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A video titled “Wealth Inequality in America” has gone viral on the Internet, it’s up to almost four million views on YouTube. It’s not clear who produced it, and it’s not clear what solution is being proposed to the “problem” of wealth inequality identified in the video. What is clear is that it’s another fallacious, static analysis of wealth distribution that focuses only on abstract, statistical brackets at a given point in time, while completely disregarding the most important point: what is happening to actual flesh-and-blood human beings whose income and wealth change all the time and who are moving among the various abstract statistical brackets from year to year.
In the video above titled “What Wasn’t Said in ‘Wealth Inequality In America,'” Steve Horwitz responds to the Wealth Inequality video and reminds us that the most important issue is not what abstract statistical bracket people fall into in a given year, but rather the degree of income or wealth mobility from year to year. It’s an important point, and one that’s completely overlooked in the viral video.
Thomas Sowell has discussed extensively the issues of static versus dynamic analysis of wealth and income distributions, and income and wealth mobility, and here are some of his quotes as an antidote to the limited, static “analysis” of wealth inequality presented in the viral video:
1. Comparing the top income bracket with the bottom income bracket over a period of years tells you nothing about what is happening to the actual flesh-and-blood human beings who are moving between brackets during those years. Following trends among income brackets over the years creates the illusion of following people over time. But the only way to follow people is to follow people. Source
2. Sports statistics are kept in a much more rational way than statistics about political issues. Have you ever seen statistics on what percentage of the home runs over the years have been hit by batters hitting in the .320s versus batters hitting in the .280s or the .340s? Not very likely. Such statistics would make no sense, because different batters are in these brackets from one year to the next. You wouldn’t be comparing people, you would be comparing abstractions and mistaking those abstractions for people.
But, in politics and in commentaries on political issues, people talk incessantly about how “the top one percent” of income earners are getting more money or how the “bottom 20 percent” are falling behind. Yet the turnover in income brackets over a decade is at least as great as the turnover in batting average brackets. Source
3. Only by focusing on the income brackets, instead of the actual people moving between those brackets, have the intelligentsia been able to verbally create a “problem” for which a “solution” is necessary. They have created a powerful vision of “classes” with “disparities” and “inequities” in income, caused by “barriers” created by “society.” But the routine rise of millions of people out of the lowest quintile over time makes a mockery of the “barriers” assumed by many, if not most, of the intelligentsia.” Source
4. Most people are not even surprised any more when they hear about someone who came here from Korea or Vietnam with very little money, and very little knowledge of English, who nevertheless persevered and rose in American society. Nor are we surprised when their children excel in school and go on to professional careers. Yet, in utter disregard of such plain facts, so-called “social scientists” do studies which conclude that America is no longer a land of opportunity, and that upward mobility is a “myth.” Source
5. Most working Americans who were initially in the bottom 20 percent of income-earners, rise out of that bottom 20 percent. More of them end up in the top 20 percent than remain in the bottom 20 percent. People who were initially in the bottom 20 percent in income have had the highest rate of increase in their incomes, while those who were initially in the top 20 percent have had the lowest. This is the direct opposite of the pattern found when following income brackets over time, rather than following individual people. Source
6. Most of the media publicize what is happening to the statistical brackets — especially that “top one percent” — rather than what is happening to individual people. Source
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