In the last few days, a short video on income inequality in the United States has gone viral. The video clip is based on research by HBS Professor Michael Norton, who did a survey asking Americans what they thought the ideal distribution of wealth in the United States ought to be. Essentially, the asked participants how much of the national wealth should each quintile of the US population control (i.e., the top 20%, the bottom 20%, the middle 20% slices). Norton then compared these numbers with the actual degree of inequality. The results were shown in the video.
I believe that rising inequality is a problem. I believe that there is a lot that governments can do to combat this trend. I think that President Obama is absolutely right to ask Congress to increase taxes on the wealthy. However, I would question Norton’s methodology, which involved asking average Americans to pick a number out of the air to describe the degree of income equality that thought was ideal.
I find this video to be even more problematic.
This video is essentially ahistorical and says almost nothing about whether inequality has increased over time. (There is a brief reference to the fact inequality has increased since the 1970s but that’s it). Norton’s published research cites the research showing that inequality in the US has increased dramatically since about 1980. Among people who teach American history and American political economy, the basic story of income inequality in twentieth century America is well-known. US society in the early twentieth century was highly inegalitarian. Then, during the New Deal and WWII eras, the Gini coefficient plummeted. The United States became a society with a large middle class and few people at the very extremes. Since 1980, inequality has reverted to Gilded Age proportions. Paul Krugman has helped to popularize this stylized account of American inequality in the New York Times.
Somehow, this important data was left on the cutting room floor by the creators of the video. The omission of the historical context is unfortunate for several reasons.
First, the omission of the historical information discourages the viewer from thinking about the causes of rising inequality. Obviously a short video can’t engage with the debate about the causes of rising inequality. Is rising inequality driven by globalization, technological progress, fiscal policy (i.e., Republican tax cuts for the rich), or some combination of the above? However, mentioning that inequality began to rise around 1980 would be a way of getting viewers to think about why it has increased.
Second, a historical or empirical approach is more likely to convince viewers than the more deductive or philosophical approach taken in this video. This video might appeal to followers of the late Harvard philosopher John Rawls, who conducted some interesting thought experiments about how much inequality we ought to permit. The average person, however, is more likely to be convinced by empirical data. The average person is a bit like Edmund Burke. He or she tends to be suspicious of attempts to bring the real world in line with grandiose theories and philosophical speculations. Tell someone that society ought to adopt principle x, and they will likely ask “Has any real world society done this? How did things work out for that society? Is that society similar enough to our country to make the adoption of principle x feasible?”
The argument that there are tribal societies on this planet in which economic inequality is very low likely isn’t going to convince many voters to support a more egalitarian distribution of wealth. After all, these societies can be dismissed as primitive, alien, and left-overs from a distant period of human history. Pointing out that societies that other Western industrial democracies have lower inequality than the United States would be more convincing, since some of these societies are objectively very successful (great companies, high GDP per capita, and trains that make Amtrak look like crap). However, when we use this approach, we run into the problem of anti-foreigner bias: people might dismiss the Danes and French because they live far away and eat smelly cheese.
To my mind, the argument for equality most likely to win over middle-of-the-road Americans is a historical one: between the 1940s and 1970s, the distribution of wealth in the US was much more egalitarian than it is now and the country experienced rapid economic growth. Americans are a practical people who believe that the proof of the pudding is in the eating. The Middle-Class America of Paul Krugman’s childhood is neither exotic nor ancient history. It is within the living memory of many people today. Tell people that a vote for equality is a vote for post-war prosperity, and you will have a winning argument.