The Dutch on How Rich is Too Rich? Most do not consider extreme wealth itself a severe problem & object to the government’s enforcement of limits to wealth & income, but widespread support exists for increased taxation

How Rich is Too Rich? Measuring the Riches Line. Ingrid Robeyns, Vincent Buskens, Arnout van de Rijt, Nina Vergeldt & Tanja van der Lippe. Social Indicators Research, Nov 25 2020. https://rd.springer.com/article/10.1007/s11205-020-02552-z

Rolf Degen's take: https://twitter.com/DegenRolf/status/1331490278440660992

Abstract: Is it possible to identify a ‘riches line’, distinguishing the ‘rich’ from the ‘super-rich’? Recent work in political philosophy suggests that this is theoretically possible. This study examines for the first time the empirical plausibility of a riches line, based on novel data collected from a representative sample of the Dutch population. The data reveal that the Dutch indeed draw such a line, namely between 1 and 3 million euros. Strikingly, respondents agree on its approximate location irrespective of their own income and education. Although most do not consider extreme wealth itself a severe problem and object to the government’s enforcement of limits to wealth and income, widespread support exists for increased taxation of the super-rich if that would improve the quality of life of the most vulnerable members of society.

Conclusions and Discussion

The data used in this study is the very first attempt of which we are aware that aims to establishing a riches line using judgements of people using a quantitative approach.Footnote3 Hence it must be seen as the first in a series of empirical studies looking into the evaluative question of whether society believes that there is an upper limit to how much wealth can contribute to the standard of living of a family, and the normative question of whether society thinks such an upper limit should be reinforced.

The first conclusion is that it is indeed possible to establish a riches line empirically. There appears to be a clear difference what “rich” and “super rich” means for people. Similar to the poverty line, this riches line proves to be a social construct. An implication is that politicians can use the riches line to discuss the level of riches in society, in a similar way as is already done in discussions about the poverty line. The evaluative claim which indicates that people can estimate what is super rich is thus supported. A riches line has already been developed in previous work based on the income distribution (Medeiros 2006; Concialdi 2018). We now have developed one which is based on judgements of people themselves.

The second conclusion is that such a riches line is not necessarily a norm for people. They do not perceive extremely rich people as a problem in itself. When a statement is presented in the abstract, not many people are in support of limiting extreme riches. By the same token, we can also conclude that a larger share of the population has a problem with riches when the statement is made concrete by means of a real-life situation. People thus appear in support of measures to limit riches when presented with specific cases of extraordinary wealth, and also when the societal gains from such limits are made salient. Most people are in support of a tax on the incomes of the super-rich if they are also told what that money will be used for—and if that money benefits the most vulnerable people in society.

The instrument we have shown seems to be able to establish how a certain population (in this case a representative sample of people in the Netherlands) thinks about where a riches line should be and at what point there might even be broad consensus that the riches line is reached. One advantage of our vignette method is that we provide respondents with an illustrative description of wealth of families rather than providing just a number of income or capital. We believe that this way of picturing helps respondents to judge richness more easily. In addition, the data have shown that the vignettes are also rightly chosen: we have quite fine-tuned distinctions around where respondents indicate that the riches line should be, while we also include the extremes where hardly any respondents think such a family is too rich or where almost everyone holds that such a family is too rich.

Clearly, the disadvantage of an illustrative instrument as this is that it is rather context dependent. The descriptions and variations used here might be reasonable for countries that have a similar welfare state infrastructure as the Netherlands. Countries with a significantly different type of welfare state, for example with a health care system or educational system that has a significant private sector, or without public pension provisions, might need to add those items to the vignettes in the questionnaire. In addition, the descriptions should be certainly adjusted if one were to use a similar methodology in less developed countries. This also implies that the outcomes might be used to guide politics within a certain country, but the method is less suitable to guide more global distributional questions. The context-relative nature of the measures we have adopted also implies that when societies change drastically over time, the measure might require adaption. At a methodological level, it should be noted that this vignette based set-up is flexible and easily adaptable to settings that require different variables while the essence of the analyses can remain the same. Finally, it is important to stress that this empirical method reveals the views by a population of people on when a person can be qualified as ‘extremely rich’, but does not directly address normative questions as to what reasons we might have for considering someone too rich, let alone what (if anything) would follow for policies.

Future research should take further steps towards refining the methodology for constructing and measuring the riches line. One question is whether mixed quantitative–qualitative methods, such as Q-methodology, would confirm the appropriateness and validity of quantitative surveys such as the one designed for this study. After we completed our study, a Report was published in which the idea of riches line was tested empirically with focus groups in London (Davis et al. 2020). One interesting line of future research would be to apply both the qualitative methods used in that study with the quantitative methods used in our study, and analyze possible differences in the results.

A second topic for further research relates to the context-sensitivity of absolute riches lines. To what extent does this make comparisons between the phenomenon of ‘superriches’ in different countries difficult, and how exactly? As we argued above, the content of the vignettes needs adapting in case the method we proposed is used in significantly different contexts. But what does this imply for intertemporal and international/interregional comparisons of studies of riches? Are they simply impossible, or are the merely difficult, and if so, what makes them (im-)possible? This study focused on the Netherlands, and it would be very interesting to investigate how the methodology can be generalized for different countries and to study whether it would be possible to quantify by means of an international comparative study to what extent the riches line depends on the economic development, policies and culture of a country.

In addition, subsequent research may probe the robustness of the tentative relationship between descriptive judgements and normative judgements identified here. Others may investigate whether public support for government policies imposing a riches line would be greater if concrete benefits of such policies were specified. Citizens may be unwilling to support policies that limit a person’s wealth if it is unclear what society would gain. Future studies may also make a clearer distinction between inequality generated by processes that people see as unfair and processes experienced as fair, such as income from employment being taxed differently than income from business activity (profit) or from capital gain. People may find ‘fairness’ important, which may not always be the same as ‘equality’ (Starmans et al. 2017).