I want to expand on one of the links I embedded into a recent post called “The rise of the Angry Rich“. The original post linked to a Krugman column. As support for his column, the Professor put up a couple of blog posts, one of which quotes Brad DeLong.
Brad DeLong’s post on Todd Henderson [one of the Angry Rich that Krugman alludes to in his column], the already-infamous whining Chicago professor who appears to be near the 99th percentile but feels poor, is worth reading for more than the takedown. Brad isn’t the first to make this point, but his discussion of how rising inequality at the top — a fatter right tail in the income distribution — makes the objectively rich feel poor is exceptionally fine[.]
Now part of the DeLong article, which he quotes (my emphasis):
Cast yourself back to 1980. In 1980 a household at the bottom of the 1% rich households in America had an income equivalent in today’s dollars $190,000 a year. They know of 1000 people–900 of them poorer than they are in income brackets 90-99% and 100 people richer than they are in the top 1% income bracket. The 900 people poorer than them back in 1980 had incomes from $85,000-$190,000 a year. Those are, if you are sitting at the bottom of the top 1%, the middle class who are not as successful as you. You don’t look downward much. Instead, you look upward. Of the 100 above you, 90 in 1980 had incomes less than three times their incomes. And they would have known of 1 person of that 100 who was seven times as rich as they were.
Thus Professor Henderson in 1980 would have known who the really rich were, and they would on average have had about four times his income–more, considerably more, but not a huge gulf. He would have known people who were truly rich, and he would have seen himself as one of them–or as almost one of them.
Now fast forward to today. Today a household at the bottom of the 1% rich households in America has an income of nearly $400,000 a year–the income of that slot in the labor market has more than doubled, while the incomes of those at the slot at the bottom of the 10% wealthy has grown by only 20% in two decades. The 900 people he knows in the 90%-99% slots have incomes that start at $110,000 a year. Compared to Henderson’s $455,000, they are barely middle class–”How can they afford cell phones?” Henderson sometimes wonders.
But he wonders rarely. … Instead, Mr. Henderson looks up. Of the 100 people richer than he is, fully ten have more than four times his income. And he knows of one person with 20 times his income. He knows who the really rich are, and they have ten times his income: They have not $450,000 a year. They have $4.5 million a year. And, to him, they are in a different world.
As I’ve said before, people have no idea how rich the really-rich really are. Paraphrasing Chris Rock — Shaq O’Neal is rich, but you don’t want to be Shaq; you want to be the man who signs Shaq’s check.
Per Barry Ritholtz, here are the estimated 2009 incomes of the top five hedge fund managers:
- David Tepper, Appaloosa Management — $4 billion
- George Soros, Soros Fund Management — $3.3 billion
- James Simons, Renaissance Technologies — 2.5 billion
- John Paulson, Paulson & Company — $2.3 billion
- Steve Cohen, SAC Capital Advisors — $1.4 billion
Remember, this is income, not net worth. These numbers were added to existing net worths in 2009 — a single year.
These folks aren’t under the radar, but the degree of inequity is. The good news? As a great man once wrote, “Whom the gods would destroy, they first make mad.” And the Angry Rich are getting really really mad. Time to apply Rule #3 — expose them while they’re dancing in the headlights.