally-warm region, in an unseasonably cold period. I could see that raising the electric bill significantly. I once went away for Thanksgiving weekend and accidentally left my refrigerator or freezer door open a crack. That month's electricity usage was several times higher than any other month since I've lived there. Was the HDTV a projection set? Those are cheap, especially second-hand. Might only be a 720p. EBay has larger TVs listed for $200. Hell, nobody wants those fuzzy room-hogging monsters anymore. Could have been a freebie from a better-off friend or neighbor who upgraded to a flat panel. XBox 360s aren't particularly new, rare, or precious, so might have been acquired used, possibly as a trade. And might have been bought by a child, or received as a gift. Maybe her kid bought it then went into the military and left it behind.
    - Encosia 16y ago
      It drops below freezing quite often in Atlanta. Most houses here have natural gas heating. Needing significant heat in the Winter here is a given.
      - jonhendry 16y ago
        Oh. Well. Nevermind about that part then.
  - gnaritas 16y ago
    > Most lower-income americans make more than the world median income. A meaningless stat; cost of living here is far more than the world median as well.
- ShabbyDoo 16y ago
  I agree. How many people in the bottom wealth quintile earn $200K+/year? Probably not a great portion, but definitely not zero. When Americans think about "wealth" inequality, do they consider the distribution of asset levels, or the distribution of income and the implied potential to accumulate wealth at various levels? Perhaps the ever "improving" social safety net reduces the risks associated with having no wealth (savings)? Another commenter noted the woman who, with her 55" TV in the background, complained that she could not afford to pay to heat her home. I'm sure there's some governmental program (or some government-mandated assistance from the utility companies) waiting to help her out.
waqf 16y ago
The question they asked is difficult to interpret, i.e. hard to translate between specific answers "I think the top quintile possesses N% of wealth" and an intuitive understanding of how skewed (or not) a distribution we're talking about. I have a strong quantitative background, and I have to do some calculations to interpret these numbers. And these guys are interviewing average Americans and inviting them to pull numbers out of their ass. Cognitive biases are going to skew these numbers horribly: people will sooner say 80% because it "sounds" like a much more "reasonable" answer than 99.8%, even if a little math would show that it wasn't. For example, I'd like to see the study done again with people asked the mathematically almost-equivalent question: what do you think is the average wealth of the top (resp. second, etc.) quintile. (Almost-equivalent, because you have to tell the respondents the total amount of U.S. wealth for them to be able to convert one answer to the other.) Without that control I think the results are worthless.
- jfager 16y ago
  Cognitive biases are going to skew these numbers horribly I guess I thought the point of the article was to demonstrate exactly this skew. Where does a person's emotional reaction to tax cuts or welfare come from? If people casually think that poor people aren't as poor as they really are and that wealthy people aren't as wealthy as they really are, they're going to act accordingly when it comes up in their daily life. How they actually think when forced to confront real numbers seems less relevant in that case - how many people actually sit down and do the math before deciding who to vote for?
  - waqf 16y ago
    You missed my point, or at least part of my point. The point is that the numbers people write down in this survey will not accurately represent their own impression of how poor poor people are.
    - jfager 16y ago
      I don't think I missed your point - you're saying that people confronted with a question they aren't qualified or interested in enough to answer thoughtfully will be biased towards responses that "sound good". I have no disagreement there, I'm just saying that it's still interesting to know what that incorrect "sounds good" answer is in this case, because it reflects how people casually regard an issue. My unsubstantiated hypothesis is that this casual regard may actually be more important anyways, because many people aren't thoughtful in their regular daily lives, either. In other words: if a cognitive bias can affect how someone responds to a survey, why can't it affect how that same someone acts in their daily lives?
deleted 16y ago
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martythemaniak 16y ago
Facts play a depressingly small part in politics and (perhaps even more depressingly so), studies/surveys and casual observations show that pointing out various facts to people does not actually change their opinions. Try talking about income inequality to a Tea Partier and you'll get the same reaction that an evangelical christian has to evolution. Moreover, this is certainly not an American phenomenon - I see it US politics, Canadian politics, and if I paid enough attention, I'd show up in European and other politics as well.
- jacoblyles 16y ago
  Tea Party supporter here - and I am quite aware of the facts regarding income distribution in this country. Are you saying that people can't disagree on the proper level of income redistribution for a society if they are all aware of the current distribution of income? That's a mighty strange assertion.
  - jlangenauer 16y ago
    Downvoted by accident (damned iPhone), but I think this is a reasonable question.
pg 16y ago
I wouldn't be surprised if most respondents are answering as if the question were about income rather than wealth.
- arvinjoar 16y ago
  Exactly, and I can't see why the charts shouldn't look like this. Saving money is a luxury, it's a good thing to do if you can afford it and if you're saving your money for something worthwhile. What's important is that people are living the lives they want to be living, and I'm sure that's possible without lots of savings (although wealth could probably help). Most people like to spend money now instead of later though, and the charts reflect that. It's as simple as time preference.
  - kiba 16y ago
    All things being equal, human beings prefer an object now instead of an object in the future.
  - Benjo 16y ago
    The problem is the distorting effect that wealth has on equal representation in a democracy.
  - jellicle 16y ago
    You're absolutely right, the reason why people earning $10K/year aren't millionaires is because they just aren't saving properly. {shakes head sadly}
    - zacharypinter 16y ago
      There's probably an interesting correlation-vs-causation discussion somewhere beween the poor and the wealthy. Are the poor not saving because they don't have any money to save (probably an easy argument for the very poor)? Or is it that people are poor because they don't save (or rather, because they are poor at managing their finances)? There's plenty of examples of people that win the lottery, only to spend it all within a few years and be back to where they started.
SandB0x 16y ago
Here's the original paper (featuring Comic Sans): http://www.people.hbs.edu/mnorton/norton%20ariely%20in%20press.pdf http://www.people.hbs.edu/mnorton/norton%20ariely%20in%20pre... Note that the survey was carried out five years ago, before the financial crisis.
jasonkester 16y ago
I'd like to see that graph broken down between people who think that wealth is a zero sum thing that can be represented as a pie (as shown) vs those who know it isn't. That is, people who think that if I have a dollar, then they can't also have that same dollar at the same time.
- woid 16y ago
  Exactly! The pie is growing. Compare your wealth to your parents not your neighbors.
  - michaelchisari 16y ago
    A deli manager at a grocery store in the Chicago area in 1985 made $35k - $40k a year. Adjusted for inflation, that was the equivalent of around $72k - $81k a year. With full benefits. It's been clearly determined that wages have not kept up with inflation, so I would say that comparing one generation's wealth with their parents is not something that will yield hopeful results.
    - jacoblyles 16y ago
      Is "full benefits" comparable across time? You couldn't buy 2010 medicine in 1985 at any price. Survival rates for a host of deadly diseases are much higher today.
    - sparky 16y ago
      Wealth != Inflation-adjusted dollars. You can buy many things for $100 today that would have cost $5000 in 1985 (or more likely, that didn't exist at all). Life's necessities, with the important exception of homes and apartments, have gotten cheaper in inflation-adjusted dollars over time. I'd argue that the truest measure of wealth is the distribution of 'happiness' over a population, but that opens so many cans of worms as to be near-useless. I'm guessing the average happiness has decreased over time, but I wouldn't chalk all that up to a decrease in inflation-adjusted dollars.
      - 16y ago
iwwr 16y ago
Technology allows people to be much more productive than the mean and the weight of most productivity is naturally skewed toward a small minority. This is not an injustice. A top programmer will be many times more productive than an average programmer and large codebases tend to include code from top programmers preferentially. Not only that, the value generated by top programmers (or project leader) is vastly more than that of an average programmer. This is why Google is paying their top people (technical, administrative) millions of dollars. Compare that to a stone age hunter, who may have been 2-3 times more effective than an average hunter. A strong or a fast man is never much stronger or faster than an average man.
- jacoblyles 16y ago
  >"This is not an injustice" Others think differential returns to people of differential abilities is an injustice (or at least, the existence of differential ability in the first place). The fact that you don't just means your not a leftist. It's an a priori assumption either way.
- jonhendry 16y ago
  "This is not an injustice." Paris Hilton. Among other examples. Yes, there are people who get large paydays because they are strikingly effective at what they do. Then there are the people who get large paydays for no particular reason. Or because of their parentage. Before celebrating the übermensch, please try checking back in with reality.
  - natrius 16y ago
    Sorry, Paris Hilton being rich is not an injustice. She's rich because people (particularly her parents) wanted to give her money. Trying to prevent that sounds like an injustice to me.
- krschultz 16y ago
  A good stone age hunter may have been able to survive in situations that a bad stone age hunter couldn't have. Frankly that's worth a whole lot more than being able to program better and I hope he got paid accordingly.
ryanwaggoner 16y ago
Poor Americans are simply much, much, much needier than people realize. You're not needier just because your neighbors are richer than you thought they were.
- gort 16y ago
  I think the idea is that your neighbours are poorer than you thought they were.
  - ryanwaggoner 16y ago
    They may have less net worth, but that doesn't mean they have income to the point that we could consider them "poor". I would really like to know what the median income is within each quintile of wealth distribution.
    - vacri 16y ago
      If you're the kind of person that frequents HN, I would have thought you'd have the google skills to find that out.
  - clarkm 16y ago
    Poorer relative to the other neighbors, not poorer in absolute terms.
    - ryanwaggoner 16y ago
      Exactly, and the term "needier" conveys an extra piece of the puzzle that these data do not support. Steve Jobs is poorer than Bill Gates by an order of magnitude, but he's hardly needy.
    - _delirium 16y ago
      For housing, your relative slice of a community's wealth is actually a pretty good predictor which bits of land/housing you'll be able to buy / live on, since real-estate prices in a region tend to rise with its GDP.
nhangen 16y ago
I think the headline is misleading, if not a flat out lie. Americans know who has money...almost everyone else. The average American is living paycheck to paycheck, or worse...they know that their friends are living in the same situation. We know that people like Bill Gates, Warren Buffet, and future Mark Zuckerbergs hold billions. I don't really know anyone that is confused or surprised when they hear that this is how the country's wealth is distributed.
- wladimir 16y ago
  Indeed. The USA has a huge divide between poor and rich for a developed country. Their poor can hardly come by, their healthcare system is a mess, and even basic infrastructure is underdeveloped in a lot of areas. And the funny thing is, even though many people agree with that, everyone is coming up with excuses. No one is addressing the problem on how to narrow the poor-rich divide instead of further widen it in any meaningful way. They all are caught up in discussions about details such as 'should we increase tax this year' which will probably have zero influence in the big picture. But the most disgusting thing to me is that they are still trying to push their system of corporate plutocracy on the rest of the world, as if it is the best thing since sliced bread.
smarterchild 16y ago
Another way of looking at it: The data is completely overwhelmed by the super wealthy. This is the very tail end of Fortune's richest people list. http://www.forbes.com/lists/2010/10/billionaires-2010_The-Worlds-Billionaires_Rank_41.html http://www.forbes.com/lists/2010/10/billionaires-2010_The-Wo... Any one of those people is worth 1 billion dollars, along with all the Gates's and Buffett's of the world. If I were pretty well off and worth, say, $1,000,000, it would take a thousand of me to equal one of him. And if I were a student with just a thousand dollars, it would take one million of me to get to one of him. Based on that, the top quintile is not rich because of doctors, executives, basketball players or lawyers - it's billionaire company founders, investors, and the like. To test that hypothesis, I tried to find results marked by percentile, instead of quintile: http://www.lcurve.org/WealthDistribution-1998.htm http://www.lcurve.org/WealthDistribution-1998.htm The top 0.5% have 25.6% of the wealth and the next 0.5% have 8.4%. --- (Side note, if you're thinking about income taxes: I'll bet there are more than a few people up at the top who get paid a dollar a year in salary.)
pedanticfreak 16y ago
I'm not sure Americans are misinformed, per se, but instead I'd sooner say human beings exhibit an equality bias. For example, if you gave a person a choice of two mutual funds, a low risk and a high risk, most people would put 50% in one and 50% in the other regardless of the actual distribution of risk over the two funds. So if you gave the average person 5 groups of people and told them to ideally distribute the wealth between them, they would probably exhibit this same equality bias on average. As for the estimated case, I'm sure you'd get similarly wrong responses asking the average person basic questions about U.S. history. Or algebra, chemistry, or pretty much any other academic subject. EDIT: Dan Ariely and others frequently cite this kind of bias in the books and talks I've seen. I wonder what Dan would have to say about that considering he collaborated on this paper.
cletus 16y ago
I find posts like this one depressing. They're cynical and shortsighted. The premise of such posts is that if people were aware of who was getting a tax cut they would be against it. Put another way: the premise is that everyone is purely motivated by self-interest. There are two immediate problems with this line of thinking. The first is tha it ignores how aspirational people are.i remember a survey from the 2000 election when Gore made the mistake of demonizing the top 1% repeatedly. The survey show something like 19% of people thought the were the top 1% and another 20% thought they would be someday. The second problem is the whole "money for rich people = bad" argument. Some may ascribe to Reagenesque trickle down economics. Others may see that overtaxing the rich is ultimately shortsighted. Yet others may not get hung upon percentages and look at the absolute tax burden (iirc the top 1% pay ~40% of the tax burden). Personally I just object to the tone of the rhetoric where politicians talk about "affording" or "paying for" a tax cut like they're giving away money. The reality is just that they're taking less money. Bit of a difference. All of this is just "policy theatre" however. What the US (and most of the West for that matter) is facing a far bigger problem that the current systemis unsustainable and no politician wants to be at the helm when the music stop (to mix metaphors) with declining birth rates and increasing life expectancy.
- jonhendry 16y ago
  " The reality is just that they're taking less money. Bit of a difference." Can you afford to take a year off from work? It's just taking less money. The fact is that tax cuts aren't free. If they aren't matched by spending cuts, you're just deferring the tax increase until later and incurring deficits in the meantime. So you have to decide what you're going to cut. Which means weighing, say, decent healthcare for veterans, versus the benefit of the tax cut to people who are probably quite well-off already. The Republicans in the Bush years were not willing to do that. So they cut taxes. And raised spending. And we could afford neither.
  - cletus 16y ago
    Nice try but no sale. This is the problem: talking about this issue will get you labeled as being anti-<insert emotive issue here> (health care for veterans in your case). The budget is blowing out for three reasons: Social Security, health care and the military. Of the three only the last is largely discretionary (being the ongoing cost for campaigns in Iraq and Afghanistan). When FDR introduced Social Security there was something like 50 working people for every retired person and the average life expectancy was probably only 60 or so. It's a straight money goes in money goes out system with no saving or planning for future spending. Everyone knows this is unsustainable. It's merely a question of when something will change and what. The smart money is on raising the retirement age. Health care costs are spiraling. This is a much more complicated and multi-faceted problem. Personally I think part of the problem is the blank chewue mentality we have to health care. Basically it doesn't matter how much it costs to research and develop pharmaceuticals and medicine, we expect to be provided it. So companies largely ignore the costs. It's a bit like saying to a subcontractor: you can choose to spend as much as you like and I'll pay you a 20% margin on top of that. What is the motivation of that subcontractor and the inevitable outcome? Also I think you need to look at the structure of the health care system. I suspect the US has the most expensive health care in the developed world. I think systemic inefficiencies and overprotective IP laws play a bigpart in this.
Ryan-R 16y ago
2th, 'nuf said. But, in all seriousness, mistakes like that make these articles lose all credibility. (notice ant the top of the graphic, "-Top 20% -2th 20%...")
joshes 16y ago
No matter the intent or implications of the post or the poll, the fact remains that 20% of the people control 85% of the wealth. This seems horribly lopsided to me. Plutocracy seems to be an apt description.
- TGJ 16y ago
  How is it lopsided? If you look at 10 of your friends, is everyone one of them extremely well off? Is everyone of them extremely talented? There is no getting around the fact that there are gifted people and not so gifted people. To say that it is lopsided would almost imply that everyone deserves equal shares. 20% seems about right. 20% of the people are entrepreneurs and are smart, gifted, talented people that employ the rest of the country to achieve their dreams.
  - vacri 16y ago
    Ah, the good ol' "if you're poor it must be your fault" reasoning, wearing yet another dress today.
    - m_myers 16y ago
      More like "if you stay poor it's probably your fault".
      - OpieCunningham 16y ago
        That assumes equality of opportunity, which doesn't exist.
      - zoomzoom 16y ago
        There are more black people in Prison then in college in this country. It's hard to advance when the cards are stacked against you.
bluedanieru 16y ago
We really only needed the first half of this title.
MikeCapone 16y ago
I'd like to see the same graph for productivity/wealth creation...
lotusleaf1987 16y ago
Some of these comments are so bizarrely disconnected from reality trying to talk about how money isn't zero sum, but seriously when the top 20% of the population has 85% wealth there is something fundamentally and critically wrong.
- mbesto 16y ago
  And so what do you define as being "right"? (playing Devil's Advocate here btw)
  - lotusleaf1987 16y ago
    It just strikes me that our system of monetary reward/punishment is fundamentally out of balance when the top 20% have 85% of the wealth/resources and the bottom 80% are left to fight over 15%. That is a banana republic. This is why revolutions occur.
WalterBright 16y ago
The article confuses wealth with income. You can have a very high income, live high on the hog, and have zero wealth. Likewise, you can have a lot of wealth and zero income.
code_duck 16y ago
Another way that Americans are quite misinformed about who has money is that the media portrays Hollywood stars as the most wealthy people in the world. A relatively minor point, but it does serve to cover up the people who truly have a lot more wealth and power than someone who makes a 'mere' $25m per movie.
canterburry 16y ago
I can't help but to always sense and underlying message of "are the rich too rich?" whenever a story like this gets published. Rather than just looking at the raw numbers (which these articles always love to do), I think the more relevant questions is, do or don't the "rich" deserve their wealth? If they deserve 85% of all wealth due to their involved in the economy, job creation etc...well, then they should have it. I think few here in the HN community would argue against some entrepreneurial fellow HNer making a buzzillion dollars off of some cool and desirable product/service which instantaneously puts then into the 1st 20th percentile of the graph. Why? Because this person created enough value to earn that money....and maybe those other Americans in that top percentile did too.

221 points by Hoff 16y ago

What’s interesting here is the extent to which the public vastly overestimates the prosperity of lower-income Americans. I bet this is due in large part to the availability of credit over the last few decades. Credit has allowed lower-income people to "play the part" of the wealthy, giving rise to the distortion. In particular, interest-only, 0% down mortgages, low or no-interest credit cards, and car leases let someone making $50,000 a year drive a Mercedes, live in a million-dollar house, and buy fancy toys like flat-screen TVs and Jet Skis. I think the vast majority of the public would base their perception of wealth on material possessions such as cars, houses, and boats rather than the amount of money in savings or investments. This could explain the discrepancy.

smhinsey 16y ago
Over the last 30 odd years, "wealthy" has gradually morphed from "compound interest" to "credit approved."
ctdonath 16y ago
Most lower-income americans make more than the world median income. Our "poverty line" is 20x the income line for half the planet. Of late in Atlanta, one news story about someone unable to pay to heat more than one room had a dramatic photo of her showing her heating bill in her living room - with a 55" HDTV and Xbox360 in the same room. Problem with that chart is scale: while 20% may have most of the money, the poorest still have enough to live in world-relative luxury.
- steveklabnik 16y ago
  But someone with $10k here and someone with the equivalent of $10k in Africa have vastly different buying power.
- michaelchisari 16y ago
  someone unable to pay to heat more than one room had a dramatic photo of her showing her heating bill in her living room - with a 55" HDTV and Xbox360 in the same room. There's a difference between the ability to purchase one-off consumer goods and the kind of situation this person is in. Consider that those consumer goods may have been purchased before an economically catastrophic event such as an illness or a layoff, or they may have been a gift from someone who is willing to purchase consumer items, but not willing to provide the household stability that they require. Also consider that, second-hand, these items are not particularly expensive, and even if they were sold, they may only provide a heating bill for a month or two. Especially in places like Atlanta, which are particularly badly insulated, and ill-equipped for severe cold. So what we have is a situation of economic precarity, an instability in which the existence of consumer good purchases does little to remedy a unstable situation. I have a lot of gadgets and toys, but the overall value of them depreciates daily, and if I lost my employment or well-being tomorrow, they would do little to stabilize my financial situation, even if I fully liquidated all of them at a good market rate.
  - skorgu 16y ago
    My inner libertarian is unable to comprehend the confusion of ideas that allows the purchase of a 55" HDTV et cetera without ~six months of rent in the bank. My inner liberal fires back with the complete, utter and deplorable lack of financial education and hence literacy in this country which is at the very least a partial cause of the most recent subprime financial kablooie. My inner conspiracy theorist mutters something about that being awfully profitable for those able and willing to profit from said illiteracy.
    - krschultz 16y ago
      My dad worked at one company for 28 years. He was fired. He had a year of emergency money in cash in the bank. Not rent, 12 months of money to cover every last little expense they had. They should have been set for any emergency, afterall, who has that much cash in the bank? And no outstanding car, credit card, or mortgage debt (lived in the same house for over 30 years) It took him over 18 months to find a job. Sure, there was a 42" HDTV in their house too. They still weren't spending money on ANYTHING. And he was working 50+ hours a week trying to find a job. Their expenses went up a little because he was traveling for interviews and networking at executive events. (Oh sorry, forgot to mention he was CEO of a 500 person company that was beating its targets even during 2008 when the stock market dropped like a stone). So yea, if it can happen to him, it can happen to you. Tell your inner libertarian 6 months is nothing, and maybe he should find out what this current economy is really like.
- jonhendry 16y ago
  "Of late in Atlanta, one news story about someone unable to pay to heat more than one room " Meaning she probably was using an inefficient electric heater, in a poorly-insulated home in a normally-warm region, in an unseasonably cold period. I could see that raising the electric bill significantly. I once went away for Thanksgiving weekend and accidentally left my refrigerator or freezer door open a crack. That month's electricity usage was several times higher than any other month since I've lived there. Was the HDTV a projection set? Those are cheap, especially second-hand. Might only be a 720p. EBay has larger TVs listed for $200. Hell, nobody wants those fuzzy room-hogging monsters anymore. Could have been a freebie from a better-off friend or neighbor who upgraded to a flat panel. XBox 360s aren't particularly new, rare, or precious, so might have been acquired used, possibly as a trade. And might have been bought by a child, or received as a gift. Maybe her kid bought it then went into the military and left it behind.
  - Encosia 16y ago
    It drops below freezing quite often in Atlanta. Most houses here have natural gas heating. Needing significant heat in the Winter here is a given.
    - jonhendry 16y ago
      Oh. Well. Nevermind about that part then.
- gnaritas 16y ago
  > Most lower-income americans make more than the world median income. A meaningless stat; cost of living here is far more than the world median as well.
ShabbyDoo 16y ago
I agree. How many people in the bottom wealth quintile earn $200K+/year? Probably not a great portion, but definitely not zero. When Americans think about "wealth" inequality, do they consider the distribution of asset levels, or the distribution of income and the implied potential to accumulate wealth at various levels? Perhaps the ever "improving" social safety net reduces the risks associated with having no wealth (savings)? Another commenter noted the woman who, with her 55" TV in the background, complained that she could not afford to pay to heat her home. I'm sure there's some governmental program (or some government-mandated assistance from the utility companies) waiting to help her out.

waqf 16y ago

The question they asked is difficult to interpret, i.e. hard to translate between specific answers "I think the top quintile possesses N% of wealth" and an intuitive understanding of how skewed (or not) a distribution we're talking about. I have a strong quantitative background, and I have to do some calculations to interpret these numbers. And these guys are interviewing average Americans and inviting them to pull numbers out of their ass. Cognitive biases are going to skew these numbers horribly: people will sooner say 80% because it "sounds" like a much more "reasonable" answer than 99.8%, even if a little math would show that it wasn't. For example, I'd like to see the study done again with people asked the mathematically almost-equivalent question: what do you think is the average wealth of the top (resp. second, etc.) quintile. (Almost-equivalent, because you have to tell the respondents the total amount of U.S. wealth for them to be able to convert one answer to the other.) Without that control I think the results are worthless.

jfager 16y ago
Cognitive biases are going to skew these numbers horribly I guess I thought the point of the article was to demonstrate exactly this skew. Where does a person's emotional reaction to tax cuts or welfare come from? If people casually think that poor people aren't as poor as they really are and that wealthy people aren't as wealthy as they really are, they're going to act accordingly when it comes up in their daily life. How they actually think when forced to confront real numbers seems less relevant in that case - how many people actually sit down and do the math before deciding who to vote for?
- waqf 16y ago
  You missed my point, or at least part of my point. The point is that the numbers people write down in this survey will not accurately represent their own impression of how poor poor people are.
  - jfager 16y ago
    I don't think I missed your point - you're saying that people confronted with a question they aren't qualified or interested in enough to answer thoughtfully will be biased towards responses that "sound good". I have no disagreement there, I'm just saying that it's still interesting to know what that incorrect "sounds good" answer is in this case, because it reflects how people casually regard an issue. My unsubstantiated hypothesis is that this casual regard may actually be more important anyways, because many people aren't thoughtful in their regular daily lives, either. In other words: if a cognitive bias can affect how someone responds to a survey, why can't it affect how that same someone acts in their daily lives?

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martythemaniak 16y ago

Facts play a depressingly small part in politics and (perhaps even more depressingly so), studies/surveys and casual observations show that pointing out various facts to people does not actually change their opinions. Try talking about income inequality to a Tea Partier and you'll get the same reaction that an evangelical christian has to evolution. Moreover, this is certainly not an American phenomenon - I see it US politics, Canadian politics, and if I paid enough attention, I'd show up in European and other politics as well.

jacoblyles 16y ago
Tea Party supporter here - and I am quite aware of the facts regarding income distribution in this country. Are you saying that people can't disagree on the proper level of income redistribution for a society if they are all aware of the current distribution of income? That's a mighty strange assertion.
- jlangenauer 16y ago
  Downvoted by accident (damned iPhone), but I think this is a reasonable question.

pg 16y ago

I wouldn't be surprised if most respondents are answering as if the question were about income rather than wealth.

arvinjoar 16y ago
Exactly, and I can't see why the charts shouldn't look like this. Saving money is a luxury, it's a good thing to do if you can afford it and if you're saving your money for something worthwhile. What's important is that people are living the lives they want to be living, and I'm sure that's possible without lots of savings (although wealth could probably help). Most people like to spend money now instead of later though, and the charts reflect that. It's as simple as time preference.
- kiba 16y ago
  All things being equal, human beings prefer an object now instead of an object in the future.
- Benjo 16y ago
  The problem is the distorting effect that wealth has on equal representation in a democracy.
- jellicle 16y ago
  You're absolutely right, the reason why people earning $10K/year aren't millionaires is because they just aren't saving properly. {shakes head sadly}
  - zacharypinter 16y ago
    There's probably an interesting correlation-vs-causation discussion somewhere beween the poor and the wealthy. Are the poor not saving because they don't have any money to save (probably an easy argument for the very poor)? Or is it that people are poor because they don't save (or rather, because they are poor at managing their finances)? There's plenty of examples of people that win the lottery, only to spend it all within a few years and be back to where they started.

SandB0x 16y ago

Here's the original paper (featuring Comic Sans): http://www.people.hbs.edu/mnorton/norton%20ariely%20in%20press.pdf http://www.people.hbs.edu/mnorton/norton%20ariely%20in%20pre... Note that the survey was carried out five years ago, before the financial crisis.

jasonkester 16y ago

I'd like to see that graph broken down between people who think that wealth is a zero sum thing that can be represented as a pie (as shown) vs those who know it isn't. That is, people who think that if I have a dollar, then they can't also have that same dollar at the same time.

woid 16y ago
Exactly! The pie is growing. Compare your wealth to your parents not your neighbors.
- michaelchisari 16y ago
  A deli manager at a grocery store in the Chicago area in 1985 made $35k - $40k a year. Adjusted for inflation, that was the equivalent of around $72k - $81k a year. With full benefits. It's been clearly determined that wages have not kept up with inflation, so I would say that comparing one generation's wealth with their parents is not something that will yield hopeful results.
  - jacoblyles 16y ago
    Is "full benefits" comparable across time? You couldn't buy 2010 medicine in 1985 at any price. Survival rates for a host of deadly diseases are much higher today.
  - sparky 16y ago
    Wealth != Inflation-adjusted dollars. You can buy many things for $100 today that would have cost $5000 in 1985 (or more likely, that didn't exist at all). Life's necessities, with the important exception of homes and apartments, have gotten cheaper in inflation-adjusted dollars over time. I'd argue that the truest measure of wealth is the distribution of 'happiness' over a population, but that opens so many cans of worms as to be near-useless. I'm guessing the average happiness has decreased over time, but I wouldn't chalk all that up to a decrease in inflation-adjusted dollars.
    - 16y ago

iwwr 16y ago

Technology allows people to be much more productive than the mean and the weight of most productivity is naturally skewed toward a small minority. This is not an injustice. A top programmer will be many times more productive than an average programmer and large codebases tend to include code from top programmers preferentially. Not only that, the value generated by top programmers (or project leader) is vastly more than that of an average programmer. This is why Google is paying their top people (technical, administrative) millions of dollars. Compare that to a stone age hunter, who may have been 2-3 times more effective than an average hunter. A strong or a fast man is never much stronger or faster than an average man.

jacoblyles 16y ago
>"This is not an injustice" Others think differential returns to people of differential abilities is an injustice (or at least, the existence of differential ability in the first place). The fact that you don't just means your not a leftist. It's an a priori assumption either way.
jonhendry 16y ago
"This is not an injustice." Paris Hilton. Among other examples. Yes, there are people who get large paydays because they are strikingly effective at what they do. Then there are the people who get large paydays for no particular reason. Or because of their parentage. Before celebrating the übermensch, please try checking back in with reality.
- natrius 16y ago
  Sorry, Paris Hilton being rich is not an injustice. She's rich because people (particularly her parents) wanted to give her money. Trying to prevent that sounds like an injustice to me.
krschultz 16y ago
A good stone age hunter may have been able to survive in situations that a bad stone age hunter couldn't have. Frankly that's worth a whole lot more than being able to program better and I hope he got paid accordingly.

ryanwaggoner 16y ago

Poor Americans are simply much, much, much needier than people realize. You're not needier just because your neighbors are richer than you thought they were.

gort 16y ago
I think the idea is that your neighbours are poorer than you thought they were.
- ryanwaggoner 16y ago
  They may have less net worth, but that doesn't mean they have income to the point that we could consider them "poor". I would really like to know what the median income is within each quintile of wealth distribution.
  - vacri 16y ago
    If you're the kind of person that frequents HN, I would have thought you'd have the google skills to find that out.
- clarkm 16y ago
  Poorer relative to the other neighbors, not poorer in absolute terms.
  - ryanwaggoner 16y ago
    Exactly, and the term "needier" conveys an extra piece of the puzzle that these data do not support. Steve Jobs is poorer than Bill Gates by an order of magnitude, but he's hardly needy.
  - _delirium 16y ago
    For housing, your relative slice of a community's wealth is actually a pretty good predictor which bits of land/housing you'll be able to buy / live on, since real-estate prices in a region tend to rise with its GDP.

nhangen 16y ago

I think the headline is misleading, if not a flat out lie. Americans know who has money...almost everyone else. The average American is living paycheck to paycheck, or worse...they know that their friends are living in the same situation. We know that people like Bill Gates, Warren Buffet, and future Mark Zuckerbergs hold billions. I don't really know anyone that is confused or surprised when they hear that this is how the country's wealth is distributed.

wladimir 16y ago
Indeed. The USA has a huge divide between poor and rich for a developed country. Their poor can hardly come by, their healthcare system is a mess, and even basic infrastructure is underdeveloped in a lot of areas. And the funny thing is, even though many people agree with that, everyone is coming up with excuses. No one is addressing the problem on how to narrow the poor-rich divide instead of further widen it in any meaningful way. They all are caught up in discussions about details such as 'should we increase tax this year' which will probably have zero influence in the big picture. But the most disgusting thing to me is that they are still trying to push their system of corporate plutocracy on the rest of the world, as if it is the best thing since sliced bread.

smarterchild 16y ago

Another way of looking at it: The data is completely overwhelmed by the super wealthy. This is the very tail end of Fortune's richest people list. http://www.forbes.com/lists/2010/10/billionaires-2010_The-Worlds-Billionaires_Rank_41.html http://www.forbes.com/lists/2010/10/billionaires-2010_The-Wo... Any one of those people is worth 1 billion dollars, along with all the Gates's and Buffett's of the world. If I were pretty well off and worth, say, $1,000,000, it would take a thousand of me to equal one of him. And if I were a student with just a thousand dollars, it would take one million of me to get to one of him. Based on that, the top quintile is not rich because of doctors, executives, basketball players or lawyers - it's billionaire company founders, investors, and the like. To test that hypothesis, I tried to find results marked by percentile, instead of quintile: http://www.lcurve.org/WealthDistribution-1998.htm http://www.lcurve.org/WealthDistribution-1998.htm The top 0.5% have 25.6% of the wealth and the next 0.5% have 8.4%. --- (Side note, if you're thinking about income taxes: I'll bet there are more than a few people up at the top who get paid a dollar a year in salary.)

pedanticfreak 16y ago

I'm not sure Americans are misinformed, per se, but instead I'd sooner say human beings exhibit an equality bias. For example, if you gave a person a choice of two mutual funds, a low risk and a high risk, most people would put 50% in one and 50% in the other regardless of the actual distribution of risk over the two funds. So if you gave the average person 5 groups of people and told them to ideally distribute the wealth between them, they would probably exhibit this same equality bias on average. As for the estimated case, I'm sure you'd get similarly wrong responses asking the average person basic questions about U.S. history. Or algebra, chemistry, or pretty much any other academic subject. EDIT: Dan Ariely and others frequently cite this kind of bias in the books and talks I've seen. I wonder what Dan would have to say about that considering he collaborated on this paper.

cletus 16y ago

I find posts like this one depressing. They're cynical and shortsighted. The premise of such posts is that if people were aware of who was getting a tax cut they would be against it. Put another way: the premise is that everyone is purely motivated by self-interest. There are two immediate problems with this line of thinking. The first is tha it ignores how aspirational people are.i remember a survey from the 2000 election when Gore made the mistake of demonizing the top 1% repeatedly. The survey show something like 19% of people thought the were the top 1% and another 20% thought they would be someday. The second problem is the whole "money for rich people = bad" argument. Some may ascribe to Reagenesque trickle down economics. Others may see that overtaxing the rich is ultimately shortsighted. Yet others may not get hung upon percentages and look at the absolute tax burden (iirc the top 1% pay ~40% of the tax burden). Personally I just object to the tone of the rhetoric where politicians talk about "affording" or "paying for" a tax cut like they're giving away money. The reality is just that they're taking less money. Bit of a difference. All of this is just "policy theatre" however. What the US (and most of the West for that matter) is facing a far bigger problem that the current systemis unsustainable and no politician wants to be at the helm when the music stop (to mix metaphors) with declining birth rates and increasing life expectancy.

jonhendry 16y ago
" The reality is just that they're taking less money. Bit of a difference." Can you afford to take a year off from work? It's just taking less money. The fact is that tax cuts aren't free. If they aren't matched by spending cuts, you're just deferring the tax increase until later and incurring deficits in the meantime. So you have to decide what you're going to cut. Which means weighing, say, decent healthcare for veterans, versus the benefit of the tax cut to people who are probably quite well-off already. The Republicans in the Bush years were not willing to do that. So they cut taxes. And raised spending. And we could afford neither.
- cletus 16y ago
  Nice try but no sale. This is the problem: talking about this issue will get you labeled as being anti-<insert emotive issue here> (health care for veterans in your case). The budget is blowing out for three reasons: Social Security, health care and the military. Of the three only the last is largely discretionary (being the ongoing cost for campaigns in Iraq and Afghanistan). When FDR introduced Social Security there was something like 50 working people for every retired person and the average life expectancy was probably only 60 or so. It's a straight money goes in money goes out system with no saving or planning for future spending. Everyone knows this is unsustainable. It's merely a question of when something will change and what. The smart money is on raising the retirement age. Health care costs are spiraling. This is a much more complicated and multi-faceted problem. Personally I think part of the problem is the blank chewue mentality we have to health care. Basically it doesn't matter how much it costs to research and develop pharmaceuticals and medicine, we expect to be provided it. So companies largely ignore the costs. It's a bit like saying to a subcontractor: you can choose to spend as much as you like and I'll pay you a 20% margin on top of that. What is the motivation of that subcontractor and the inevitable outcome? Also I think you need to look at the structure of the health care system. I suspect the US has the most expensive health care in the developed world. I think systemic inefficiencies and overprotective IP laws play a bigpart in this.

Ryan-R 16y ago

2th, 'nuf said. But, in all seriousness, mistakes like that make these articles lose all credibility. (notice ant the top of the graphic, "-Top 20% -2th 20%...")

joshes 16y ago

No matter the intent or implications of the post or the poll, the fact remains that 20% of the people control 85% of the wealth. This seems horribly lopsided to me. Plutocracy seems to be an apt description.

TGJ 16y ago
How is it lopsided? If you look at 10 of your friends, is everyone one of them extremely well off? Is everyone of them extremely talented? There is no getting around the fact that there are gifted people and not so gifted people. To say that it is lopsided would almost imply that everyone deserves equal shares. 20% seems about right. 20% of the people are entrepreneurs and are smart, gifted, talented people that employ the rest of the country to achieve their dreams.
- vacri 16y ago
  Ah, the good ol' "if you're poor it must be your fault" reasoning, wearing yet another dress today.
  - m_myers 16y ago
    More like "if you stay poor it's probably your fault".
    - OpieCunningham 16y ago
      That assumes equality of opportunity, which doesn't exist.
    - zoomzoom 16y ago
      There are more black people in Prison then in college in this country. It's hard to advance when the cards are stacked against you.

bluedanieru 16y ago

We really only needed the first half of this title.

MikeCapone 16y ago

I'd like to see the same graph for productivity/wealth creation...

lotusleaf1987 16y ago

Some of these comments are so bizarrely disconnected from reality trying to talk about how money isn't zero sum, but seriously when the top 20% of the population has 85% wealth there is something fundamentally and critically wrong.

mbesto 16y ago
And so what do you define as being "right"? (playing Devil's Advocate here btw)
- lotusleaf1987 16y ago
  It just strikes me that our system of monetary reward/punishment is fundamentally out of balance when the top 20% have 85% of the wealth/resources and the bottom 80% are left to fight over 15%. That is a banana republic. This is why revolutions occur.

WalterBright 16y ago

The article confuses wealth with income. You can have a very high income, live high on the hog, and have zero wealth. Likewise, you can have a lot of wealth and zero income.

code_duck 16y ago

Another way that Americans are quite misinformed about who has money is that the media portrays Hollywood stars as the most wealthy people in the world. A relatively minor point, but it does serve to cover up the people who truly have a lot more wealth and power than someone who makes a 'mere' $25m per movie.

canterburry 16y ago

I can't help but to always sense and underlying message of "are the rich too rich?" whenever a story like this gets published. Rather than just looking at the raw numbers (which these articles always love to do), I think the more relevant questions is, do or don't the "rich" deserve their wealth? If they deserve 85% of all wealth due to their involved in the economy, job creation etc...well, then they should have it. I think few here in the HN community would argue against some entrepreneurial fellow HNer making a buzzillion dollars off of some cool and desirable product/service which instantaneously puts then into the 1st 20th percentile of the graph. Why? Because this person created enough value to earn that money....and maybe those other Americans in that top percentile did too.