Krugman’s Billionaire Derangement Syndrome
January 5, 2016
by Robert Huebscher
PDF | Page 2
Last year was a bumper year for hedge fund launches. According to a Hedge Fund Research report released towards the end of March, 614 new funds hit the market in 2021. That was the highest number of launches since 2017, when a record 735 new hedge funds were rolled out to investors. What’s interesting about Read More
The New Year can be a time for taking positive, productive steps to improve one’s life and those of others. But not for Paul Krugman. He used his January 1 column in the New York Times to chastise the super-rich as narcissistic egomaniacs who use their wealth to manipulate the political process for their own purposes.
Krugman is right about the role money plays in politics. But his attitude toward the ultra-wealthy is unsubstantiated and misguided. He suffers from a condition I will call “billionaire derangement syndrome.” At least one candidate for the U.S. presidency has made comments that are symptomatic of a similar affliction.
“The affluent are, on average, less likely to respect norms and even laws, more likely to cheat, than those occupying lower rungs on the economic ladder,” Krugman wrote. He based those claims on a 2012 study by Paul Piff, a psychologist at the University of California at Berkeley.
Krugman claimed that Piff’s research constituted “a conclusion from social science, confirmed by statistical analysis and experiment.”
Despite Krugman’s faith in Piff’s analytical rigor, Piff’s research is hardly proof of anything, much less that all – or even most – billionaires are immoral and disrespectful of the law. Piff’s research included tests where, for example, he asked people to draw circles of themselves and of others. Wealthier people tended to draw larger pictures of themselves than those of more modest wealth. Piff also found that drivers of luxury cars were more likely to cut off other drivers at an intersection and to speed past pedestrians at a crosswalk.
Piff’s research is interesting and makes great fodder for cocktail party talk. But the size of circles drawn by a group of test participants and the driving habits of Berkeley residents is hardly the basis to indict those who have accumulated great wealth. Indeed, there is no evidence that Piff’s research even included the billionaires Krugman so vigorously demonizes.
Krugman claimed that “extreme wealth can do extreme spiritual damage.” According to Krugman, people who would otherwise be merely disagreeable turn into self-obsessed sycophants, unconcerned with others, once they accumulate great wealth.
He offers no statistical analysis or experiments to back up that claim. So let’s look at one very objective measure of whether one’s character has been spiritually impaired: the amount they donate to charity. The average ultra-high net worth (UHNW) individual donates approximately 10% of their net worth over their lifetime. In this case, UHNW is defined as the richest 0.003% of the world’s population. That compares with a mere 1.3% for Americans in the top 20% of earnings and 3.2% for those in the bottom 20%.
Very rich people are extremely charitable, and some are exceedingly generous, as is the case with Mark Zuckerberg and his wife, who recently pledged 99% of their net worth to charity. Zuckerberg is among a group of over 200 individuals who have taken the Giving Pledge. That group consists of billionaires who have committed to donate at least 50% of their wealth to charity. In fact, the only reasonable criticism you can make of this group is whether they undertake their charitable giving fast enough – spending money during their lifetimes rather than creating a legacy that distributes the money more slowly.
PDF | Page 2