Lessons from the Nobel Prizes and the Olympic Games
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 prizes.  

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 income.

(Mark J. Perry, Ph.D. is associate professor of economics at the University of Michigan-Flint.  He can be reached by email at mjperry@umich.edu.)