Not Worrying About “Unequal” Wealth ‘Distribution’

by Don Boudreaux on November 9, 2010

in Inequality, Seen and Unseen, Standard of Living

Here’s a letter to the Los Angeles Times:

Michael Norton and Dan Ariely surveyed us Americans and found that we “drastically underestimated the current gap between the very rich and the poor” (“Spreading the wealth,” Nov. 8).  They found also that Americans’ “ideal” distribution of wealth is one that is more even than is the wealth-distribution in reality.

There are many reasons why Messrs. Norton and Ariely are mistaken to conclude that their findings support “policies that involve taking from the rich and giving to the poor.”  Here’s just one:

That Americans “drastically” underestimate the wealth of “the very rich” compared to the wealth of “the poor” reveals that the difference in the number of dollars owned by “the very rich” compared to the number of dollars owned by “the poor” translates into a much smaller – that is, far more equal – difference in living standards.  In other words, differences in monetary wealth are not the same as differences in living standards.

Bill Gates’s monetary wealth, for example, is approximately 70,000 times greater than my own, but I’m certain that he doesn’t daily ingest 70,000 times more calories than I ingest in a day.  I’m also certain that the food Bill Gates eats isn’t 70,000 times tastier than the food I eat; that his many homes are not 70,000 times larger than my one home; that his children are not educated 70,000 times better than is my child; that he cannot travel to Europe or to Asia 70,000 times faster or more safely than I can; that he doesn’t have 70,000 times more annual leisure than I have; and that he will not live 70,000 times longer than I will live.

I’m even sure that he’s not 70,000 times happier than I am.

So, really, it’s incorrect to conclude that Bill Gates’s real wealth is 70,000 times larger than my real wealth.  The difference isn’t remotely close to being that large.

Donald J. Boudreaux

(Thanks to my buddy Ross Kaminsky for alerting me to Norton’s and Ariely’s op-ed.)

UPDATE: In my letter, I used $42B as Gates’s monetary worth.  If it is now $53B (as now seems to me to be the case), then Bill Gates’s wealth is 88,333 times greater than my own.

So here’s another way to look at the issue I address: when Gates’s monetary wealth rose from $42B to $53B, did his standard of living – or even his potential standard of living – further increase over my standard of living by a factor of 18,333?


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