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Americans Are Horribly Misinformed About Who Has Money

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Re: Americans Are Horribly Misinformed About Who Has Money

#31

Post by jacoblyles »

redwood wrote: post #20
pg wrote: post #6

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

The other thing is that the bottom folks aren't as "needy" as folks were in, say, the great depression. - I.e. "no one starves in america" and most people know this: so while the distribution in wealth is extreme, the distribution in QUALITY OF LIFE is less extreme. - This biases people's view and makes them feel that generally, for most americans, things are okay. This is all true of course: except that the worry ab…

The fears of a plutocracy are overblown. You write that "money is power and speech". But people like Meg Whitman and Mitt Romney have tried to buy elections with their personal fortunes and it didn't work (and self-funded candidates do worse, on average, than other candidates).

Political inertia, the passions of the mob, and the maladaptive incentives facing legislators and bureaucrats are much more potent forces shaping our society than concentrated wealth.

Re: Americans Are Horribly Misinformed About Who Has Money

#32

Post by jacoblyles »

iwwr wrote: post #10

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 t…

>"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.

Re: Americans Are Horribly Misinformed About Who Has Money

#33

Post by sparky »

michaelchisari wrote: post #22
woid wrote: post #11

Earlier quoted context omitted.

Exactly! The pie is growing. Compare your wealth to your parents not your neighbors.

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.

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.

Re: Americans Are Horribly Misinformed About Who Has Money

#34

Post by ShabbyDoo »

michaelchisari wrote: post #22
woid wrote: post #11

Earlier quoted context omitted.

Exactly! The pie is growing. Compare your wealth to your parents not your neighbors.

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.

A grocery store deli manager in the mid-80's likely would have been a union member, especially in Chicago. It would be interesting to compare real wage changes in non-unionized vocations vs. highly unionized ones to tease out relative impact of macroeconomic changes vs. the decline of unions and their power to impart wealth transfer.

Re: Americans Are Horribly Misinformed About Who Has Money

#35

Post by Benjo »

arvinjoar wrote: post #12
pg wrote: post #6

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

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 tho…

The problem is the distorting effect that wealth has on equal representation in a democracy.

Re: Americans Are Horribly Misinformed About Who Has Money

#36

Post by michaelchisari »

ctdonath wrote: post #17
byoung2 wrote: post #2

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 some…

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 poo…

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.

Re: Americans Are Horribly Misinformed About Who Has Money

#37

Post by ShabbyDoo »

byoung2 wrote: post #2

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 some…

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.

Re: Americans Are Horribly Misinformed About Who Has Money

#38

Post by tjansen »

michaelchisari wrote: post #22
woid wrote: post #11

Earlier quoted context omitted.

Exactly! The pie is growing. Compare your wealth to your parents not your neighbors.

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.

Did a manager at a grocery store have the same amount of responsibility as today? My guess would be that today being a deli manager just means that you need to follow your chain's rule books. In 1985, with more independent stores and smaller chains, a manager had more responsibilities, and thus her contributions were more directly related to the store's profit than today. Thus a good deli manager is worth less than she used to be (and the really good people should work where they contribute more value, like creating the rules for deli managers in a chain).

Re: Americans Are Horribly Misinformed About Who Has Money

#39

Post by zamfi »

pg wrote: post #6

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

I wondered about this too. Just for fun, I plotted the household income distribution on the same chart: http://dl.dropbox.com/u/667/income-distribution.jpg

Income distribution looks quite different from wealth distribution, and is more equal than the estimates in the original article.

[ Household income data from here: http://www.econlib.org/library/Enc/DistributionofIncome.html]

Re: Americans Are Horribly Misinformed About Who Has Money

#40

Post by mixmax »

sparky wrote: post #33
michaelchisari wrote: post #22

Earlier quoted context omitted.

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.

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…

The things you mention are what inflation is meant to nullify. In an economists perfect world the amount of a normal good you can buy with $1 would be the same as the amount of that good you could buy for 1 inflation-adjusted dollar at any other time in history.
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