I saw this link on Facebook, and my opinion on it was a bit too big to fit on Facebook. So I'm writing it here, instead.
The summary of the video is that the wealth inequality in the US is too big. This is something I entirely agree with. However, the way this is presented stresses me. The analysis is straightforward and slick, cutting through the complexities to deliver a simple message.
However, it's a complex subject. As an engaging, entertaining introduction to the subject, it completely discourages you from engaging in critical thinking, or even realising there's more to it than what you're showing. You can come away thinking 'Yes, this is a serious problem', when that's not actually the evidence being shown. Ugh.
What's wrong with the analysis? The initial analysis was based around what a survey of 5000 Americans thought was the wealth distribution per quintile, and what was the ideal distribution. This is then contrasted against the actual distribution. The message meant to be taken away was 'inequality is way more than it should be'. The message I read got was 'people are incredibly naive and mathematically weak'.
The estimate was that the top 20% had a little over half the wealth. In other words, the top 20% has, on average, four times as much wealth as everyone in the other 80%. Despite the fact that you're taking an arithmetic mean over a portion of society including wads of millionaires and a number of billionaires. The outliers really skew stuff, and it seems people don't get that.
The 'ideal' distribution had the wealthiest 20% having less than double what the middle 20% had. That's a level of naivety that boggles me. Even ignoring the billionaires and the millionaires, people from the land that gave you the American Dream, people reckon that the upside to entrepreneurship, or years of training, or whatever should top out at around double what everyone else does.
And all this is before you think about what 'distribution of wealth' means. Wealth has a funny relationship with lifestyle. Most people don't buy a house outright, so the availability of credit is important, which is probably a bit more tuned to income than wealth per se. Actual wealth is likely to vary over a lifetime - you save for your retirement, then use the money up. Wealth means different things in different places - you can earn a lot more in a big city, but need to spend a lot more too. So, taking all that into account, the 'ideal' distribution looks incredibly flakey, even before considering that people may have different amounts of wealth for reasons beyond where they live and how old they are.
So, at this point, I feel the evidence is that the public don't know what they're talking about, and should be ignored when it comes to defining a sensible level of inequality, at least until they've done some proper in-depth data analysis. The video, however, uses them as a baseline for what follows.
The actual figures give the top 20% having a little over 80% of the wealth, and the top 1% having around 40% of the wealth (but 24% of the income). This is, I think, meant to be shocking, but it's pretty much in the nature of a long-tailed distribution like this.
As the data is nice and easy to find, I looked at the distribution of US billionaires. Even at that level, the top 20 of 100 billionaires had half of their wealth. The richest person had 20 times as much as the hundredth richest person. Wealth seems to follow some exponential process, and you'll always look very poor compared to those above you.
I really don't think it's worth trying to eliminate the form of the distribution, as it seems something fairly fundamental. Indeed, this exponential curve is what you expect with money growing/shrinking multiplicatively. What you can do, though, is try to tweak the constants of the process - progressive taxes, prevention of tax avoidance, chunky inheritance tax laws, etc.
However, the video captures nothing of this. It rails against a curve shape seen pretty universally around the world, rather than the specifics of how inequality has been increasing for decades in the US. It takes a real issue and turns it into mental mush.
So now... Tufte vs. McCandless. Edward Tufte has shown us that good information visualisation is vital. Data can be made beautiful, and insights laid bare through appropriate representation. If it's truthful, it should be beautiful. Infographics, represented by McCandless's Information is Beautiful have taken this idea and run with it. A superficial understanding of the issues by graphic designer types lead to a pile of data being made simple and beautiful. However, a lack of understanding of the underlying thoughtfulness of Tufte's work means that while these diagrams follow in form, they miss the real point. A superficial understanding leads to a superficial presentation.
However, we've been trained to believe in simple, straightforward explanations displayed elegantly. If it's beautiful, it must be truthful. Just as we believe talking heads with strong opinions over far more knowledgable experts who hedge their opinions, we trust these bold graphics.
And thus we demean the discourse on vital issues. Ho hum.
Posted 2013-03-06.