Lessons from the Nobel Prizes and the
by Mark J. Perry
(Note: This article appeared in the
Detroit News on October 31, 1997 under the title "Comment: Let's Not Make
Losers of the Free Enterprise Winners.")
A recent study by the Center on Budget and Policy Priorities criticizes the
widening gap in the United States between high income groups and low income
groups. The group reports that the richest 20 percent of the population
in 1999 will earn more than 50 percent of all after-tax income, an outcome
which some people find offensive.
What often gets overlooked in the complaints about income inequality is that
the top 20% of U.S. taxpayers actually pays about 75% of the total taxes
collected! One could argue that what should offend us is not the inequality
of income, but the grossly unfair distribution of taxes!
In discussing equality, we should distinguish between "equality of opportunity"
and "equality of outcome." Most of us agree that equality of opportunity
is desirable and we support measures to ensure that everyone gets a fair
chance in society. However, equality of opportunity in no way guarantees
that outcomes will be equal. In fact, inequality of outcome is the
natural and expected result of any fair, competitive process, whether the
competition is Olympic medals, Nobel prizes, income or admission to a university.
For example, consider that the average annual income inequality between two
brothers is about $26,000, which is almost as great as the average $29,000
income differential for men paired randomly. That is, even after controlling
for the effects of race, sex, genetics, religious background, socioeconomic
status, parental influence, etc., significant income inequality occurs naturally
even within a family. Why then wouldn’t we expect that same result
in the general population?
Another example of a natural, yet dramatic inequality of outcome is revealed
by analyzing the Nobel prizes awarded through 1998 in the four science
categories - physics, chemistry, medicine and economics. Since 1901
there have been 478 Nobel prizes awarded to individuals from thirty countries.
Winners from the top six countries (U.S., U.K., Germany, France Sweden and
Switzerland) have earned over 400 Nobel awards. In other words, the
top 20 percent of countries receiving awards got over 85 percent of the Nobel
In the 1996 summer Olympics, 80 countries competed in over 270 events in
26 different sports. At the final ceremony, 840 gold, silver and bronze
medals were awarded. The sixteen countries that received the
most medals represented only 20 percent of the countries that competed.
Yet that top 20 percent won more than 70 percent of the total medals awarded.
As long as everyone has an equal opportunity to compete in a fair contest
with well-defined rules, no one is offended by the inequality of outcomes
within a family, at the Olympics or for Nobel prizes. No one would
suggest that Olympic medals or Nobel prizes be redistributed to achieve "equality
of outcome." And no one suggests that the standards for Nobel prizes
or Olympic medals be lowered for under represented groups or countries to
promote diversity in the awards.
Why then do people object so strongly to an unequal distribution of income
and attempt to redistribute income through the progressive income tax system?
The results of income distribution conform very closely to the inequalities
outlined above for the Olympic and Nobel competitions. An unequal distribution
of income is a natural and expected outcome both within a family and in the
general population - just like the unequal distribution of Olympic medals
or Nobel prizes.
The economy is a competitive process and there will always be people who
excel in business, athletics, science or the arts. Through some combination
of skill, luck and hard work, there will always be successful people like
Bill Gates, Oprah Winfrey and Ted Turner who make more in a year than most
of us make in a lifetime. But then the United States usually wins more
Nobel prizes in a year than Japan has won all century, and many individual
U.S. athletes won more medals in 1996 than the entire country of Mexico.
The Olympic medal winners and Nobel prize winners are respected and admired,
despite the inequality of outcome in those competitions. We should
pay the same respect to the winners of our free enterprise system - the successful
workers at the top of our economic ladder.
We can learn a lesson from the Olympic games and the Nobel awards: unequal
results should be expected as the natural outcome of competition in any area,
whether it is sports, science, education, intra family income or national
(Mark J. Perry, Ph.D. is associate professor of economics at the University
of Michigan-Flint. He can be reached by email at email@example.com.)