Distributions of Wealth
The “distribution of wealth” is a growing concern for politicians, citizens, and academics alike. We are told, wealth is concentrating in the hands of fewer and fewer individuals. Should the accumulation of wealth increase, opportunities and resources may be restricted to holders of sufficient capital.
Like many charged issues there are multiple aspects that need to be disentangled. Let’s start by taking a look at the graph below. This is data I acquired through some nifty web scrapping. We’re looking at the change in the wealth share of each group over time. For example, if the top 0.1% held 5% of all wealth in 1985 and 15% of all wealth in 2020, then they experienced a 200% increase in their wealth share over this period.
From this graph, the conclusion may be drawn that in fact “the rich are getting richer.” Even worse, it appears the poor — the bottom and middle 20% — are getting poorer. As they experienced nearly 50% reductions in their wealth share over time.
Before we go any further, let’s examine the typical conclusion of many on the issue of wealth distribution. When “solutions” are discussed, what is the initial inclination of many politicians and economists? It is always some form of redistribution, invariably through taxation — income tax, capital gains tax, payroll tax, property tax, and even a general wealth tax.
By allowing the state to play Robinhood, we can take from the rich and give to the poor in order to smooth the wealth distribution. Now, what if I told you this graph did not display monetary wealth? Instead of dollars in the bank accounts of people, it shows citations awarded to academic papers. Does this change our “solution” to the problem? Most certainly.
One would find it quite silly to think of redistributing citations across articles and authors. However, the case could still be made that academic opportunities — grants, donations, and collaborations — are reserved for higher-earning citation authors. Why should we not be concerned with redistribution in the academic arena? Why should the top 0.1% of researchers increase their wealth so much, and seemingly at the expense of those on the bottom?
The most obvious reason is that academia, to an outside observer, is clearly a meritocracy. We recognize our lack of knowledge in relation to leaders of academic fields. It is very plain to an observer that he could not do the job of a research scientist in cardiology. After all, what does he know of blood flow, arteries, and oxygenation? The world of business, however, is felt to be more within reach. Any layman can enact transactions, he knows how to spend and to save, and most importantly he can give commands to subordinates. What more do chief executives do?
It is for this reason, that in the world of dollars those at the bottom are seen to be more deserving of redistribution. In academia, it is understood that those at the top clawed their way there through hard work, determination, and ingenuity. One would not expect an undergraduate, new to the field, to garner an equivalent amount of citations to a senior professor. Why should this expectation be any different in the world of dollars? Unsurprisingly, those in the lower quintiles of the economic distribution are typically younger than those in higher regions. Just as we would expect undergraduates and graduate students to have fewer citations compared to their advisors.
The whole notion of distributions is really a red herring. It conceals two more important aspects of the discussion — mobility and positive-sum enterprises.
If a researcher has 100,000 citations and I have 62, is this some form of injustice, that demands rectification? Should citations from the researcher be taken and given to me in the name of equality? The answer is no. No matter how unequal, the distribution by itself does not tell us enough information to make this decision. I will go so far as to say the distribution is not relevant. It makes for nice headlines and catchphrases but ultimately what we care about is mobility. Where do you start and where can you end up.
If you start at the bottom, the lowest 20%, what chance do you have of rising out of that group? This is one of the most deceiving aspects of tracking percentage groups (like the above graph). We focus on these groups, like the infamous top 1%, as if they’re some fixed entity. All the while denying that the people who make up that group change constantly. In fact, they change more in countries with less bureaucracy (you have a better chance of rising in the United States compared to Italy). Looking back at academic citations, mobility is actually more restricted compared to the world of dollars. A bad investment for an entrepreneur causes losses — fewer dollars than they previously had. However, the loss of citations is a rarity. Thus it is more difficult for every generation of researchers to reach the heights of past giants.
Whenever we discuss “distributions” it implies not only a distributor but also a fixed quantity. Such verbiage suggests there is a discrete amount of wealth and those with more got theirs by taking from those with fewer. This simplistic viewpoint ignores an important distinction between two types of individuals. Those who partake in zero-sum activities and those who create positive-sum endeavors. Zero-sum means, if I win, you lose. If there is a pie with ten slices and I get eight, there’s only two left for you. Politicians, tax collectors, and lobbyists are among the class of those who partake in zero-sum schemes. The only way for them to gain is for others to lose.
Positive-sum on the other hand can create more wealth in the process. Much is made of the massive fortune Bill Gates has amassed throughout his life. Did Gates get this rich by stealing from others? No. The wealth he’s accumulated through the creation of Windows computers pales in comparison to the total wealth he has created for the world. Every time you use a Microsoft product for a task, it’s made possible by the wealth Gates created. Think of all the jobs that use Microsoft, all the engineers who design its ecosystems, all the cloud applications running on Microsoft servers. This is all created wealth. Every job and every computer-based application is a reflection of the small sum awarded to Gates for his contribution to the world.
To tie this back to academia, research can be positive-sum. Inventions and discoveries create new fields that provide careers for more scientists. So too can be the endeavors in the world of dollars. If someone is getting rich it does not always imply it is at the expense of someone else’s poverty. Distribution schmistribution. Focus on mobility and positive-sum ventures.
You can find the code to recreate this plot as well as many others from a variety of academic subjects here.
